BOJ’s Ueda Says He Will Continue to Raise Rates, Finance Minister Denies Currency Manipulation

Posted on April 18, 2025 by Gino Bruno D'Alessio

The US has blamed countries for currency manipulation to expand imports, yen weakening has taken part in trade negotiations.

Japan core inflation came in higher than expected at 2.9%
BOJ’s Ueda tells Parliament he will raise rates to reach 2% inflation target
Finance Minister Kato says currency manipulation will be discussed with USA

The [[NIKKEI225]] had its best week in 3 months as trade tariff fears subsided in hopes negotiations can come to a positive conclusion. Today’s rally of 1% makes a total weekly gain of 3.41%.

BOJ Set to Hold Rates Steady

The governor of the BOJ told parliament today that the central bank would pursue policy to reach its 2% inflation target.

The market has widely discounted the next policy meeting on April 30 – May 1 will keep interest rates on hold at 0.5%.

Today’s inflation data was mixed, with overall Inflation YoY slowing pace to 3.6% in March from 3.7% the previous month.

However, Core Inflation YoY increased from 2.7% previously to 2.9% in March. This inflation metric is more similar to the Core CPI which the BOJ follows closely in its decision making.

The next data for Core CPI is out on April 22, just a week before the policy meeting and might bring some surprises.

Currency Manipulation

The finance minister also spoke to parliament today and said that the government was not involved in weakening the yen.

Katsunobu Kato’s comments came after accusations from the US government that Japan intentionally depreciates it currency.

“Japan does not manipulate the currency market to intentionally weaken the yen, as seen by the fact our latest action was to conduct yen-buying intervention.” Kato stated to parliament.

Kato is scheduled to visit Washington next week for the G20 finance ministers and the IMF meetings.

Analysts expect Kato to meet with his US counterpart Treasury Secretary Bessent for bilateral talks on the sideline of the scheduled meetings.

Bessent has also said he is looking forward to talks with Kato on trade tariffs and non-tariff barriers, in a hint of currency manipulation.

Kato said he was aware that the US wanted to discuss exchange rate concerns, without adding anything as to what they might debate.

DAX Opens Higher, Awaits ECB Decision Today – Tariff Woes Linger

Posted on April 17, 2025April 17, 2025 by Gino Bruno D'Alessio

The market is widely expecting the ECB to cut rates by 25 basis points, Siemens Energy Jumps on earnings.

The [[DAX]] opened up 0.63% on the day as investors gain confidence in a positive outcome of the trade tariff negotiations. The index is led by a surge in Siemens Energy.

ECB Interest Rate Cut & Trade Balance

The DAX has been outperforming most peers despite 2 years of contracting GDP Growth. DAX stocks are heavily reliant on trade, as seen in the large trade surplus.

Exports account for around 47% to 50% of German GDP, it’s largest trading partners being the USA and China.

Trade tariffs are, therefore, a large concern for DAX investors. The ECB can help with its monetary policy by cutting interest rates.

Lower interest rates should weaken the euro and offset trade tariffs. A 25% trade tariff would be easily offset by a decline in [[EUR/USD]] of an equal proportion.

At today’s meeting the market has discounted a 25 bp cut in interest rates, from 2.65% to 2.40%. I doubt there will be any surprises, and what may cause volatility is the forward guidance from Lagarde at the press conference.

Siemens Energy & Tariff Concerns

Siemens Energy released earnings yesterday showing its best profit margins since Siemens AG spun off the business in 2020.

Second quarter profits increased more than 5-fold to €906 million, for a profit margin of 9.1% compared to forecasts of 6.2%.

The company raised its outlook for fiscal year 2025 to 4%-6% from 3%-5% previously.

Siemens Energy stocks were up over 11% this morning leading the DAX higher, the next best performer is Zalando up only 0.62%.

Investors are still weighing the possibilities of trade negotiations taking a positive turn. The best scenario I see would be the elimination of tariffs bilaterally.

Adding the ECB rate cut to the mix would then allow for further trade-fueled momentum for the DAX

DAX Continues Recovery Thanks to Touted Tariff Relief on Autos

Posted on April 15, 2025 by Gino Bruno D'Alessio

German stock continue bullish momentum on automakers but the DAX remains in bearish territory.

