DAX Gains on Steady Services PMIs

The DAX index has posted gains in the Tuesday session. Currently, the DAX is currently trading at 12,170.50, up 0.54% on the day. On the release front, German and Eurozone Services PMI were within expectations. Eurozone Retail Sales declined 0.2%, shy of the estimate of -0.3%. On Wednesday, Germany releases Factory Orders and the eurozone publishes Retail PMI.

The DAX has responded positively to services sector numbers, as German and Eurozone Services PMIs both pointed to slight expansion. Eurozone Final Services PMI slowed to 54.7, shy of the estimate of 54.9 points. However, German Final Services PMI improved to 53.5, edging above the forecast of 53.4 points. Retail Sales was not as positive, posting a decline of 0.3%, compared to a gain of 0.5% a month earlier. This marked the first decline since January. If upcoming consumer spending data is weak, investor risk appetite could weaken and send stock markets lower.

The ECB will hold a crucial policy meeting on Thursday, with the bank’s quantitative easing program the main order of business. The ECB’s current asset-purchase program terminates in December, and the bank will have to decide on a new scheme. However, analysts don’t expect the details of the new program to be announced until October or possibly December. Still, every nuance from Mario Draghi’s press conference will be analyzed, and any hints about changes in the ECB’s monetary policy, such as withdrawing stimulus, is likely to have a sharp impact on the euro. The eurozone’s strong performance in 2017 has raised speculation that the ECB will commence tapering in the near future, but the rejuvenated euro has complicated matters. The euro has gained some 13% against the dollar this year, with much of the appreciation due to speculation that the ECB will end its asset purchases. The stronger euro is equivalent to a raise in interest rates and has resulted in monetary tightening, so the ECB could decide on a slow exit from its asset purchase scheme. Aside from the headache of a stronger euro, ECB policymakers must wrestle with the dilemma of  what monetary stance to take with a stronger eurozone economy that remains gripped by very low inflation. Will the ECB address these concerns at the Thursday meeting?

Economic Calendar

Tuesday (September 5)

• 3:55 German Final Services PMI. Estimate 53.4. Actual 53.5
• 4:00 Eurozone Final Services PMI. Estimate 54.9. Actual 54.7
• 5:00 Eurozone Retail Sales. Estimate -0.2%. Actual -0.3%

Wednesday (September 6)

• 2:00 German Factory Orders. Estimate 0.4%
• 4:10 Eurozone Retail PMI

*All release times are EDT

*Key events are in bold

DAX, Tuesday, September 5 at 8:10 EDT

Open: 12,126.00 High: 12,214.50 Low: 12,120.75 Close: 12,174.00

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