DAX holds steady despite dip in German economy

Kenny Fisher MarketPulse

The DAX index is almost unchanged in the Wednesday session, continuing the gains seen on Tuesday. Currently, the DAX is trading at 11,465, down 0.06% since the close on Tuesday. In economic news, German Preliminary GDP in the third quarter declined 0.2%, missing the estimate of -0.1%. Eurozone GDP dipped to 0.2%, matching the estimate. On Thursday, the eurozone releases trade balance.

European stock markets are under pressure on Wednesday, after Germany reported that the economy contracted in the third quarter for the first time since Q1 of 2015. However, the DAX has held its own, posting gains on Wednesday. Predictably, German officials tried to put a brave spin on the numbers. The Economy Ministry said that a 0.2% decline “isn’t a catastrophe” and that the economy would rebound in the fourth quarter. The ministry blamed the contraction on weakness in the auto sector due to new pollution standards. However, the well-respected ZEW research institute did not share this enthusiasm, saying on Tuesday that investors did not expect a rapid recovery from the current weakness. German ZEW Economic Sentiment posted a second straight soft release, with a reading of -24.1 points. This points to deep pessimism on the part of institutional investors and analysts.

The drama over the Italian budget continues on Wednesday, after Rome defiantly ignored a EU deadline on Tuesday to revise its budget. The government said it would stick to its deficit target of 2.4% and a growth forecast of 1.5%, which the EU argues breaches its fiscal rules. With the ball in the EU court, what happens next? The EU could respond with financial sanctions worth billions. The markets have already responded on Wednesday with a thumbs-down, as Italian bonds have climbed sharply and the Milan stock exchange is down one percent.

European open – Brexit deal, Italy budget and oil

Sterling braces for wild moves after cabinet meeting

There’s significant risk ahead.

Economic Calendar

2:00 German Preliminary GDP. Estimate -0.1%. Actual -0.2%
2:45 French Final CPI. Estimate 0.1%. Actual 0.1%
5:00 Eurozone Flash GDP. Estimate 0.2%. Actual 0.2%
5:00 Eurozone Industrial Production. Estimate -0.4%. Actual -0.3%
Tentative – German 30-year Bond Auction
5:00 Eurozone Trade Balance. Estimate 16.7B

Open: 11,394 Low: 11,463 High: 11,314 Close: 11,465

Author

Kenny Fisher

MarketPulse

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities.

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