DAX: German Stocks Languish on Interest Rate Concerns & China Tariffs – US Inflation Data Wednesday

The week started with most Eurozone indices up on the day, but inflation data due this week and the Fed’s stalling pivot point weigh on new highs.

The market rallied this morning but found that concerns on the ECB and Fed monetary policy pivot created a risk-off sentiment. The DAX reached a high for the day at 18802 but retraced from there dropping 0.2% on the day.

We are expecting US inflation data for Wednesday and Eurozone inflation on Friday.

The US data is expected to show a small decline in the inflation rate from 3.5% to 3.6% YoY, while Eurozone inflation is expected to decrease to 2.7% from 2.9%. Both readings are still well above the central banks’ inflation target of 2%.

Recent comments from the Fed’s Kashkari have added to the perception that the Fed may have to hold interest rates high for longer. Higher interest rates in the US may mean that the ECB holds out longer also on their first interest rate cut.

For Wednesday we’ll get the GDP Growth for the Eurozone which is forecast to show improvement in the common currency area’s economic expansion. Last month’s data showed GDP Growth at 0.1% YoY, consensus for this month’s reading is for an increase in growth to 0.4%.

Another concern that has impacted stock markets this week is Joe Biden’s intention to raise tariffs on an array of Chinese imports to the US. In the case on Chinese electric vehicles would go from 27.5% to 102.5%, while other goods could also see their tariffs increased by double or triple.

The news could create a trade war with one of the biggest trading partners for the US, which would also affect many US firms exporting or importing from China.

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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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