The DAX index has edged upwards in the Tuesday session, erasing the losses seen on Monday. Currently, the index is at 12,365, up 0.12% on the day. On the release front, German Wholesale Price Index jumped 0.3%, edging above the estimate of 0.2%. On Wednesday, the spotlight will be on the Federal Reserve, which is likely to maintain interest rates at a range between 2.00% and 2.25%.
The DAX was red-hot last week, posting gains of 3.1 percent. On Friday, the DAX touched 12,458, its highest level in September. However, risk appetite will be tested this week, as the U.S and China have upped the ante and imposed new tariffs on each other. On Monday, the U.S imposed tariffs on some $200 billion worth of Chinese goods, while China responded with tariffs of $60 billion on U.S products. There may be more headwinds ahead, as China sharply attacked the U.S, saying it had plunged “a knife to China’s neck” with the new tariffs. The Chinese have canceled trade talks with the Trump administration, and no new talks are likely to be held until the mood improves between the world’s two largest economies. Previous rounds of tariffs between the two economic giants have boosted the U.S dollar, but so far this week, equity markets are steady.
The normally cautious Mario Draghi had a hawkish message on Monday. Draghi was testifying before the European Parliament Economic and Monetary Affairs Committee. He said there had been a “relatively vigorous pick-up in underlying inflation”. With regard to the ECB’s forward guidance, Draghi said that the ‘”through the summer of 2019″ was a timeline in which conditions warrant a first rate increase. This means that the September meeting will be a live meeting, with many analysts predicting a rate hike in December.
