The DAX index has steadied in the Wednesday session. Currently, the DAX is trading at 11,174, up 0.33% on the day. There are no German or eurozone indicators on the schedule. On Thursday, the ECB releases the minutes of its policy meeting in October and the eurozone publishes consumer confidence.
A sharp fall in technological stocks on Wednesday has sent global equity markets sharply lower. The DAX has dropped 1.8% this week, and there could be more bumps ahead, as nervous investors fret over the escalating trade war between the U.S. and China. There had been hopes that the U.S might ease up on the rhetoric against China, but those hopes were dashed on Sunday, at an Asian-Pacific summit in Papua New Guinea. The meeting ended in discord, with leaders unable to agree on a final communique. U.S Vice President Mike Pence, who headed the U.S. delegation, was blunt in his remarks, saying that China would have to drastically change its trade practices before the U.S. would remove current tariffs on $250 billion in Chinese goods.
The standoff between Rome and Brussels over the Italian budget continues, with the ball now in the court of the European Commission, which is in charge of EU regulations. The Commission is expected to issue a report on Wednesday that Italy’s draft 2019 budget is in breach of EU deficit and debt rules. Italy’s debt stands at a staggering 132% of GDP, and the EU is concerned that the high-spending budget could cause another debt crisis in the eurozone. The EU could impose severe financial sanctions on Italy, with fines of up to 0.2% of the country’s GDP. Senior Italian officials have vowed not to bend on the budget, but a compromise would clearly be in the interest of both sides.
The ECB remains on track to wind up its stimulus package at the end of the year, but the economic slowdown gripping the eurozone could mean a change in monetary policy. German data is often viewed as a bellwether for the eurozone, and a rare decline in German GDP in the third quarter is an alarm bell that the euorozone economy has hit some headwinds. On Tuesday, ABN-Amro, one of the largest banks in the Netherlands, said that it does not expect the ECB to raise interest rates before March 2020.
