The DAX index has posted losses in the Tuesday session. Currently, the index is trading at 12,230.44, down 0.44% on the day. On the release front, there are no German or Eurozone indicators on the schedule for a second straight day.
US stock markets posted gains on Monday, raising hopes that last week’s correction is over. However, European investors appear to be more skeptical, as European markets are in red territory. The DAX has dropped 0.40% on Tuesday, erasing the gains from Monday. It’s been a rough February for investors, as the DAX has shed 7.6% since the start of the month. Investors will likely remain on the sidelines until there is stronger optimism that the massive sell-off is over.
German President Angela Merkel has reached an agreement with the socialist SDP to form a new government, but the price was steep, as the SDP extracted major concessions from Merkel, notably control of the powerful finance ministry. This will likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. The weaker members of the eurozone, such as Greece, will likely find a more sympathetic ear for financial help from the SDP than they did from Schauble. Many conservatives fear that the Olaf Scholz, who is expected to become finance minster, will not be as fiscally responsible as Schaeuble. On the weekend Scholz said that Germany should not dictate economic policies to other eurozone members. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP, and if the deal is rejected, Germany will likely be headed to new elections.