Trump suggests he may consider modifying auto tariffs
VW, BMW, and Mercedes all up over 3%
Technicals on day chart remain bearish for DAX

The [[DAX]] is up 1.36% this morning after gaining 1.28% in yesterday’s session. However, the trend remains bearish after dropping over 11% in the first week of April.

Trump Tariffs On & Off

Trump slapped 25% tariffs on automakers for imports from Canada and Mexico and caused a rout in German auto stocks.

All German auto manufacturers have plants in both countries that serve the US market.

The US President has now stated there might be some modifications to these tariffs. He said he might exempt the auto industry to allow time for manufacturers to adjust.

VW is up 3.91%, BMW 3.59%, and Mercedes 3.27% on the day. Auto parts maker Continental is also up over 3% on the day.

The relief might be temporary, as relocating whole plants from one country to another take considerable time. And it seems unlikely that Trump would allow an exemption to run that long.

DAX Live Chart

[[DAX-graph]]

Technical View

The chart below for the DAX shows prices still below the Ichimoku cloud and in a clear bear trend.

The market correction that took place last week met with the resistance of the cloud, as I expected.

The next level of major resistance is at 21,600, which coincides with the bottom of the cloud. Above that, the next level of resistance would be the base of the consolidation area from the last rally at around 22,382 (green line).

That level of resistance also coincides with the top side of the cloud. To the downside, the first support level is at 20,531 (orange line), which coincides with a previous high.

FTSE Continues Helter Skelter Ride as Tariffs Remain the Concern

Posted on April 11, 2025April 11, 2025 by Gino Bruno D'Alessio

Stocks head south again as tariffs weigh more than better than forecast economic data.

GDP Growth MoM 0.5%
Manufacturing production MoM 2.2%
BoE says tariff effects on rates are not clear

The [[FTSE]] opened down this morning and attempted a rally in pre-market trading. The bullish mood was quickly wiped out sending the FTSE down 0.91%.

Economic Data Better than Forecast

GDP Growth came in higher than forecast, MoM printed at 0.5% compared to 0.1% predictions, and last month’s 0% growth. Other data also outperformed expectations:

GDP Growth YoY: 4%, expected at 0.9%
Industrial Production: 5%, expected at 0%
Manufacturing Production: 2%, expected at 0.2%

The FTSE rallied initially on the back of some bullish data, but concerns about the effects of tariffs remain the main driver.

Investors are still cautious about the possibility of a full-blown trade war, and the 90-day pause for most countries isn’t seen as a solution.

What remains to be seen is how negotiation proceed globally and for the UK in particular. The UK was hit with lower tariffs than the EU, and there is likely a simple way out of this situation, eliminating tariffs on US goods.

FTSE Live Chart

[[FTSE-graph]]

BoE Deputy Governor Tariff Implications Uncertain

The deputy governor Sarah Breeden said that the impact from tariffs on UK inflation was uncertain, and therefore also the implications for interest rates.

Stating that “Expenditure switching by US consumers away from UK goods, combined with weaker global demand due to potential counter tariffs and supply chain disruptions would be expected to weigh on UK activity,”

She believes that overall, tariffs are likely to lower UK growth, and that it’s also too early to estimate the impact on UK inflation.

“I think it’s too early to call the overall impact on inflation for the UK and hence the appropriate monetary policy response at this stage.”

Breeden also added that there had been a large global shift since the last MPC meeting in March, when it kept interest rates on hold.

DAX Posts Largest One-Day Gain Since Crisis of 2008

Posted on April 10, 2025April 10, 2025 by Gino Bruno D'Alessio

German stock market reacts to 90-day reprieve on all tariffs, as Goldman Sachs lifts recession call.

China gets slapped with 125% tariffs
Other countries get a 90-day exemption
Technical outlook remain weak for DAX

The [[DAX]] posted a massive rally yesterday of 8.89% in a reaction to the news Trump has suspended tariffs for 90 days.

Trade War on Hold Not Over

Trump decided to put most tariffs on hold, as countries have come forward to offer negotiations. China on the other hand has been handed even higher tariffs at 125%.

While it seems the trade war may be averted, since most countries have stated their intention to come to negotiations on tariffs. There is a lingering risk that those negotiations may not produce the desired results.

The US president said that China is going to figure out a solution for tariffs. A lot remains to be seen as to how willing China will be to take measure that could affect its positive trade balance.

As all this plays out, Goldman Sachs lifted the recession call it had made just over an hour earlier.

