The DAX index has started the week with losses. Currently, the index is at 10,814, down 0.36% on the day. In economic news, eurozone CPI dropped to 1.9%, just shy of the estimate of 2.0%. The eurozone trade surplus narrowed for a second straight month, falling to EUR 12.5 billion. This was short of the estimate of EUR 14.2 billion. On Tuesday, Germany releases Ifo Business Climate.
With the eurozone experiencing a slowdown in the second half of the year, inflation levels are also lower. Final CPI dropped to 1.9%, falling below the 2% level for the first time since May. Final Core CPI declined to 1.0%, down from 1.1% a month earlier. Will the downward spiral continue? At the Thursday policy meeting, the ECB downgraded its growth forecasts for the eurozone – from 2.0% in September to 1.9% in December for 2018, and from 1.8% in September to 1.7% in December in 2019. Mario Draghi added that headline inflation is also expected to drop in the coming months, due to weaker economic conditions.
At the policy meeting, the ECB formally ended its 2.6 trillion euro bond-purchase scheme. The program was implemented in order to kick-start the economy and raise ultra-low inflation levels. At a press conference after the meeting, ECB President Mario Draghi said the stimulus scheme had not only boosted growth in the eurozone, but was “in some cases the only driver of this recovery”. With the bond-purchase program being laid to rest, interest rates will again become the ECB’s primary policy tool. With the eurozone experiencing a slowdown, no raise rate hike is expected until well into 2019.
