DAX Gains on Better Retail Sales & Unemployment Data, Hopes for Coalition Government Increase

Retail sales were higher than expected, and unemployment change decreased more than forecast.

• Retal Sales YoY up 2.9%, forecast 1.5%
• Unemployment change up 5k, forecast 15k
• Chancellor in waiting already holding coalition talks
• Bundesbank warns of recession in 2025

The DAX rallied from today’s lows and is posting a gain of 0.36%, spurred largely by a surprise jump in retail sales and a drop in unemployment numbers.

Better than Forecast Economic Data

This morning’s data turned the DAX around, the index was losing 0.63% on the day before the news hit the screens.

Retail Sales YoY for January was forecast at 1.5%, a sharp decline from last month’s 2.8% increase. Today’s data showed that despite recent declines in consumer confidence spending is rising.

Another concern for consumers is the perception of a contracting job market. However, today’s unemployment change showed only 5k additional unemployed for February.

Analysts had expected a rise of 15k from 11k last month, so the surprise is more than unexpected given the general sentiment.

DAX Live Chart

Three-party Coalition Talks

The chancellor in waiting, and leader of the CDU Merz, has already begun talks with his peers from the Socialist and Green parties.

Merz has stated his intention to get the government formed as quickly as possible. Various hurdles are bound to arise given the very different stances on spending and renewable energy.

The leader of the CDU has already back tracked on pre-election promises of closing the border, something both left wing parties are against.

However, extra spending, limited under the constitution and green energy subsidies are where the right and left parties are most divided.

Bundesbank Warns of 3^rd Year of Stagnation

Joachim Nagel, the head of the German central bank warned of the increasing risk of a 3^rd year of stagnation if action is not taken.

The Bundesbank president stated that fiscal reforms are necessary to stimulate demand, and that the new government needs to act quickly. The central bank is set to make proposals to increase borrowing but maintain fiscal stability.

ABOUT THE AUTHOR See More

Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.

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