The DAX index has started the week with strong gains. In the Monday session, the DAX is trading at 11,442, up 2.15% on the day. In economic news, there are no German or eurozone indicators. On Tuesday, Germany releases Preliminary CPI and the eurozone publishes Preliminary Flash GDP.
There was breaking news on Monday, as German Chancellor Angela Merkel announced that she would not seek re-election as chair of the Christian Democrats. Merkel made the announcement after her party had a poor result in a regional election. The news sent the euro lower briefly and pushed German bond yields higher. Merkel said she will stay on as Chancellor until her term ends in 2021, but her announcement is another dent in the Iron Lady’s authority, which has diminished as her CDU party has slipped in popularity. The DAX shrugged off the news, with strong gains on Monday. Still, it has been a disastrous October for the DAX, which has plunged 6.8 percent. On Friday, the DAX touched a low of 11,051, its lowest level since December 2016.
There were no surprises from the ECB policy meeting on Thursday. The ECB maintained its main refinancing rate at a flat 0.00%, where it has been pegged since January 2016. With the euro and European stock markets heading lower this week, ECB President Mario Draghi tried to put a positive face on recent developments. Draghi acknowledged that the turmoil in global markets has raised the risks to the eurozone economy, but reiterated that the ECB remained on track to wind up its asset-purchase program in December. He discussed the eurozone’s “broad-based” economic growth and said he was confident that the Italian government would reach an agreement with the European Commission, which has rejected Italy’s budget since it raises the country’s deficit. However, Drahgi acknowledged that the eurozone economy has softened, and also noted the risks from the global trade war and the volatile political climate in Italy.
