Wed, Mar 29, 2023 @ 12:25 GMT
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DAX Unchanged As Markets Eye US-China Summit, Nonfarm Payrolls

The DAX Index is showing little movement in the Friday session. Currently, the DAX is trading at 12,168.00. In economic news, Germany continues to post strong numbers. Industrial Production jumped 2.2%, beating the estimate of -0.1%. Germany’s trade surplus improved to EUR 21.0 billion, beating the forecast of EUR 19.4 billion. The US will release Nonfarm Employment Payrolls, with the markets braced for a drop to 174 thousand.

Investors remain cautious ahead as President Donald Trump and Chinese President Xi Jinping are meeting for a two-day summit. The two leaders will meet on Thursday in Florida. There are plenty of potential sticking points between the US and China, including trade, currencies and North Korea. During the presidential campaign, Trump harshly criticized China for its trade and currency policies, but he has moderated his stance since becoming president. However, any undiplomatic incidents could unnerve investors and trigger volatilty in the stock markets.

The ECB released the minutes of its March policy meeting on Thursday. The minutes indicated that the ECB plans to maintain its monetary policy, with no changes to interest rate levels or the central bank’s asset-purchase scheme. The minutes added that there was “considerable risk surrounding the economic outlook and the robustness of inflation convergence”, which warranted maintaining the downward bias on interest rates. Essentially, the ECB has promised “more of the same”, with the asset-purchase scheme scheduled to remain in place until December. The powerful German central bank is not of the same view, however, as it would like to see tighter monetary policy, given the improvement in the economic data and higher inflation levels. March PMI reports impressed, as German and Eurozone Services and Manufacturing PMIs pointed to expansion. If the Eurozone economy continues to improve, we can expect the calls in favor of higher rates to get louder.

The Federal Reserve released the minutes of its March policy meeting, when the Fed raised rates by a quarter-point, to 0.75%. The minutes had a slightly hawkish tone, as policymakers noted upside risk to the US economy. However, policymakers remain divided on whether inflation will rise to the Fed target of 2.0% percent. The minutes also stated FOMC members were in favor of taking steps to trim the $4.5 trillion balance sheet, which has ballooned since the Fed implemented its aggressive quantitative easing program back in 2008. However, the Fed is unlikely to make any moves on this front till later in the year, as President Trump’s fiscal policy remains a big question mark. So what’s next for the Federal Reserve? According to the CME’s Fed Watch, the odds of a rate hike at the May meeting are just 5 percent, while the likelihood of a rate hike in June stand at 63 percent.

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