The DAX index is trading sideways in the Thursday session. Currently, the index is at 12,295 points, up 0.07% on the day. In economic news, there are no German or eurozone events on the schedule. On Friday, Germany releases Factory Orders and PPI. In the U.S, the key event is nonfarm payrolls.
The DAX is in red territory on Thursday, but German banks are showing strong gains, boosted by higher eurozone bond yields. On Wednesday, U.S services sector data improved sharply, which boosted U.S treasury bills to their highest level since 2011. This in turn has boosted eurozone bond yields on Thursday. On the DAX, Commerzbank has jumped 3.25% and Deutsche Bank has climbed 2.00%.
The crisis over Italy’s budget continues to weigh on European stock markets. Last week, the new populist government proposed a controversial budget which increases spending, lowers taxes and set the budget deficit at 2.4% of GDP for the next three years. Italy has a massive debt, and the European Union doesn’t want Rome to expand the current deficit, which stands at 1.6% of GDP. The populist Italian government appeared to backtrack on Wednesday, and has now said that the budget deficit could be lowered in 2020 and 2021. Still, the budget remains a sore point for the EU, and the risk appetite could slide if the EU and Italy remain at loggerheads over Italy’s fiscal policy. The budget must first be approved by Italy’s parliament and then by the European Commission, so this crisis could continue for some time.