DAX Live Chart

[[DAX-graph]]

Economic Data and Trade Balance

Economic data from Germany has not been backing up the performance of the DAX for the past 2 years.

Valuations have increased over the past years, the P/E average for the DAX was 14.2 in March 2022, going to a high of 17.5 in March 2024. The current P/E average for the index is 16.15%.

While GDP Growth has shown 2 years of contractions, the only metric keeping companies’ books in the black has been exports.

The trade balance has expanded from a surplus of €87.6 billion in 2022 to a surplus of 238.6 billion in 2024.

The US is Germany’s largest trading partner with a trade surplus of €70 billion in 2024.

Technical View

The day chart below for the DAX shows a market in a bear trend with prices below the Ichimoku cloud.

Yesterday’s massive one-day rally hit the resistance of the cloud, and today’s momentum is indicating a technical correction. Very common after a large move to see some profits taking, leading to a reversal.

The next support level is at 20,531 (orange line), while major resistance is found at the bottom of the cloud.

FTSE Enters Bear Trend on Trump Tariffs and Domestic Concerns

Posted on April 8, 2025April 8, 2025 by Gino Bruno D'Alessio

UK stocks experience largest 2-day slide since Covid epidemic, could be ready for a correction.

LSE logo outside building

FTSE loses 8.65% in 2 sessions
UK will not relax fiscal rules
Reeves budget weighs on employer costs

The [[FTSE]] opened higher today by 0.57% after losing 8.65% in the previous two sessions. At one point yesterday, the FTSE index was trading down 5.7% on the day, for a total loss of 11.2% over two days.

Government Spending and Reeves’ Budget

Reeves’ budget, which introduced higher employment costs, more taxes, and strict spending rules has played a large role in the FTSE’s week performance in March.

While the effects of the budget still linger, the newly imposed retaliatory US tariffs have sent a reverberating shock to the stock market.

Pundits are calling for PM Starmer to loosen spending rules, which he could do by declaring an economic shock.

However, the prime minister has stated that the spending rules, aimed at balancing the budget by 2029/30, are in place to create stability.

During a meeting at a Jaguar Land Rover factory, he stated that “the first thing to do is not put aside our fiscal rules, but to remind people why we put them there in the first place.”

FTSE Live Chart

[[FTSE-graph]]

FTSE Day Chart Enters Bear Trend

The day chart below for the FTSE shows a market in a clear bear trend. Price is below the Ichimoku cloud, and the Lagging line (yellow line) has followed down below the cloud in confirmation.

The 2-day drop, between Friday and Monday, is the worst 2-session decline since the Pandemic in 2020.

Also worthy of note, is yesterday’s candle broke below a very strong support level of 7,994 (red line). This level was tested 3 times in 2024 and recovered each time.

Yesterday’s close was on the support level of a previous dip from April 2024 at 7.753 (yellow line).

With the RSI dipping down to 14, showing how high the momentum is to the downside, there may be room for a correction from here.

The next resistance is at 7,910 (gray line), with the major resistance at 7,994 (redline).

ftse set for rebound after heavy losses

DAX Slumps as Investor Sentiment hits 16-Month Low

Posted on April 7, 2025 by Gino Bruno D'Alessio

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

[[DAX-graph]]

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%.

CAC Enters Bear Trend After Trumps Slaps Extra Tariffs on EU Goods

Posted on April 4, 2025April 4, 2025 by Gino Bruno D'Alessio

The CAC index loses 5% in 2 days as recession fears increase on a possible global trade war.

CAC Drops nearly 10% from ATH
Threat of global tariff war sinks in
New car registrations decline 14.5%

The [[CAC]] continued to slide lower today opening down 1.5% on the day, after a drop of 3.5% yesterday.

Trump Tariffs Push CAC into Bear Trend

The Tariffs Trump announced on Tuesday reverberated throughout the global stock market. The CAC index lost 3.5% in one day alone on Wednesday and continues to slide on today’s open.

Investors are concerned about the effect the retaliatory tariffs will have on exports. But they also have a weak domestic market as recent economic data continues to show.

The CAC index managed a new all-time high on March 6, on hopes of a Ukraine-Russia peace deal and domestic political stability.

However, the peace deal seems to be moving further away and now investors have to face the reality of higher-than-expected tariffs.

