The DAX index has posted small gains in the Wednesday session. Currently, the DAX is trading at 12,581.50, up 0.18% on the day. On the release front, there are no major eurozone indicators on the schedule. German PPI remained unchanged at 0.2%, edging above the forecast of 0.1%. In the US, the Federal Reserve winds up its policy meeting and will release a rate statement. On Thursday, ECB President Mario Draghi will deliver remarks at the European Systemic Risk Board conference in Frankfurt.
The eurozone is enjoying solid growth, with much of the credit going to Germany, the largest and strongest economy in the bloc. The German economy continues to perform well, with low unemployment, strong consumer demand, and a robust export sector. Institutional investors and analysts like what they see, as German ZEW Economic Sentiment Sentiment rebounded in September and climbed to 17.3 points, following a disappointing reading in August of 10.0 points. The ZEW report was very positive, noting that German growth in the second quarter remained strong, and both the public and private sectors were marked by increased investment. The report added that the stronger euro had not had a negative impact on the German economy, and the upcoming German election had not caused any uncertainty in the markets.
Germany is holding a federal election on Sunday, and Chancellor Angela Merkel holds a comfortable lead over the opposition. Merkel has seen some erosion in her popularity ratings, but is still widely favored to win a fourth term as president. Merkel is essentially the de facto leader of the European Union, so her success in the election could have a strong impact on the movement of the euro. Merkel’s center-right CDU party will likely have to enter into a coalition with another party, and historically this process can be quite lengthy. The current junior coalition party is the center-left Social Democratic Party (SDU), but the pro-business Free Democratic Party (FDU) also remains in the running. The FDU has insisted on the finance portfolio in any coalition agreement, and wants Germany to stop funding struggling EU members, such as Greece. The party has also taken a hard line on immigration, a hot election topic which could boost its performance in the election.
