Markets Update Monday 06/12/2021 – Recovery

Frankfurt – 06/12/2021

Recovery

The market’s current high volatility is still due to the recently reported corona mutation Omikron. Overall, there is still a lack of well-founded information on the virus, causing nervousness and uncertainty in the stock market. In addition, there are signs of an earlier than expected turnaround in interest rates in the USA. 

According to market observers, investors are increasingly shifting from technology stocks to papers in traditional sectors because of the signs of tightening US monetary policy. The labour market report for November published on Friday was somewhat mixed. Still, according to experts, it was good enough for the US Federal Reserve (Fed) to reduce its bond purchases more quickly than recently thought.

Today, statements by health authorities in South Africa and the USA that the corona variant has so far not been associated with any severe courses of disease provided confidence concerning Omikron. The variant has also only occurred in fully vaccinated people.

US Markets at a glance

The stock market bulls took the reins on Wall Street at the start of the week. The Dow Jones significantly extended its early gains during the day and closed with a plus of 1.87 per cent at 35,227.89 index points. The NASDAQ Composite tech index also made significant gains on the first trading day of the week, rising 0.93 per cent to 15,225.15 points.

News about the Omikron variant of the coronavirus continues to determine the market’s direction. An article by the Medical Research Council from South Africa, according to which the Omikron symptoms were milder than those of other variants, was well received. Experts, however, warned to wait and see, as the data are not yet reliable. Meanwhile, the US Food and Drug Administration (FDA) wants to speed up the approval process for new vaccines.

Far East Markets at a glance

The stock markets in Asia showed losses on Monday.

In Japan, the Nikkei ended 0.36 per cent weaker at 27,927.37 points. The Shanghai Composite in mainland China closed 0.50 per cent lower at 3,589.31 points, while the Hang Seng in Hong Kong slipped 1.76 per cent to 23,349.38 points by the end of trading.

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The US indices were weak, with some prices falling sharply before the weekend. In addition, worries about the Chinese real estate giant Evergrande made the rounds again after it warned that it might not be able to service upcoming bond obligations.

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European Markets at a glance

Investors on the European stock exchanges took advantage on Monday. The EuroSTOXX 50 gained 0.37 per cent to 4,095.39 units at the start and significantly expanded its gains in the day. In the end, it was up 1.40 per cent at 4,137.11 index units.

The DAX moved in green terrain at the opening. In the meantime, it fell back to its previous day’s close. However, in the day, it climbed back into positive territory and significantly extended its gains. By the end of Monday’s trading session, it had gained 1.39 per cent to 15,380.79 points. The TecDAX traded higher at the beginning but gave up its gains in the day and ended the session 0.2 per cent lower at 3,752.95 points.

However, some analysts are warning of further profit-taking in the coming days, especially if the inflation data due from the US at the end of the week shows another sharp rise. Experts said the stock markets had done well this year, and investors are reducing risk as Christmas approaches.

Headwinds came from recent economic data: At the beginning of the week, investors were looking at new order data from German industry, among other things.

Forex, gold, oil and crypto

The euro fell below the $1,13 mark at the beginning of the week and closed at $1,286.

Oil prices rose significantly on Monday. A study from South Africa on the new Corona variant Omikron provided confidence in the market. According to the study, the health effects could be less drastic than previously feared. The development of the Corona crisis is a decisive factor for the economic development and the demand for crude oil. Market participants also justified the price increases with news from Saudi Arabia. The state oil company Saudi Aramco increased sales prices for Asian customers, sending a signal of confidence for future crude oil demand. Brent crude rose $1.90 to $71.77, while West Texas Intermediate gained $1.93 to $68.19.

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Gold hovered around Friday’s closing price and ultimately left trading at $1,779 per troy ounce, down 0,2 per cent. 

After a flash crash over the weekend, cryptocurrency stabilised today. Having dropped between 20 and 30 per cent, they consolidated today. Bitcoin traded at around $48,800, Ethereum at $4,200 and Binance Coin at $547. 

Corporate and world economic news

Economic data

Price-adjusted turnover in the German manufacturing sector rose strongly in October. According to the Federal Statistical Office, it increased by 3.6 per cent compared to the previous month. The 0.3 per cent decline reported for September was revised to 0.1 per cent. Compared to February 2020, the month prior to the start of restrictions due to the corona crisis in Germany, turnover was 7.1 per cent lower.

The mood among consumers has plummeted in the middle of the Christmas shopping season due to the reported corona situation. The consumer barometer for the coming months surveyed by the German Retail Association (HDE) plummeted to 95.36 points in December after a slight increase to 98.18 points in the previous month. “If the pandemic situation remains tense, the negative development of consumer sentiment could put the brakes on private consumption in the Christmas season,” explained the HDE.

German industry’s order intake in October was significantly weaker than expected due to a decline in foreign demand. According to the Federal Statistical Office, it dropped by 6.9 per cent compared to the previous month and was 1.0 per cent below the level of the same month of the last year, adjusted for calendar effects. In September, it had been 10.3 per cent higher. Economists interviewed by Dow Jones Newswires had forecast a monthly increase of 0.5 per cent. Excluding large orders, the decline was 1.8 per cent. Statisticians revised the 1.3 per cent increase in total new orders reported for September to 1.8 per cent.

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