DAX gains ground as investors upbeat after ECB meeting

The DAX index has posted gains in the Friday session. Currently, the index is at 12,092, up 0.30% on the day. On the release front, the eurozone trade surplus was dismal, dropping to EUR 12.8 billion, well short of the estimate of EUR 16.3 billion. This was the lowest surplus since July 2014.

There were no surprises from the ECB policy meeting, as policymakers held the course, keeping the benchmark rate at 0.00%. However, there were some noteworthy items at the meeting. In a slight change to guidance, the Bank announced that it would wind up asset purchases at the end of this year. As well, the ECB will trim its monthly bond purchases from EUR 30 billion to 15 billion, starting in October. These measures mark a vote of confidence in the eurozone economy, which has softened in the second quarter, but still remains solid. The euro moved higher on the news, and the currency has enjoyed a strong week, with gains of 1.4 percent. The ECB reiterated that it will maintain monetary policy “through next summer”, so there is little chance of a rate hike before the second half of 2019. The Bank also revised downwards, albeit slightly, its growth forecast – the previous forecast of 2.1% growth in 2018 and 1.9% in 2019, was lowered to 2.0% and 1.8%. The ECB is predicting that inflation will remain steady at 1.7% through 2020, which meets the ECB target of slightly below the 2% level.

German ZEW economic surveys are well respected and often have an impact on the movement of the euro and German stock markets. Earlier in the week, ZEW Economic Sentiment improved in September, but remains mired in negative territory. The indicator came in at -10.6, posting a decline for a sixth straight month. The survey press release noted that during the survey period, Turkey and Argentina saw their currencies plunge, and German industrial production was soft. On Thursday, German Final CPI dipped to 0.1%, down from 0.3% a month earlier.

Economic Calendar

Friday (September 14)

• 5:00 Eurozone Trade Balance. Estimate 16.3B. Actual 12.8B

*All release times are DST

*Key events are in bold

DAX, Friday, September 14 at 6:00 DST

Previous Close: 12,055 Open: 12,107 Low: 12,076 High: 12,133 Close: 12,092

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