DAX Subdued as German Stock Market Closed for May 1 Holiday

It’s a quiet start to the week for the DAX, as the Frankfurt stock exchange is closed for the May 1 holiday. The index has ticked higher in the Monday session, and is trading at 12,438.00 points. There are no German or Eurozone indicators on Monday. On Tuesday, we’ll get a look at Eurozone and German Manufacturing PMIs, as well as the Eurozone Unemployment Rate.

Eurozone consumer inflation climbed considerably in April. The Eurostat flash estimate indicated that CPI will climb to 1.9% in April, compared to 1.5% in March. Although this figure is close to the ECB inflation target of about 2 percent, the markets are not expecting Mario Draghi & Co. to make any monetary moves just yet. Last week, the ECB held rates at a flat 0.0%, and Draghi sent a dovish message out to the markets, saying that the ECB’s inflation forecast remained unchanged. The current ultra-loose policy, which includes a quantitative easing program of EUR 60 billion/mth, has been in place since 2008. Draghi acknowledged that the eurozone is in better shape, noting that economic conditions had improved and downside risks had decreased. There had been speculation that the ECB might taper or bring forward its asset-purchase program, which runs until December. The ECB holds its next meeting in June, and the markets will again be looking for some tightening from the ECB.

The French presidential campaign continues this week, with voters choosing between Emmanuel Macron and Marie Le Pen. The markets have priced in a victory by Macron, which is why we didn’t see significant movement in European stock markets last week. The opinion polls ahead the first round were fairly accurate, correctly forecasting that Macron would win 24% of the vote and Le Pen 22%, with both advancing to the May 7 runoff. The markets are thus relying on the polls for the second round, which continue to show Macron with a comfortable lead of 60-40. Le Pen is a heavy underdog, compounded by the fact that some candidates from the first round as well as former President Francois Hollande have publicly called for voters to support Macron. At the same time, traders should keep an eye on the polls, as any shift in the numbers could quickly translate into some volatility from the stock markets.

Economic Calendar

Monday (May 1)

• There are no German or Eurozone events

Tuesday (May 2)

• 3:55 German Final Manufacturing PMI. Estimate 58.2
• 4:00 Eurozone Final Manufacturing PMI. Estimate 56.8
• 5:00 Eurozone Unemployment Rate. Estimate 9.4%

*All release times are EST

*Key events are in bold

DAX, Monday, May 1 at 7:00 EST

Open: 12,411.75 High: 12,462.11 Low: 12,414.10 Close: 12,438.00

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