The DAX has edged lower in the Thursday session, after plunging 1.5% on Wednesday. Currently, the DAX is at 11,565, down 0.33% on the day. On the release front, there are no German or eurozone indicators. European leaders are meeting for a summit in Brussels, as the clock winds down on Brexit. Friday will be busy, as On Friday, Germany and the eurozone release services and manufacturing PMI reports.
European markets suffered sharp losses on Wednesday, after pessimistic news about the U.S-China trade talks. The DAX declined 1.5%, as investor jitters over the trade war sent banking and automaker shares sharply lower. President Trump has adopted a tougher negotiating position, saying that the U.S. would maintain tariffs on China until it was clear that China was complying with a deal. Chinese officials are likely to insist that tariffs be removed as soon as a deal is signed, so a deadlock could be in the offing. Trade talks between the two super-economies have taken a pause, but are scheduled to continue next week.
The Federal Reserve has been sending out a steady dose of dovish messages since the start of the year, but the sharply dovish stance at the Wednesday policy meeting was a surprise. The Fed’s rate outlook (dot plot), which is released each quarter, showed that a majority of FOMC members expect no rate hikes in 2019. This was in sharp contrast to the previous quarter’s forecast, in which the FOMC projected two hikes this year.
The rate statement was downright pessimistic, stating that economic activity “has slowed”. Policy makers singled out slower growth in household spending and business investment and noted that inflation has decreased due to lower energy prices. The Fed also announced that it would stop reducing its balance sheet by $50 billion a month. This move is a loosening of policy and is intended to stimulate the economy. The new Fed forecast projects GDP growth of 2.1%, down from 2.3% in December.
