The DAX has started the week in positive territory. In the Monday session, the DAX is at 12,749, up 0.20% on the day. In economic news, there are no major eurozone events. Eurozone Sentix Investor Confidence tumbled to 9. 3, well short of the estimate of 18.6 points. On Tuesday, Germany releases Final Services PMI and retail sales. This marked the lowest level since October 2016. On the inflation front, the Producer Price Index dropped to 0.0%, shy of the estimate of 0.1%. The last time that the indicator failed to post a gain was in August 2017.
There was some good news for investors on Friday, as Italy appears to have wrapped up months of political turmoil, as the country finally has a government. The new coalition is made up of two euro-sceptic parties, the League and the Five-Start Movement, which is likely to result in friction between Rome and the European Union. After President Sergio Matterella vetoed the choice for finance minister last week, it appeared that the country might be headed for another election and more political uncertainty, and Italian stocks and bonds dropped sharply. However, the crisis is over after the prime minister-elect, Giuseppe Conte, found another candidate for the key finance post. The new government has said it will drastically reduce immigration and raise spending, planks which could put it at odds with EU policy. Although the League and Five Star Movement have not issued any threats to withdraw from the EU or even hold a referendum, there is plenty of concern among investors that the fourth largest economy in the eurozone is being steered by a government with a populist, anti-establishment platform.
Is a new global trade war brewing? There are some ominous signs, after the Trump administration made good on its threats and slapped tariffs on the European Union, Mexico and Canada on Thursday. These include tariffs on the U.S had granted all three trading partners a temporary extension but cited insufficient progress on trade talks as the reason for the tariffs. This has triggered promises of retaliatory tariffs on US products, and tempers were short at the G-7 meeting of finance ministers in Canada on the weekend. US Treasury Secretary Steve Mnuchin faced sharp criticism from other finance ministers over the tariffs. There are fears that the escalating trade tensions could trigger a global trade war, which could have a devastating effect and lead to sharp losses on world stock markets.
