DAX rebounds with strong gains

The DAX index has posted strong gains in the Tuesday session. Currently, the DAX is at 12,400, up 1.33% on the day. In economic news, eurozone data was mixed.  PPI jumped to 0.8%, well above the estimate of 0.4%. Retail Sales edged down to 0.0%, shy of the forecast of 0.1%. On Wednesday, Germany and the eurozone will release Services PMIs.

The DAX is coming off another rough week, in which it declined 1.5 percent. Recent trade tensions are threatening to hamper the eurozone export sector, which in turn could weigh on manufacturing output. Investors are keeping a close eye on German and eurozone manufacturing PMIs, which are bellwethers of the strength of the manufacturing sector. In June, the German and eurozone readings pointed to expansion but also continued a downward trend. Both PMIs have now dropped for six straight months, raising concerns among investors about the strength of the eurozone economy. Germany, the locomotive of the eurozone, produced soft consumer numbers last week. Retail Sales plunged 2.1%, its steepest decline in 2018. As well, Preliminary CPI fell to 0.1%, down from 0.5% a month earlier.

On Friday, EU leaders holding a summit in Brussels announced that they had reached an agreement on migration. However, the deal, which was short on details, appears to be a stopgap which papers over the deep divisions that still remain in the EU over immigration. German Chancellor Angela Merkel didn’t have much time to celebrate the news, as her fragile coalition is in crisis. On Sunday, German Interior Minister Horst Seehofer offered to resign, saying the migrant deal didn’t go far enough in protecting Germany from illegal immigration. Seehofer heads the CSU, which is the junior coalition partner in the coalition. Merkel will have to find a way to keep Seehoger on board if she wants to stay in power, and if this political crisis continues, investors could get nervous and send the DAX lower.

  Risk is in the air

Economic Calendar

Tuesday (July 3)

• 5:00 Eurozone PPI. Estimate 0.4%. Actual 0.8%
• 5:00 Eurozone Retail Sales. Estimate 0.1%. Actual 0.0%

Wednesday (July 4)

• 3:55 German Final Services PMI. Estimate 53.9
• 4:00 Eurozone Final Services PMI. Estimate 55.0

*All release times are DST

*Key events are in bold

DAX, Tuesday, July 3 at 7:50 DST

Previous Close: 12,238 Open: 12,329 Low: 12,276 High: 12,410 Close: 12,400

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