The DAX index has edged upwards in the Tuesday session. Currently, the DAX is at 13,099, up 0.17% on the day. On the release front, there are no German or eurozone data releases, so traders can expect a quiet day on German stock markets. On Tuesday, Germany and eurozone will release manufacturing and services PMI reports. In the US, the Federal Reserve will release the minutes of its May policy meeting.
It’s been a solid run for the DAX, which has strung together 7 consecutive winning weeks. The index has jumped an impressive 9.8% in that time and is currently at its highest level since late January. A robust German economy and lower tensions over North Korea have helped fuel positive sentiment and increased investor risk appetite.
Investors are keeping a watchful eye on Italy, as the country moves towards establishing a new government. Two euro-sceptic parties, the Lega Nord and the Five Star Movement have reached an agreement and requested approval to form a government from the country’s president. The platform issued by the parties calls for increased deficit spending and a review of European Union fiscal rules. So far, neither party has called for a referendum on Italian membership in the European Union or demanded that the EU cancel the portion of Italy’s debt that it holds. Still, Italy is the third largest economy in the EU (with Britain heading out the door), and any moves which will put Italy on a collision course with the EU could have a negative impact on investor sentiment towards the euro. On Monday, ECB governing council member Ewald Nowotny admitted that the political situation in Italy had “created a lot of nervousness”, but that the new government would be judged on its actions.
There was a dramatic development in the China-US tariff battle on the weekend, as US Treasury Secretary Steven Mnuchin said that the trade war was being ‘put on hold’. Just last week, the White House sounded pessimistic about a deal being reached with China. The two economic giants have traded stiff tit-for-tat tariffs in recent weeks, worth billions in trade. These moves had raised fears of a bilateral trade war between the two largest economies in the world. The respite in tariffs means that the US can now discuss the US trade deficit with China, which President Trump has long complained is a result of a non-level playing field with China. In addition to the trade deficit, the US wants to discuss technology transfers and cyber theft.
