DAX sinks to 3-week low on concerns over U.S.- China trade spat

The DAX index has paused for breath in the Friday session, after sharp losses on Thursday. The DAX is currently trading at 10,976 down 0.41% on the day. On the release front, there are no major German or eurozone indicators. Germany’s trade surplus widened to EUR 19.4 billion, above the estimate of EUR 18.3 billion.

Investors remain jittery about trade tensions between the U.S and China, which have been the catalyst for the global trade war which was rocked equity markets. Although the sides met for talks last week in Washington, there have been no signs of progress. On Thursday, U.S. stock markets fell after President Trump said that he had no plans to meet with Chinese President Xi before March 2, when further U.S. tariffs are scheduled to be imposed. This has raised concerns that a trade deal will not be reached prior to the March 2 deadline. On the DAX, bank and automotive shares have dropped sharply. Deutsche Bank has declined 1.08%, and Daimler, BMW and Volkswagen have all dropped over 1.2%.

The European Commission has projected moderate growth in the EU in 2019, but economic uncertainty has dampened confidence. The forecast lowered its growth forecast for the eurozone to 1.9% in 2018, down from 2.1% in the November forecast. For 2019, the growth forecast has also been revised down to 1.5%, compared to 1.9% in the November forecast. Inflation slipped in late 2018 due to lower oil prices, with an average inflation level of 1.7%. This is expected to dip to 1.6% in 2019. The report highlighted Brexit and the slowdown in China as key sources of uncertainty for European economies, adding that the projections were subject to downside risks.

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• 2:00 German Trade Balance. Estimate 18.3B. Actual 19.4B

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