Germany’s benchmark stock index has broadly managed to stay above a long-term trendline and that could again act as strong support, with investors expecting a fillip from possible European Central Bank dovish signals to counter deflation threats.
The DAX Index has dropped as much as 12 percent from its November peak. The beginning of the slide coincided with disappointment over ECB policy as President Mario Draghi refrained from expanding the asset purchase program in early December, even while cutting the deposit rate. As the Bloomberg Commodity Index hit its lowest since at least 1991 and oil prices continue to tumble amid a slowdown in China, the probability of the ECB cutting the deposit rate by 10 basis points in March has risen to 54 percent from 23 percent five days ago, Eonia forwards show. A rate cut is fully priced for July.