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Strong German Services PMI, Retail Sales Fails to Boost DAX

The DAX index is showing limited movement in the Tuesday session, after considerable losses on Monday. Currently, the DAX is at 11,576, down 0.15% on the day. It’s a busy day in the eurozone, with the focus on services PMI reports. Germany and the eurozone services PMI both improved in February, with readings of 55.1 and 52.3, respectively. Eurozone retail sales rebounded with a strong gain of 1.3%.

The DAX started the week with losses, as investors responded negatively to disappointing manufacturing data. The manufacturing industry continues to struggle as the global trade war has reduced the demand for European exports. German and eurozone manufacturing PMIs in February came in below the 50-mark, which separates contraction from expansion. The eurozone remains mired in a slowdown, but risk appetite is strong. On Friday, the DAX touched a high of 11,676 on Friday, its highest level since the end of October. The catalyst has been trade talks between China and the U.S. continue to make progress. If the positive momentum continues, President Trump and Chinese President Xi could sign a trade agreement in late March. Still, it’s unclear what the agreement will look like, as the sides have been very tight-lipped. It is unclear whether U.S. tariffs on Chinese products would be eliminated immediately or phased out over time. If speculation rises that a breakthrough is imminent, the stock markets will likely head higher.

The eurozone services sector has looked stronger than manufacturing, which continues to struggle. German Final Services PMI climbed to 55.3 in February, marking a 5-month high. The eurozone release also improved, although the score of 52.3 points to weak expansion. France and Italy both pulled themselves out of contraction territory, but the scores were just above the 50-level, pointing to stagnation. Meanwhile, consumer spending rebounded in January, after sustaining declines in December. German retail sales jumped 3.3%, while the eurozone release climbed 1.3%.

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