The DAX index has posted sharp losses in the Monday session. Currently, the DAX is trading at 12,284, down 0.85% on the day. On the release front, it’s a quiet start to the week. The eurozone trade surplus fell to EUR 19.9 billion, missing the estimate of EUR 22.6 billion. This marked a 3-month low. On Tuesday, Germany releases PPI and ZEW Economic Sentiment.
The DAX has taken a cold shower to start the week, with sharp losses on Monday. European technology stocks are in the red, after Micro Focus, one of Britain’s largest tech firms, saw its shares plunge by 55 percent after it lowered its revenue forecast and its CEO resigned. Investor sentiment has chilled, sending the DAX lower.
The eurozone economy is enjoying a strong first quarter in 2018, with a robust German economy leading the way. A stronger global appetite has boosted exports and the manufacturing sector, while unemployment continues to drop. However, inflation, which has persistently hovered at low levels, continues to pose a problem for policymakers. In fact, Eurozone Final CPI has been dropping in recent months, and this worrisome trend continued on Friday, when the indicator dropped to 1.1%, down from 1.3% a month earlier. This marked the weakest gain since December 2016. ECB President Mario Draghi addressed inflation concerns last week, and sounded cautious. Draghi said that the ECB still needed to see evidence that inflation was gaining strength before there could be any talk about a change in monetary policy. In the meantime, Draghi said the ECB would remain “patient, persistent and prudent”. Stronger economic conditions have led to growing speculation that the ECB will wind up its stimulus program in September. However, there is still plenty of slack in the economy, and coupled with low inflation, Draghi can afford to remain cautious and maintain current monetary policy for some time.
