The DAX index has posted gains in the Wednesday session. Currently, the index is trading at 12,490.00, up 0.79% on the day. On the release front, German Industrial Production declined 0.6%, close to the estimate of -0.7%. This marked the third decline in four months. On Thursday, Germany releases Trade Balance.
It’s been a volatile week for global stock markets, and the DAX has not been immune. The index declined 4.2% last week, as a sharp decline in Deutsche Bank shares sent European stock markets lower on Friday. The slide continued this week, as strong US employment numbers raised concerns of higher inflation and additional rate hikes by the Federal Reserve. Higher US rates would be bad news for European stock markets, as investors would be attracted to dollar-denominated assets. US stock markets were in red territory on Monday, and the Dow Jones posted its biggest one-day loss ever. However, US stock markets rebounded on Tuesday and the trend has continued in the Asian and European markets on Wednesday.
Germany is close to a new government, as the socialist SDP and Angela Merkel’s conservatives are expected to announce an agreement later on Wednesday. Merkel has made major concessions in order to reach a deal, including giving the SDP the powerful finance ministry. This would likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. Members of the eurozone that have been struggling, such as Greece, will likely get a more sympathetic ear from the SDP than they did from Schauble. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP.
The German economy continues to shine, despite the ongoing coalition negotiations, which have dragged on since September. A spokesman for the SPD party, which is negotiating with Angela Merkel’s conservative bloc, said on Tuesday that a deal is "90-95%" done. For her part, Merkel has said that she is willing to make painful concessions in order to form a government. Both parties have stated that they want to reach an agreement on Tuesday. If there is an announcement later in the day, the euro could move higher.