The DAX index has started the week with strong gains. In the Tuesday session, the DAX is at 13,126.00, up 0.52% on the day. The index has jumped 1.4% this week. There are no German or eurozone indicators on the schedule. On Wednesday, the eurozone releases consumer confidence and the Federal Reserve will publish the minutes of the November policy meeting.
Germany is facing one of its biggest political crises in decades, as President Angela Merkel has been unable to form a coalition. Talks to form a government have been ongoing for a month, but the Free Democratic Party (FDP) pulled the plug on Sunday, saying there was no "basis of trust" to enter a government with Angela Merkel’s CDU-CSU alliance and the Greens. The parties have been holding negotiations for a month, but have failed to bridge the gaps on issues such as immigration. Merkel has said she is not interested in running a minority government, whereby the opposition could topple the government at any time. President Frank-Walter Steinmeier has urged the parties to redouble their efforts in order to reach an agreement, warning that another election would cause uncertainty in German as well as Europe.
ECB head Mario Draghi spoke before a European Parliament Committee on Monday, and sounded optimistic about the eurozone economy. Draghi said that the ECB continues to see signs that the recovery is continuing. Economic growth continues to point upwards, and employment is at a record high. As for inflation, Draghi was optimistic, saying he was confident that wage growth will increase and drive underlying inflation. Still, Draghi acknowledged that inflation has "yet to show convincing signs of a self-sustained upward trend."
