The DAX index has posted considerable gains in the Tuesday session. Currently, the index is at 12,149, up 0.44% on the day. On the release front, there are no German or eurozone indicators. On Wednesday, the eurozone releases current account and Germany holds an auction for 10-year bonds.
There was growing speculation that another round of tariffs in the U.S-China trade war was in the offing, and President Trump has delivered the goods. On Monday, Trump imposed tariffs of 10% on some $200 billion worth of Chinese goods and threatened further action if China retaliated. Why did the currency markets not react? Investors were braced for a move by Trump, and may be sighing in relief that the tariff was set at 10% rather than at 25%. One senior economist summed up Trump’s most recent salvo as “bad but manageable”. However, if the Chinese retaliate and the U.S takes further measures, this would likely hurt the equity markets.
ECB President Mario Draghi will be speaking at events on Tuesday and Wednesday, and the markets will be hoping for some insights after last week’s ECB policy meeting. As expected, the benchmark rate was held at 0.00%. However, in a slight the Bank announced that it would wind up asset purchases at the end of this year. As well, the ECB will trim its monthly bond purchases from EUR 30 billion to 15 billion, starting in October. These measures mark a vote of confidence in the eurozone economy, which has softened in the second quarter, but still remains solid. If there is no sudden downturn in economic conditions, investors can look forward to the ECB finally winding up its stimulus program.
