DAX 30 Index Edges Higher, Caution Dominates Ahead Of French Vote

German stocks made limited gains on Friday, although there was a lack of commitment ahead of the French Presidential election vote on Sunday.

US indices moved significantly higher on Thursday, but much of the advance had taken place by the European close and there was little further buying support at the European open. European bourses were also unsettled by the Paris shooting on Thursday evening.

The flash reading for the German April PMI manufacturing index edged slightly lower to 58.2 from 58.3 previously, maintaining a high degree of confidence in the outlook, although the services-sector data was weaker than expected with a decline to 2-month lows of 54.7 from 55.6 the previous month. Overall confidence in the German and Eurozone growth outlook remained strong after the Eurozone PMI data.

The DAX index overall traded within relatively narrow ranges in early dealings with the index drifting lower during the first two hours of trading.

There was an important element of caution ahead of the first round of voting in the French Presidential election given concerns that a strong showing for National Front candidate Le Pen would be likely to put some downward pressure on equity markets at Monday’s open.

Equities made some headway from mid-session with optimism that the ECB would maintain an accommodative policy in the short term.

There was no significant lead from US equities with the S&P 500 index trading slightly lower towards the European close. Oil prices also moved lower, although there was support for banking stocks.

Overall, the index closed with a gain of 21.25 points and 0.18% at 12,048.57.

A second-round run-off between Le Pen and left-wing candidate Melenchon would be likely to trigger heavy selling pressure on equities.

If both Le Pen and Melenchon fail to make the second round, there would be the potential for sharp gains in German stocks on Monday.

German DAX 30 Index 4-Hour Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.