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DAX Has Dismal Week As U.S. Threatens Tariffs Against Mexico

The DAX has started the week with slight losses. Currently, the index is at 11,707, down 0.17% on the day. In economic news, German manufacturing PMI ticked lower to 44.3, down from 44.4. The eurozone indicator dropped from 47.9 to 47.7. Both scores matched the estimates. On Tuesday, the eurozone releases CPI Flash Estimate.

It was a rough week for equity markets, and the DAX plunged 2.37%, its worst week since mid-March. The month of May was absolutely dismal, with whopping losses of 5.0%. On Friday, President Trump shook up the markets with a threat to slap tariffs on all Mexican products, due to the illegal immigration crisis. Although Trump said that tariffs would be set at just 5%, investors were jarred by the news. The DAX, which is especially vulnerable to trade risks, fell by 1.47% on Friday, as German automakers posted sharp losses.

Weak global demand has taken a toll on German and eurozone manufacturing. In Germany, manufacturing PMIs have hovered below the 50-level for five months, while the eurozone indicator has been below 50 for four months. This points to persistent contraction in the manufacturing sector. The trade war between the U.S. and China has dampened demand for German cars, which has hurt the massive German car industry. Unless the U.S.-China trade war shows signs of being resolved, the weak manufacturing numbers are likely to continue.

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