DAX Rally Continues Despite US Tariffs On China

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The DAX index has posted gains in the Thursday session, continuing the upward trend seen on Wednesday. Currently, the index is at 12,284, up 0.54% on the day. On the release front, there are no major German or eurozone events. Eurozone consumer confidence is expected to post a decline of -2 for a second straight month. On Friday, Germany and the eurozone release manufacturing PMIs.

The US-China trade war ratcheted upwards this week, as the U.S. imposed 10% tariffs on some $200 billion worth of Chinese goods. Previous rounds of tit-for-tat tariffs have rocked the equity markets, but that hasn’t happened this time around. The DAX has shrugged off the news, gaining 1.8% this week. It is notable that German automakers, which could be hit hard by further tariffs, have posted strong gains on Thursday. BMW is up 1.24%, Daimler has risen 0.94% and Volkswagen has climbed 1.69%. Bank shares have also posted gains – Deutsche Bank is up 1.13% and Commerzbank has jumped 2.79%.

Why the calm reaction from German equity markets? Investors appear to have been ready for a move by Trump, and may be sighing in relief that the tariff was set at 10% rather than at 25%. One senior economist summed up Trump’s most recent salvo as “bad but manageable”. However, if the Chinese do indeed retaliate and the U.S takes further measures, this would likely shake up the currency markets and boost the U.S dollar.
 
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