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DAX Jumps On Optimism Over U.S-China Trade Talks

The DAX index has posted considerable gains in Friday trade, after a pause on Thursday. Currently, the DAX is at 11,484, up 0.53% on the day. On the release front, German data was soft. Final GDP for the fourth quarter came in at 0.0%, matching the forecast. Ifo Business Climate dropped to 98.5, shy of the estimate of 99.0 points. In the eurozone, inflation dipped to 1.4%, slowing down for a third straight month.

It’s been an excellent February for the DAX, which has climbed 2.8%. Risk appetite remains high, but German numbers continue to disappoint. On Friday, fourth-quarter GDP showed no change, after a contraction of 0.2% in the third quarter. The Ifo Business Climate survey slowed for a sixth successive month, indicating concern in the business sector about the country’s economic outlook. German manufacturing PMI contracted for a second straight month, while German CPI declined in January for the first time in a year. As the largest economy in the eurozone, Germany is the bellwether for the entire eurozone, and if German data continues to miss expectations, risk apprehension could rise and weigh on equity markets.

Is a breakthrough around the corner in the U.S-China trade rift? Trade officials are holding a fourth round of talks in Washington this week. The talks are reportedly making substantial progress, as negotiators are preparing memorandums of understanding on key issues such as cyber theft and intellectual property rights. The trade war has triggered a slowdown in China and weighed on global stock markets. The U.S. has threatened to raise tariffs on March 1 if a deal is not reached, so there is strong pressure to reach a deal before the deadline. If the negotiations continue to make progress, traders can expect the DAX to move higher.

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