DAX recovers as U.S. eases restrictions on Huawei

The volatility continues for the DAX index this week. Currently, the index is at 12,176, up 1.1% on the day, after falling 1.6% on Monday. For a second successive day, there are no major German or European events on the schedule. The eurozone releases consumer confidence, which is expected to remain in negative territory, with a forecast of -8.

The DAX had a dismal start to the week, but has rebounded on Tuesday, as the U.S. lowered tensions over the Huawei crisis. The Trump administration had announced it was imposing trade sanctions on the Chinese telecom giant, a move which sent stock markets reeling on Monday. However, the U.S. Commerce Department has taken a step back, saying that it will provide 3-month exemptions to U.S. companies that sell to Huawei. The tussle over Huawei has exacerbated the trade war between the two economic giants, and risk appetite will remain soft until the sides resume negotiations.

Voters in all 28 members of the European Union will head to the polls for a 4-day election, beginning on Thursday, to elect members to the European Parliament. Election turnout has been on the decline, with only 43% of eligible voters casting a vote in 2014. Key issues included the economic slowdown, the migrant crisis and the rise in Euroskpeticism. Euro-skeptics increased their representation in parliament from 12% to 25% in the last election, and with the dramatic increase in strength of populist parties, this trend could well continue. A strong showing by parties with an anti-EU agenda could weaken the euro. As well, the outcome of the vote could have an impact on the choice of the new head of the ECB, as Mario Draghi steps down in October, after an eight-year term.