Markets Update Monday 06/04/2020 – Positive signals or fantasy?

Frankfurt – 06/04/20

Positive signals or fantasy?

At the beginning of the week, the stock market picked up speed. Signs of a flattening of the corona disease are creating a lot of fantasy and driving the various stock markets up again.

However, the situation in the USA and Japan is currently worsening, but this has not yet impacted the stock markets in the new week.

In this environment, however, it remains to be seen how sustainable today’s recovery of the equity markets will be. Experts had recently warned of a bear market rally – a short, sharp rise within a larger downward trend.

US Markets at a glance

The US stock indices rose significantly on Monday. The Dow Jones opened trading stronger and continued to climb further into green territory. At the end of trading, a substantial gain of 7.73 per cent to 22,679.99 points was recorded. The Nasdaq Composite also appreciated significantly, closing 7.33 per cent higher at 7,913.24 points.

Supporting factors were the first signs that the shutdown of public life and the restriction of social contacts is leading to a gradual slowdown in the spread of the coronavirus. However, the USA still has a challenging week ahead of it. New record levels of infection are expected.

Far East Markets at a glance

In Asia, the most important indices were able to record solid gains at the beginning of the week. In China, however, there was no stock exchange trading on Monday due to a public holiday.

In Japan, the Nikkei increased by 4.24 per cent and left the meeting at 18,576.30 points. On the Chinese mainland, the Shanghai Composite remained at its Friday closing level of 2,763.99 points. The Ching Ming Festival was celebrated here on Monday. In Hong Kong, however, the stock markets were open, and investors were in a buying mood: The Hang Seng gained 2.21 per cent to 23,749.12 index points by the close of trading.

European Markets at a glance

The European stock exchanges also gained at the start of the new trading week. The EuroSTOXX 50 had already climbed by around one and a half per cent at the opening and further increased during the day. At the end of trading, it had gained 4.99 per cent to 2,795.97 index units.

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At the opening, the DAX was already more than three per cent above its closing price on Friday. In the day, Germany’s leading index even managed to increase its gains, breaking through the psychologically important 10,000 point mark in the afternoon. In the end, the index gained 5.77 per cent to 10,075.17 points. The TecDAX initially showed little change at the start of trading but was able to post substantial gains as trading progressed. At the sound of the closing bell, it rose by 3.94 per cent to 2,662.88 points.

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Today’s performance was driven by moderately flattening growth rates from the corona hotspots Italy, Spain and New York. Austria is even considering relaxing the drastic measures to contain the virus at least somewhat. Italy, Spain and France, in particular, are also reporting a lower growth rate in deaths. This gave investors a reason to hope. Furthermore, positive data from Asia provided a tailwind. German Chancellor Merkel, however, declared this afternoon that the restrictions on public life in Germany would, in any case, remain in place until 19 April. 

Forex, gold, oil and crypto

At the beginning of the week, the euro exchange rate was hovering around the 1.08 dollar mark. In American business, the common currency, the euro, cost 1.0798 dollars, slightly more than in late European trading. The European Central Bank had previously set the reference rate at 1.0791 (Friday: 1.0785) dollars. 

On Monday, the currencies of countries with strong crude oil production made the most gains. The Canadian dollar, the Norwegian krone and the Russian rouble all gained significantly. This was triggered by hopes for an agreement in the oil price war between Russia and Saudi Arabia. The dispute has weighed heavily on crude oil prices and, with them, the revenues of the producing countries since the conflict broke out at the beginning of March. Accordingly, the prospect of a settlement and rising oil prices has benefited the respective currencies.

Most recently, a barrel of North Sea Brent for delivery in June cost $31.94, $2.04 less than on Friday. The price of a barrel of American WTI for delivery in May fell by $1.88 to $26.47.

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The price for a troy ounce of gold rose sharply today. In late US trading, the price had appreciated by almost 3 per cent to $1,665. 

Last but not least, the most significant digital assets also were in an upward trend at the start of the week. Bitcoin moved up by over 6 per cent to currently $7,200, Ethereum gained a whopping 16.5 per cent to $168, and XRP climbed by over 8 per cent to $0.1950.

Corporate and world news

The Marshall Plan and the bond controversy

EU Commission President Ursula von der Leyen has called for a Marshall Plan for the period after the Corona crisis. Despite all the aid measures, Europe must take more money into its hands, she demanded in a guest commentary for Welt am Sonntag. For this reason, she called for massive investments in the EU budget. This budget was accepted in all Member States as an instrument of solidarity-based compensation and had to be adapted to the crisis.

Carnival stock soaring

Saudi Arabia joins the ailing US cruise company Carnival as a major shareholder in the Corona crisis. In a statement to the US stock exchange supervisory authority on Monday, the Saudi state fund PIF disclosed a stake of a good eight per cent in the tourism company, which was worth just under 370 million dollars (around 343 million euros) at the last closing price of the share. 

On the stock exchange, investors took up the Saudis’ investment with relief: Carnival stock shot up 20.85 per cent to $10.23 on Monday on the NYSE. The Saudi sovereign wealth fund received its investment at a bargain price, with the share price having fallen by a good 80 per cent since the beginning of the year. This is not the first time that PIF has invested money in US companies. For example, the fund is also invested in the driving broker Uber or the electric car manufacturer Tesla.

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