The DAX index is showing little movement in the Monday session. Currently, the DAX is trading at 12,583 points, up 0.02% on the day. On the release front, German Retail Sales declined 0.6%, well off the estimate of 0.8%. Later in the day, Germany releases Preliminary CPI, with an estimate of -0.1%.
German Retail Sales, the primary gauge of consumer spending, continues to struggle. The indicator dropped 0.6% in April, marking a fourth consecutive decline. At the same time, the German consumer remains very optimistic, as underscored by the well-respected GfK consumer confidence reports. The Frankfurt stock market remains at high levels, another sign of favorable sentiment towards the robust German economy.
It was more of the same from the ECB on Thursday, as the bank held the course with its monetary policy and guidance. With an interest rate hike not in the cards until 2019, the euro lost ground, while the DAX improved sharply, gaining 1.2% on Thursday. The ECB rate statement said that “the Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases”. The stimulus program of EUR 30 billion/month is scheduled to remain in place until September, so investors shouldn’t even think about an interest rate hike until sometime in 2019. In his press conference, Mario Draghi said that the eurozone economy had slowed in the first quarter, but expressed “caution tempered by an unchanged confidence” that the ECB would realize its target of around 2 percent inflation. Although the ECB has said that it plans to wind up stimulus in September, this is not a date set in stone – if second-quarter numbers are not strong, the ECB could continue to the stimulus scheme into 2019.