The DAX index has ticked higher in the Tuesday session. Currently, the DAX is at 13,140.00, up 0.12% on the day. On the release front, German ZEW Economic Sentiment slowed to 17.4, short of the estimate of 17.9 points. Eurozone ZEW Economic Sentiment also softened, with a reading of 29.0. This was short of the 30.2 points. Later in the day, ECB President Mario Draghi speaks at an event in Frankfurt. The US will release PPI, an important inflation indicator. On Wednesday, Germany and the US release CPI reports. As well, the Federal Reserve is expected to raise the benchmark rate to a range between 1.25% to 1.50%.
In Germany and the eurozone, investor confidence weakened in December. The well-respected ZEW Economic Sentiment indicators, a confidence barometer of institutional investors, missed their forecasts. Still, the readings point to optimism – Germany’s economy continues to look sharp, and this had led the way for the eurozone, which has enjoyed solid growth in 2017. At the same time, investors have to keep an eye on political developments as well, and there are some worrisome developments. Germany still remains without a government, and uncertainty over Brexit continues to hover over the European Union. Like the euro, German stock markets are showing a muted reaction to the soft ZEW readings.
Will the Fed press the rate trigger on Wednesday?. The markets are expecting a quarter-point rate hike from the Fed later on Wednesday. Even though this move has been priced in, rate hikes tend to trigger a surge of confidence among investors, and could trigger gains in global stock markets. Another rate hike is expected in January, with fed futures pricing a rate hike at 87%. The Fed has hinted that it could raise rates up to three times in 2018, and this upward movement in rates will likely propel the US dollar upwards. The US labor market remains at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages.
