The DAX index has posted considerable gains in the Tuesday session. Currently, the index is at 11,689, up 0.66% on the day. In economic news, German ZEW Economic Sentiment plunged to a level of -24.7, well below the estimate of -12.3 points. Eurozone ZEW Economic Sentiment followed a similar trend, falling to -19.4, compared to a forecast of -9.2 points. On Wednesday, the eurozone releases Final CPI and EU leaders will hold a summit in Brussels.
After sustaining losses of over 4 percent last week, the DAX has reversed directions and posted modest gains so far this week. Global equity markets nosedived last week due to two key factors – Two key factors in the downward spiral of global markets are the recent spike in U.S bond yields and growing fears about the impact of the U.S-China trade war. The Italian budget has triggered a crisis between Italy and the EU, has also weighed on European markets in recent weeks. However, market sentiment is more positive this week, with Italian stock markets showing gains on Tuesday. Will these gains be short-lived? The budget proposed by Rome increases the deficit to 2.4% of GDP, which breaches EU rules that requires lower deficits. The budget will be sent later this week to the Italian parliament for approval. If it is approved, Rome and Brussels appear headed for a collision which could hurt European stock markets as well as the euro.
EU leaders are meeting on Wednesday in Brussels, but hopes that the summit would include a draft statement on Brexit have been dashed due to a deadlock over the Irish border. The EU is insisting that it will not sign a withdrawal agreement with Britain, unless there is a backstop which allows Northern Ireland to remain in a customs union with the EU after Brexit. However, the British government is unlikely to agree to such a move, since it would require regulatory barriers within the United Kingdom. With plans for a Brexit statement at Wednesday’s meeting on hold, a Brexit statement with have to wait until EU leaders meet in November or even December, which is extremely close to the Brexit deadline in March 2019.
