European markets are higher in the Tuesday session. Currently, the DAX is trading at 12,397 points, up 1.10% on the day. The CAC is also higher, posting gains of 0.69% on the day. On the release front, there are no German or eurozone indicators on the schedule. On Wednesday, ECB President Mario Draghi speaks at an event in Frankfurt. As well, the Federal Reserve will publish the minutes of its March rate meeting.
After weeks of escalating rhetoric in the trade battle between the US and China, there is a lull in the action, and the markets have reacted positively. On Sunday, US officials sought to lower the temperature on the Sunday television programs, and Treasury Secretary Steve Mnuchin said that he doesn’t “expect there will be a trade war.” This was followed by a calm message from Chinese President Xi Jimping on Tuesday. Xi was speaking at a development conference in China, and promised to lower tariffs on vehicle imports into China. This has been a major sticking point between the US and China, with President Trump complaining that China has a 25% tariff on US vehicle imports, yet the US only charges 2.5% on Chinese vehicles. Although China has previously declared that it would reduce the tariffs on vehicles, the markets were looking for some positive news, as the trade battle between the two largest economies in the world has shaken the markets in recent weeks. Xi added that China was looking to solve issues through dialogue rather than confrontation, and the markets are hoping that the US and China can avert a trade war, which could drag down the global economy.
German industrial numbers disappointed last week. Factory Orders posted a weak gain of 0.3%, well off the forecast of 1.6%. On Friday, Industrial Production declined 1.6%, compared to an estimate of 0.2%. This marked the fifth decline in the past six months. Earlier in the week, German Manufacturing PMI softened to 58.2, missing the estimate of 58.4. Although the reading indicated expansion, there is cause for concern as it marked an 8-month low.
