The DAX has ticked higher in the Monday session. Currently, the DAX is at 13,233.50, up 0.12%. German Retail Sales gained 0.5% in September, matching the forecast. Later in the day, Germany releases Preliminary CPI, with an estimate of 0.1%. In the US, the key event is Personal Spending, which is expected to gain 0.8%. On Tuesday, the eurozone releases CPI Flash Estimate, and Preliminary Flash GDP. The US will publish CB Consumer Confidence.
The focus is on consumer data in Germany at the start of the week. Retail sales rebounded in impressive fashion, gaining 0.5% after two straight declines. We’ll also get a look at Preliminary CPI, the primary gauge of consumer spending. The indicator has posted two consecutive gains of 0.1%, and the same reading is expected in the September reading. On an annualized basis, retail sales has gained 4.1%, indicative of strong consumer spending.
On Thursday, the DAX posted its strongest daily gain since August, jumping 1.3 percent. The catalyst for the gain was the ECB, which cut its asset purchase program (QE) from EUR 60 billion to 30 billion/mth. The ECB extended the program, which was due to terminate in December, to September 2018. However, investors were disappointed with ECB President Mario Draghi’s dovish stance, with Draghi stating that QE would remain open-ended. There were expectations that the ECB would announce a date when the program would end. ECB President Mario Draghi has given himself plenty of wiggle room, as he can simply extend QE beyond next September. As for monetary policy, the ECB maintained interest rates at a flat 0.00%, and Draghi provided no hints about the timing of future rate hikes. The ECB appears in no rush to tinker with rate policy, and we’re unlikely to see any rate increases until QE is completed.
Spaniards woke up to more uncertainty on Monday morning. On Friday, the central government made good on its threat and imposed direct rule on Catalonia. Just prior this move, the Catalonian government pre-empted Madrid and declared independence. There have been huge demonstrations in Barcelona, both in favor and against secession from Spain. Both governments have declared that moves by the other are null and void, so what happens now? The answer may lie with Catalonia’s 200,000 civil servants, who must decide whether to follow orders from Madrid, or join a civil disobedience campaign which is being organized by the Catalan government. So far, the Spanish government has taken a hard line against the independence movement, deposing Catalan President Carles Puigdemont and threatening to file rebellion charges against him. Prime Minister Mariano Rajoy has called elections in Catalonia for December 21, but with developments folding on a daily basis, that date appears eons away.
Monday (October 30)
- 3:00 German Retail Sales. Estimate 0.5%. Actual 0.5%
- All Day – German Preliminary CPI. Estimate 0.1%
Tuesday (October 31)
- 6:00 Eurozone CPI Flash Estimate. Estimate 1.5%
- 6:00 Eurozone Preliminary Flash GDP. Estimate 0.5%
*All release times are GMT
*Key events are in bold
DAX, Monday, October 30 at 6:55 EDT
Open: 13,215.25 High: 13,240.75 Low: 13,215.25 Close: 13,233.50
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