DAX – NAFTA progress pushes auto stocks higher

The DAX has started the week with considerable gains. In the Monday session, the index is at 12,456, up 0.50% on the day. In economic news, German Ifo Business Climate improved to 103.8, above the estimate of 101.9 points.

The equity markets reacted positively to news that the NAFTA negotiations have picked up steam. A senior Mexican official said that the issues surrounding the auto sector were “basically resolved”, and President Trump said on Saturday that a deal was near. The upbeat comments have propelled auto stocks on the DAX higher on Monday – BMW is up 1.85%, Daimler 1.08% and Volkswagen 1.78%. A new NAFTA agreement would reduce trade tensions between the U.S and the other two NAFTA members, Canada and Mexico. One of the most important aspects of NAFTA is the auto sector, and Mexico wants to ensure that European cars manufactured in Mexico can enter the U.S with minimal tariffs.

The ECB released the minutes of its July meeting on Thursday. Policymakers were in agreement that economic growth in the eurozone was as expected, and saw no need to tweak monetary p0licy. The minutes noted that the eurozone economy remained in expansion mode and unemployment was falling. However, the threat of protectionism and a global trade war marked serious concerns, which if not addressed, could dampen eurozone growth. Inflation has risen to 1.7%, which some, though it remains unclear if this meets the ECB target of “close to but below 2.0%”. With the ECB expected to wind up its asset-purchase program in December, investors will be looking for policymakers to confirm this move.

Economic Calendar

Monday (August 27)

• 4:00 German Ifo Business Climate. Estimate 101.9. Actual 103.8

*All release times are DST

*Key events are in bold

DAX, Monday, August 27 at 7:30 DST

Previous Close: 12,394 Open: 12,462 Low: 12,427 High: 12,500 Close: 12,456

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