DAX Slips to 4-Week Lows as Deutsche Bank Shares Plunge

The DAX has headed downwards for a second straight day. In the Friday session, the index is trading at 12,863.50, down 1.08% on the day. It’s a quiet end to the week, with just one eurozone event. The Producer Price Index edged lower to 0.2%, missing the estimate of 0.4%. Later in the day, the US releases nonfarm payrolls, which is expected to improve to 181 thousand.

Deutsche Bank shares have dropped sharply on Friday, sending European stock markets into red territory. Shares of the giant German bank are currently down 5.5% on the day. The picture is not a pretty one, as the stock price is at its lowest level since November, and the bank posted its third straight annual loss in 2017. A decline in investment bank revenue and the US tax reform bill contributed to a weak fourth quarter for Deutsche Bank shares. The banking sector showing losses on Friday, with Commerzbank down by 1.62%. Almost all listing on the DAX are in negative territory and showing “strong sell”, so traders can expect the DAX to continue to decline in the Friday session.

With the eurozone economy continuing to perform well, there has been speculation that the ECB could wind up its asset-purchase program (QE) in September and shift to a normative policy, and perhaps raise interest rates. However, Mario Draghi and other ECB members have taken pains to reiterate that the Bank is in no rush to end QE. On Wednesday, executive board member Benoit Coeure joined the chorus, saying that although QE “will not last forever” policymakers were in agreement “that we have to be patient and prudent because we are not yet where we want to be in terms of inflation”. Investors would be well advised to keep a close eye on eurozone and German inflation numbers, as asset purchases could be extended beyond September if inflation remains well below the ECB target of around 2.0%.

Economic Calendar

Friday (February 2)

• 5:00 Eurozone PPI. Estimate 0.3%. Actual 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 181K

*All release times are GMT

*Key events are in bold

DAX, Friday, February 2 at 6:20 EDT

Open: 12,956.00 High: 12,956.00 Low: 12,786.50 Close: 12.863.50

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