The DAX index has started the week with losses. In the Monday session, the DAX is at 12,237, down 0.56% on the day. In economic news, the focus is on manufacturing reports. German and eurozone manufacturing PMIs were within expectations, with readings of 55.9 and 54.9, respectively. Later in the day, the eurozone releases PPI and the unemployment rate. On Tuesday, the eurozone releases retail sales.
European equity markets remain under pressure and the DAX had another rough week, declining 1.5 percent. Recent trade tensions are threatening to hamper the eurozone export sector, which in turn could weigh on manufacturing output. Investors are keeping a close eye on German and eurozone manufacturing PMIs, which are bellwethers of the strength of the manufacturing sector. In June, the German and eurozone readings pointed to expansion but also continued a downward trend. Both PMIs have now dropped for six straight months, raising concerns among investors about the strength of the eurozone economy. Germany, the locomotive of the eurozone, produced soft consumer numbers last week. Retail Sales plunged 2.1%, its steepest decline in 2018. As well, Preliminary CPI fell to 0.1%, down from 0.5% a month earlier.
On Friday, EU leaders meeting in Brussels announced with great fanfare that they had reached an agreement on migration. However, the deal was short on details appears to be a stopgap which papers over the deep divisions that still remain in the EU over immigration. German Chancellor Angela Merkel didn’t have much time to celebrate the news, as her fragile coalition is in crisis. On Sunday, German Interior Minister Horst Seehofer offered to resign, saying the migrant deal didn’t go far enough in protecting Germany from illegal immigration. Seehofer heads the CSU, which is the junior coalition partner in the coalition. Merkel will have to find a way to keep Seehoger on board if she wants to stay in power, and if this political crisis continues, investors could get nervous and send the DAX lower.
