The DAX has moved higher in Wednesday session, after two consecutive losing sessions. Currently, the DAX is at 12,762, up 0.75% on the day. In economic news, German retail sales jumped 2.3%, easily beating the estimate of 0.5%. Later in the day, Germany releases Preliminary CPI, which is expected to rise to 0.3%. In the US, the key event is Preliminary GDP, with an estimate of 2.3%.
European stock markets are seeing red and the DAX is down 2.2% this week, despite rebounding on Wednesday. The decline is in response to the continuing political drama in Italy, the Eurozone’s fourth-largest economy. The drama started when President Sergio Mattarella stunned the nation, rejecting the choice for finance minister of the two parties which were expected to form a coalition, the League Nord and the Five Star Movement. Mattarella said he could not support the nomination of a finance minister who was in favor of Italy leaving the eurozone. The prime minister-elect, Giuseppe Conte, then announced that he had withdrawn his mandate to form a government, and Mattarella invited Carlo Cottarelli, a former IMF economist, to form a temporary technocrat government. However, there are reports that the League and Five Start Movement could get another kick at the can to form a government. Another possibility is that Italy will hold a snap election. It’s doubtful if another election would change the political landscape, so Matterella will likely huddle with political leaders and seek a compromise in order to avoid another general election.
German retail sales were unexpectedly strong in April, with a sharp gain of 2.3%. This reading ended a nasty streak of four declines. The gain is the strongest since December, and raises hopes that second quarter growth will rebound after a sluggish first quarter. Inflation is also expected to improve, with German Preliminary CPI forecast to rise to 0.3% in May after a flat reading of 0.0% in April. The story in France, the second largest economy in the eurozone, was not as bright. Consumer spending plunged 1.5% in April, marking a 3-month low. Preliminary GDP fell to 0.2% in March, down from 0.6% a month earlier.
