The DAX index has posted sharp gains in the Friday session. Currently, the index is at 11,046, up 1.17% on the day. Bank and auto shares have climbed sharply, with BMW (MI:BMW), Daimler (DE:DAIGn) and Deutsche Bank (DE:DBKGn) all registering gains of over 2% on Friday. In economic news, there is only one release. The eurozone current account surplus narrowed to EUR 20.3 billion, down from EUR 23.0 billion. This was well off the estimate of EUR 24.1 billion.
Is the eurozone headed for a recession? Growth forecasts have been revised lower for the three largest economies in the bloc (Germany, France and Italy). The U.S-China trade war, which shows not signs of being resolved anytime soon, has taken a bite out of the eurozone export and manufacturing sectors have slowed. If the trade war worsens or the U.S. economy slows down in 2019, the eurozone could lapse into a recession. Given these weak economic conditions, the ECB, which finally terminated its massive stimulus program last month, is unlikely to raise interest rates before the fourth quarter of 2019. Just a few months ago, analysts were predicting a rate hike in the third quarter. Lower rates should be bullish for the equity markets, which will be more attractive to investors than the bond markets.
Another week has meant more gains for the streaking DAX index. The DAX is on track to post gains for a third successive week, and has enjoyed a stellar January, with gains of 5.3 percent. On Friday, the DAX pushed above the 11,000 level for the first time since early December. Investors remain hopeful that trade tensions between the U.S. and China will ease, with senior Chinese and U.S. officials meeting for another round of trade talks on January 30. The tariff spat has triggered a slowdown of the Chinese economy, and there are concerns that U.S growth will slow if the sides don’t resolve the conflict.
Economic Calendar
Friday (January 18)
- 4:00 Eurozone Current Account. Estimate 24.1B. Actual 20.3B
*Key events are in bold
DAX, Thursday, January 18 at 5:55 EST
Previous Close: 10,918 Open: 10,990 Low: 10,985 High: 11,052 Close: 11,046