DAX Lower, Investors Await German CPI

The DAX index has lost ground in the Wednesday session, continuing the downward trend which marked the Tuesday session. Currently, the index is at 12,605.50, down 0.56%. On the release front, ECB President Mario Draghi will speak again before the ECB Forum of Central Bankers. On Thursday, Germany releases Preliminary CPI and the US will publish Final GDP and unemployment claims.

The markets continue to keep an eye on Sintra, Portugal, which is hosting the ECB Forum. On Tuesday, Mario Draghi was upbeat about economic conditions in the eurozone, and the euro responded with sharp gains, although the CAC lost ground. Draghi acknowledged that economic indicators continued to point to a broadening recovery in the eurozone, but pointed to inflation as the barrier to tightening policy. Draghi defended the bank’s loose accommodative policy, saying that it had pushed inflation higher, but stimulus was needed until inflation becomes “durable and self-sustaining”. Germany is not happy with the ECB’s current monetary policy, as it feels that tighter policy is more appropriate for the strong German economy. For his part, Draghi has no intentions of altering current policy until inflation moves closer to the ECB’s target of 2 percent, and he has been consistent in this message.

The German economy continues to perform well, as the labor market is strong, exports are up and consumer demand is solid. Still, Germany has not been immune to low inflation levels, which have hampered economies in Europe, Japan and North America (the UK is one notable exception). German CPI, the primary gauge of consumer inflation, has not posted a gain since March, and the estimate for the June report stands at a flat 0.0%. The strong economy and the ECB’s loose monetary policy, inflation remains stubbornly low. One key factor in this is falling oil prices, which have also pushed energy stocks lower, and this has weighed on the DAX as well. Mario Draghi has sounded more optimistic about inflation levels, but at the same time has underscored that the ECB has no plans to remove stimulus until inflation levels in the eurozone are closer to the ECB’s target of 2 percent. Some analysts have projected that the ECB will not raise interest rates before 2019.

Economic Calendar

Wednesday (June 28)

• 2:00 German Import Prices. Estimate -0.6%. Actual -1.0%
• 4:00 Eurozone M3 Money Supply. Estimate 5.0%. Actual 5.0%
• 4:00 Eurozone Private Loans. Estimate 2.5%. Actual 2.6%
• 9:30 ECB President Mario Draghi Speaks

Thursday (June 29)

• 2:00 GfK German Consumer Climate. Estimate 10.4
• All Day – German Preliminary CPI. Estimate 0.0%
• 8:30 US Final GDP. Estimate 1.2%

*All release times are EDT

*Key events are in bold

DAX, Wednesday, June 28 at 7:00 EDT

Open: 12,589.50 High: 12,538.00 Low: 12,625.50 Close: 12,605.50

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