With only third-tier economic data released, the DAX ended last week with marginal gains. Germany’s equity index closed 61.52 points higher or with a 0.47% gain at 13,241.75. Meanwhile, the Dow Jones Industrial Index rallied to record highs on Friday.
Euro zone’s final CPI reading for the third quarter of 2019 showed that overall inflation rose 0.7% from last year. Meanwhile, the core CPI report which excludes the price of volatile items, revealed a 1.1% uptick. Both inflation numbers came in as expected.
On the other hand, euro zone’s trade balance fell short of the 18.7 billion EUR consensus when it printed at 18.3 billion EUR. The reading for September was also revised lower at 19.7 billion from 20.3 billion EUR.
The index initially sold off at market open but soon found enough support around its November 14 lows at 13,170.55. In the latter part of the session, risk appetite picked up on optimism that the US and China would soon complete a phase one deal. It was reported that US and Chinese representatives had “constructive talks” over tariff negotiations on Friday. This news follows after White House Chief Economic Adviser Larry Kudlow announced that they were “getting close” to a deal earlier last week.
Without any major reports from Europe scheduled today, the index will likely take its cue from market sentiment. News that point at positive developments in the US-China trade deal will likely fuel risk appetite and push the DAX back up to 13,300. On the other hand, reports which suggest that the two countries are nowhere near a phase one deal could send the index to the lower end of the range that it has been trading in since November 7 at 13,159.23.
The same goes for news on Trump’s auto tariffs on European-made cars. Earlier this year, US President Donald Trump announced that they may impose a 25% levy on imported cars. The deadline for his decision was on November 14 but there have been no updates thus far. Key officials think that the US will not proceed with this threat and news consistent with this view likely likely have a bullish effect on German equities. On the other hand, if Trump pushes through with the levies, we could see the DAX drop below support at the 13,000 psychological handle.Download our latest quarterly market outlookfor our longer-term trade ideas.
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