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After Mario Draghi’s statement last week, there has been speculation the ECB will finally loosen its monetary policy to tackle low growth and deflation in the eurozone. This morning the Bundesbank has indicated it will support such a move.
In early trading, the DAX was pushed into the red when the German ZEW economic sentiment dropped from 41.3 in April to 33.1 in May. The slump in investment confidence, in the strongest economy in the eurozone, is evidence the region is in trouble. However, the ZEW report was quickly forgotten after Bundesbank’s statement, and the Germany equity market is now higher than it was before trouble broke out in Ukraine.
At the beginning of the year the DAX struggled to break the 9800 level, and it is likely to remain a barrier. I suspect some profit-taking will take us back to the 50-hour moving average of 9676.