DAX Slumps as Investor Sentiment hits 16-Month Low
The Eurozone investor sentiment decline to -19.5 in April, it’s worst reading since October 2023.
- Sentix Investor sentiment -19.5 from -2.9
- Industrial production falls by -1.3% in February
- ECB expected to step in and ramp up cuts
The DAX traded as low as -7.44% on the day before recovering some lost ground. Investor sentiment took a hit due to Trump’s retaliatory tariffs, as government spending surge loses steam.
Sentix Index Eurozone Investor Sentiment
Sentix published its investor sentiment survey for April showing the sharpest drop in 16 months, beaten only by the invasion of Ukraine.
The EU has been slapped with 25% tariffs on steel and autos, plus 20% reciprocal tariffs on other goods.
The market had been hoping for some reprieve, a deal or perhaps a delay. Reality has hit har from April 3, when tariffs came into effect.
Forward expectations for the following 6 months from the survey showed a massive drop of 33.8 points to -15.8.
Expectations for Germany showed an even larger fall of 36.3 points to -15.8 in April.
DAX Live Chart
Economic Data Continues to Disappoint
German Industrial Production came in at -1.3%, lower than the forecast -1.1%. More importantly, unable to show any signs of recovery after last month’s number of 2% expansion.
On a positive note, the Balance of Trade showed expansion in February increasing from €16.2 billion to €17.7 billion.
The weak euro helping German exporters continue to trade internationally. There is also the question of whether this surge was to get as many goods exported before the tariffs kicked in.
ECB to the Rescue
The ECB has reiterated its plans to cut rates a total of 4 times in 2025. However, there is growing speculation that the central bank may be obliged to quicken the pace of these cuts.
The markets are now pricing in a 70% chance of an interest rate cut in April, as the ECB attempts to avoid further contraction of the economy.
The last forecast for the terminal central bank rate from the ECB was at 2%, the market positioning means a possible final deposit rate of 1.75%.
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