DAX rises after German Q3 GDP growth – Daily Market Brief, November 25, 2022

The German economy grew more than initially expected in the July to September period. The DAX is pointing to a higher start and is set to gain 0.75% this week, in its 8th straight week of gains.

·         US markets are open half day owing to the Thanksgiving holiday

·         China COVID cases hit a record high pulling Asian stocks lower

·         Japan’s inflation rises to a 40-year high at 3.8% YoY, USD/JPY trades around a 10-day low

The less hawkish FOMC minutes helped boost the mood in Europe yesterday, with the major European bourses ending the day higher.

The DAX has been a notable gainer and has seen a strong rebound from the 2022 low of 11810, hit in October. The index now trades over 20% higher above 14500. Data from the eurozone’s largest economy is showing tentative signs of improvement. German business sentiment is heading higher. The IFO business climate rose to 86.3, up from 84.5. Improving business confidence could indicate that the looming recession won’t be as severe as first feared.

German GDP

Today the DAX is set for a positive start on the open, boosted by an upward revision to economic growth. German GDP was upwardly revised to 0.4% QoQ, up from 0.3% in the preliminary reading and up from 0.2% growth in Q2.

Separately GFK consumer confidence also ticked up from -41.9 to -40.2, further indicating that the picture is stabilising in Germany, although morale remains at a very low level. Fears of surging energy prices have eased slightly, which is helping buoy consumer confidence. The consensus is that a recession will be hard to avoid next year. German GDP is forecast to contract by 0.5% in the coming year.

COVID China

Elsewhere in Europe, stocks are pointing to a weaker start, and US futures are also in the red. Concerns over rising COVID cases in China weigh on risk sentiment. Infections rose to a record high, and the path away from the economically damaging zero-COVID strategy is looking increasingly challenging. Asian stocks slipped across the session, and risk sentiment remains fragile, heading toward the European open.   

In the FX markets, the USD continues to trend lower in the wake of the Fed minutes and amid holiday-thinned trade. Following the minutes, the market has grown increasingly confident that the Federal Reserve will slow the pace of rate hikes from the December meeting. According to the CME Fed fund watch, the market is pricing in a 75% probability of a 50 basis point hike at the December meeting. The US dollar index, which measures the dollar’s value against a basket of currencies, trades 1% lower this week.

USD/JPY

Inflation in Japan rose by more than expected in November to a 40-year high. Core CPI rose to 3.6%, up from October’s 3.4% and ahead of forecasts of 3.5%. Meanwhile, headline CPI rose 3.8%, up from 3.5% and its fastest pace since 1980.

The data highlights the struggles the Japanese economy faces amid high raw material prices and a weak yen. The yen fell to a 32-year low earlier in the year and has since pared some losses. USD/JOY trades at 138.50 at the time of writing, around a 10-day low.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

Sources: Bloomberg, CNBC, Reuters

Original article provided by Trading Writers

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