DAX Edges Higher, Markets Eye German CPI Report

The DAX index has posted gains in the Thursday session. Currently, the DAX is trading at 12,695.50, up 0.31% on the day. On the release front, German GfK Consumer Climate edged lower to 10.8, shy of the estimate of 11.0 points. Later in the day, Germany releases Preliminary CPI, which is expected to remain unchanged at 0.1%. On Friday, Germany releases Retail Sales and Unemployment Change, while the eurozone will publish CPI Flash Estimate.

German President Angela Merkel is in a weakened position after last week’s election, and she will likely have to make major concessions in order to form a coalition government. The most likely coalition partners with Merkel’s CDU party are two small parties, the pro-business FDP and the Greens. This is uncharted political territory, as Germany hasn’t had a 3-party coalition since the 1950s. However, Merkel, an experienced and astute politician, hasn’t wasted any time, and has already appointed her former finance minister, Wolfgang Schaeuble to president of parliament. This astute move clears the path for the FDP to join a coalition, as the party has insisted on the finance portfolio. The FDP is fiscally hawkish and is strongly opposed to Germany continuing to finance weaker eurozone members, such as Greece. If the FDP does take part in the government, Merkel may have to shift away from her plans to further integrate the European Union.

On Tuesday, German industrial giant Siemens AG announced that it would merge rail operations with Alstom SA, a French train manufacturer. The merger is aimed as a response to growing competition in the rail transport sector, particularly from the Chinese state-owned railroad, CRRC. The merger still needs to be approved by regulators, but is already being hailed as an important deal which will strengthen economic ties between France and Germany and will help Europe compete on the global stage. Siemens is listed on the DAX 30, and its shares have jumped 2.2 percent in Wednesday trade.

Economic Calendar

Thursday (September 28)

• 2:00 German GfK Consumer Climate. Estimate 11.0. Actual 10.8
• All Day – German Preliminary CPI. Estimate 0.1%

Friday (September 29)

• 2:00 German Retail Sales. Estimate 0.5%
• 3:55 German Unemployment Change. Estimate -5K
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.6%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.2%

*All release times are EDT

*Key events are in bold

DAX, Thursday, September 28 at 6:25 EDT

Open: 12,681.50 High: 12,709.00 Low: 12,666.50 Close: 12,695.50

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