The DAX index has posted strong gains in the Wednesday session. Currently, the DAX is at 13,190.00, up 1.00% on the day. On the release front, Germany releases Preliminary CPI, which is expected to accelerate to 0.3%. In the US, Preliminary GDP is expected to post a strong gain of 3.3%. On Thursday, German releases retail sales and the eurozone publishes CPI Flash Estimate.
European stock markets are in green territory on Wednesday, buoyed by comments from Fed Designate Jerome Powell. At his confirmation hearing, Powell said that he favored tailoring regulations for small banks, leaving the toughest regulations for the big players. This boosted bank shares on Wednesday, and the DAX has jumped on the bandwagon. Commerzbank has gained 1.16% and Deutsche Bank has improved 1.17%.
There are new developments in the German political saga, as President Angela Merkel continues efforts to form a new government. Coalition talks will now center on Merkel’s conservative bloc (CDU) and the social democrats (SPD). After the election, the SPD announced that it would remain in the opposition. However, coalition talks imploded when the Free Democrats pulled out of the negotiations and there is pressure on the SPD to reconsider in order to avoid elections. The SPD is split on whether to join a coalition with Merkel, as many SPD members don’t want the SPD to be relegated to a junior party in the coalition, as was the case prior to the election. Although the SPD has agreed to exploratory meetings with the CDU, substantial talks of a “grand coalition” are not expected to start before 2018. The SPD is likely to take advantage of Merkel’s weak hand and press demands for greater government spending and a looser immigration policy. The SPD could even demand the powerful finance ministry.
