The DAX is trading at 9120, down 0.7%. Germany’s market has been hit the hardest by concerns that began playing on investor’s minds after a report from the Bank for International Settlements pointed out that European banks have exposure in excess of $3 trillion to emerging markets.
The German equity market was trading above 9700 before emerging-market currencies took a dive and, as the German banking system is one of the strongest in Europe, traders are worried about the level of exposure to emerging economies.
In addition, the latest eurozone producer price index (PPI) report showed that prices increased by 0.2% in December compared with November, whereas analysts were expecting an increase of 0.3%. This highlights the weak demand in the region.
The European Central bank (ECB) will release an interest-rate decision and a statement on Thursday. Economists are expecting interest rates to remain at 0.25%, but there is speculation that the ECB will begin a stimulus package in the near future.
The DAX bounced off the 9070 level, and if we dip below that we could head towards the 9000 mark. However, if sentiment surrounding the emerging markets changes, the DAX may move towards 9200.