DAX Index Gains Ground, Poised to Break 12,000

The DAX Index has posted considerable gains in the Tuesday session, and is poised to break above the symbolic 12,000 level. The index is up 1.1 percent and is trading at 11,967 in North American trade. Earlier in the day, the DAX touched a high of 11,978, its highest level since April 2015. In economic news, German Services and Manufacturing PMIs pointed to expansion, as both indicators beat their estimates. Manufacturing PMI improved to 57.0, above the forecast of 56.2 points. Services PMI improved to 54.4, beating the estimate of 53.6 points. Eurozone Manufacturing and Services PMIs also beat expectations. The markets will be keeping an eye on the Federal Reserve, which releases the minutes of its January policy meeting on Wednesday.

German data has looked sharp this week, boosting the DAX. PPI climbed 0.7% in January, well above the estimate of 0.3%. This marked a 3-month high. This was followed by strong PMI reports on Tuesday. Next up is Ifo Business Climate, which dipped to 109.8 in January, short of expectations. Little change is expected in February, with an estimate of 109.6 points. A strong reading could send the DAX to higher levels.

Recent eurozone numbers have been steady, with the economy expanding and inflation levels moving upwards. Nonetheless, the ECB appears reluctant to make any changes to current monetary policy. The ECB released the minutes of its January policy meeting on Thursday. The minutes indicated that the central bank continues to have little appetite for reducing stimulus. Policymakers stated that the recent climb in inflation could prove to be temporary and there is political uncertainty ahead. France and Germany, the two largest economies in the eurozone, go to the polls later this year, as does the Netherlands. Inflation has moved close to the central bank’s target of around 2 percent, prompting calls from Germany and elsewhere to tighten monetary policy. At this point in time, a majority of ECB policy makers are in favor of maintaining course the asset-purchase program, which ends in December. However, if growth and  inflation numbers continue to climb, there will be increased pressure and louder voices calling for tighter monetary policy, which would be bearish for the stock market.

Germany goes to the polls in September, and Chancellor Angela Merkel’s center-right Christian Democrats received some bad news on Sunday, as a poll by the Emnid Institute showed the center’left Social Democrats (SPD) climbing to top spot for the first time since 2006. The SPD has steadily gained ground since it chose Martin Schultz to lead the party in late January. Schultz is well-respected and is a former President of the European Parliament. Merkel remains a popular leader, but has lost support over her open-door policy on refugees, which led to hundreds of thousands of migrants coming to Germany. Merkel is seeking a fourth consecutive term, but this election could be her toughest challenge.

Economic Calendar

Tuesday (February 21)

• 3:30 German Flash Manufacturing PMI. Estimate 56.2. Actual 57.0
• 3:30 German Flash Services PMI. Estimate 53.6. Actual 54.4
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 55.0. Actual 55.5
• 4:00 Eurozone Flash Services PMI. Estimate 53.7. Actual 55.6
• All Day – ECOFIN Meetings
• 8:50 US FOMC Member Neel Kashkari Speech
• 9:45 US Flash Manufacturing PMI. Estimate 54.7. Actual 54.3
• 9:45 US Flash Services PMI. Estimate 55.8. Actual 53.9
• 12:00 US FOMC Member Patrick Harker Speech

Upcoming Key Events

Wednesday (February 22)

• 4:00 German Ifo Business Climate. Estimate 109.6
• 14:00 US FOMC Minutes

*All release times are EST

*Key events are in bold

DAX-30 for Tuesday, February 21, 2017

DAX-30, February 21 at 11:55 EST

Open: 11,818.00 High: 11,987.60 Low: 11,798.50 Close: 11,967.49

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