The DAX index has posted small losses in the Wednesday session, continuing the lack of movement which has characterized the week. Currently, the index is at 12,363, down 0.09% on the day. In economic news, there are no eurozone or German events. In the U.S, the focus is on the Federal Reserve, which virtually certain to raise the benchmark rate to a range between 2.00% and 2.25%. On Thursday, Germany releases Preliminary CPI and GfK Consumer Climate.
After posting strong gains last week, the DAX has shown limited movement since Monday. The week started with the U.S imposing tariffs on some $200 billion in Chinese goods, and China responding with tariffs of $60 billion on U.S imports. Previous rounds of tariffs between the two economic giants have rocked the equity markets, but investors have shrugged off these latest tariffs. Chinese equity markets have actually improved on Wednesday, as investors are optimistic that Chinese stimulus measures will minimize the damage to the Chinese economy from the U.S tariffs. However, there may be more headwinds ahead, as China sharply attacked the U.S this week, 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.
All eyes are on the Federal Reserve, which is widely expected to raise rates by 25 basis points at the conclusion of its policy meeting on Wednesday. What will be the tone of the rate statement? The U.S economy is in excellent shape, with GDP for Q2 expected at 4.2%, and unemployment hovering below 4 percent. However, the escalating global trade war has raised concerns that it could cool down global economic growth and hurt the U.S economy as well. Still, another rate hike in December is pegged at 78%, according to the CME, and some experts are predicting up to four rate hikes in 2019.