CAC Live Chart

[[CAC-graph]]

Economic Data Still Weak

Today’s economic data was mixed. Industrial Production increased more than forecast at 0.7% compared to -0.5% contraction last month.

While PMI for construction came in lower than expected at 43.8, which is an improvement from last month’s 39.8 but still below the expansion level of 50.

New car registrations dropped faster than the forecast of -0.7%, at -14.5% fewer sales than the same period in 2024.

Technical View

The chart above for the CAC shows a market that has entered a full-on bear trend. Price is below the Ichimoku cloud and with today’s candle at this level, the Lagging line (yellow line) should also close below the cloud.

The RSI has dipped below the level of 30, on the day chart this is not usually sustained for long periods. So, we may see some level of correction from here.

DAX Drops 2% After Trump Announces Global Tariff Hikes

Posted on April 3, 2025 by Gino Bruno D'Alessio

Trump tariffs higher than expected, the stock market was clearly expecting less. Germany stocks take a dive on increased recession fears.

Tariffs on China 34%, Vietnam 46%
Analysts see higher recession risk
Will ECB come to the rescue?

The [[DAX]] opened down over 2% in pre-market trading. The market then recovered some lost ground, as it often does on a gap.

Higher Than Expected Tariffs

Trump announced the extra tariffs on a TV broadcast and took most investors by surprise. Various numbers had been floated in the past weeks, and they weren’t anywhere close.

The following nations have been slapped with these extra tariffs:

China: 34% on top of 20% applied earlier in 2025
EU: 20% on top of 25% on some other goods
Vietnam: 46% on top of the 10% universal tariff

Some countries have been hit harder than others. The White House explains it’s retaliatory against tariffs on US goods and trade barriers, such as subsidies or currency manipulation.

It seems certain good that are not easily available in the US remain tariff free, such as semiconductors.

DAX Live Chart

[[DAX-graph]]

ECB to Come to The Rescue

The DAX has been defying the laws of gravity, and the markets, for some time. The German economy has been in contraction for the past 2 years, yet the DAX has managed to post successive all-time highs.

Mostly helped by an expanding Chinese economy, many top DAX companies export massively to China and also to the US.

Then there was the ECB loosening and interest policy reduction. Stock markets love cheap money, and the ECB has been cutting rates at a faster pace than ever before.

Lower rates has also weakened the euro allowing German companies to be more competitive with their exports.

My bet is the ECB will cut rates even further than expected, especially if growth in the EU area as whole turns negative.

DAX Shows Signs of Recovery Ahead of Tariffs, Funds see Net In-Flows

Posted on April 2, 2025 by Gino Bruno D'Alessio

German stocks rallied yesterday as the markets took short profits, while data from Blackrock shows net in-flow to EU stocks in Q1.

DAX rallies after 6.4% decline
US investors place $10.6 billion in European ETFs
3 out of the last 5 years showed net outflows

The [[DAX]] rallied almost 1% yesterday after the index lost 6.40% from its peak of 23,480 on March 18.

Reciprocal Tariffs Main Concern

The German caretaker government has pledged a massive spending bill that looks to put nearly €1 trillion into the economy.

The infrastructure fund is set to finance €500 billion in spending over the next 12 years. While the new defense spending rule could take military spending up to €500 billion over the next 5 years.

Global stock markets, however, have been concerned with the tariffs announced by Trump. The reciprocal tariffs are seen as a risk to growth and inflation, and the DAX has seen valuations decline.

There has also been a lot of talk by EU officials to take action on the incoming tariffs. Sparking concerns that the trade tariffs may escalate into a tariff war.

DAX Live Chart

[[DAX-graph]]

ETFs See Massive Inflow into European Funds

The DAX has benefitted from foreign inflows into European stock for the first quarter of 2025. Data from Blackrock shows European ETFs saw net in-flows of $10.6 billion in Q1.

The number is 7 times the allocations seen to European ETFs for 2024. The renewed interest in European stocks doesn’t mean US investors are dumping domestic stocks.

The interest stems from the lower valuations of European companies compared to their peers in the US. Large investment banks, such as Citi, Goldman Sachs, and Morgan Stanley, have made bullish calls for European stocks.

Citi and Goldman Sachs gave bullish recommendations as early as October 2024. Both citied attractive valuations for the European market.

What remains to be seen is whether European companies can also follow through with increased profits.