Markets Update Friday 11/10/2019 – Who let the bulls out!?

Frankfurt – 11/10/2019

Who let the bulls out!?

New confidence in the American-Chinese trade conflict, as well as signals of relaxation in the Brexit issue, triggered a fireworks display on the stock markets on Friday. The most recent US economic data also provided a buying mood. US consumer sentiment improved surprisingly in October, with the University of Michigan’s Barometer rising to 96 points, while economists had expected a decline. However, experts warn against disillusionment.

The new week may provide some clues as to whether concerns about the state of the world’s economy and corporate earnings are justified. After a quiet trading day on Monday, the US banks will start their reporting season on Tuesday. Four financial institutions – JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo – are presenting their quarterly reports. More US companies will follow later this week.

US Markets at a glance

On Wall Street, the prospect of a rapprochement between China and the USA has caused a fireworks display of share prices. The Dow Jones index rose by 1.6 per cent to 26,962 points by the end of trading in Frankfurt.

The Apple share even climbed to a new record high: at 234.40 dollars, it just exceeded its previous all-time high of more than a year ago. In addition, the iPhone manufacturer has recently been back on the stock market for more than a trillion dollars – currently the only company apart from the software giant Microsoft, which is just ahead in terms of market capitalization. Recently, both stocks showed a rather average price development with price gains of 1.7 and 1.1 per cent, respectively.

European Markets at a glance

The EuroStoxx 50 has improved by over 2 per cent, finishing the day with 3,569.92 points. 

The German Dax30 has managed to maintain its substantial daily gains until the end of electronic trading. And that’s not all. The leading index continues to expand its gains in the afternoon and even breaks through the 12,500 mark in the last few trading minutes.

In the end, at 12,511 points, it leaves trading, 2.86 per cent or 347.45 points more than the day before. This is the largest daily gain in four months and the highest level since July 24.

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Forex, gold, oil and crypto

On Friday, the euro profited from growing confidence concerning an agreement in the Brexit dispute. At the close of trading, the common currency cost 1.1044 dollars. In early trading, it had been trading just above the 1.10 dollar mark. The European Central Bank (ECB) set the reference price at 1.1043 (Thursday: 1.1030) US dollars.

The British pound also profited and rose to 1.2660 dollars. This is two cents more than in the morning and the highest level for three months.

Oil prices are also benefiting from hopes of a settlement to the trade dispute. Also, reports of an explosion on an Iranian oil tanker caused prices to rise. At the close of trading, a barrel (159 litres) of West Texas Intermediate (WTI) US crude cost $54. That was one dollar more than the previous day. The price of Brent crude oil from the North Sea also rose to 60.00 dollars.

On the other hand, the gold price fell sharply. On Friday it fell by 1.3 per cent to 1,478 dollars per troy ounce (31 grams), its lowest level since the beginning of October. In the hope of a breakthrough in the trade dispute and Brexit, investors withdrew their money from safe havens.

Not much happened in the cryptocurrency market. All top coins remained stable, with only minor price movements. 

Corporate and world news

Metro sells a majority stake in China business

The retail giant Metro has confirmed the sale of a majority stake in its China business to the retailer Wumei. As a result, the company expects an estimated net cash inflow of around one billion euros. Besides, Metro is to receive a stake of about 20 per cent in the Wumei subsidiary and thus be able to benefit from the dynamic market development in China in the future as well.

Metro CEO Olaf Koch wants to concentrate the Düsseldorf retail giant on the business around its wholesale stores. He has, therefore, put the majority share of the business in China and the supermarket chain Real in Germany up for sale.

New SpaceX spacecraft ready for launch

According to NASA, Elon Musk’s space company will be ready for the first manned launch of the Crew Dragon capsule in the first quarter of next year. NASA chief Jim Bridenstine stated that no risks would be taken. NASA is paying SpaceX and Boeing $6.8 billion for the development of a missile system. This should enable astronauts to be brought to and from the International Space Station ISS for the first time since the Space Shuttle programme was discontinued in 2011.

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US Fed representatives see growing risks

At their meeting on September 18 the US Currency Watchdog highlighted weakening global growth and increasing uncertainty in trade policy as negative factors.

As the minutes of the meeting showed, they feared that these factors could weigh on the labour market and the US economy.

The Federal Reserve Bank lowered its key interest rate by 25 basis points at the September 18 meeting to protect the economy from risk as to the US-China trade dispute clouds the global economic outlook. The key rate fell to between 1.75 and 2.00 per cent. There were three dissenters, two of whom pleaded for stable interest rates and one for a stronger cut.

Between the Council meetings in July and mid-September this year, “a clearer picture of continued weakness in investment, industrial production and exports have emerged,” the minutes say.

Council members feared that this would lead to an erosion of consumer spending, the most important growth driver for the US economy in recent years. Some representatives of the Fed even referred to models that have signalled an increasing likelihood of recession over the medium term in the past months.

The risks posed by global developments have made central bankers more cautious in their statements about imminent interest rate hikes. The September minutes lacked clear signals, but several weak data published since then fired market expectations that interest rates would be lowered again already in October. High-ranking central bankers have neither clearly agreed to these expectations nor clearly contradicted them.

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