The DAX index has recorded slight gains in the Tuesday session. Currently, the DAX is at 13,042.50, up 0.33% on the day. On the release front, German GfK Consumer Climate is expected to edge up to 10.8 points. In the US, Fed Chair Designate Jerome Powell will testify at his confirmation hearing before the Senate Banking Committee. On Wednesday, Germany releases Preliminary CPI. The US will publish Preliminary GDP and Pending Home Sales and Janet Yellen will testify before a congressional committee.
Investors like they see from the German economy, and the DAX continues to trade at high levels. The euro and the stock markets remain steady, despite the political crisis in Germany. There are renewed hopes that another election can be avoided, as the SPD (socialist democrats) have reluctantly agreed to hold coalition talks with Angela Merkel’s CDU. The SPD was the junior partner in the previous government, and is expected to demand a bigger role in a new government if it agrees to a “grand” coalition. Talks between the CDU, the Greens and the Free Democrats imploded when the Free Democrats bolted, saying there was not enough common ground to continue talks. Merkel is reluctant to run a weak minority government, and if talks with the SPD don’t make progress, the likely result would be another election. For its part, SPD lawmakers are split on whether to join up with the CDU, but Merkel may choose to make her former coalition partner an offer it can’t refuse, such as the powerful finance minister.
The spotlight will be on Jerome Powell, who testifies before the Senate Banking Committee on Tuesday for his confirmation hearing. Powell is widely expected to maintain Janet Yellen’s cautious monetary stance, which has been marked by small, incremental rate hikes. Powell inherits an economy that is in excellent shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.
