Markets Update Monday 07/09/2020 – Monday Blues

Frankfurt- 07/09/20

Monday Blues

As usual, when the US markets are closed, the equity markets around the globe move pretty slow as many major drivers and market players are missing.

Nevertheless, the Dax 30 rose significantly in this country, but how sustainable this recovery will be will become apparent later in the week. Tomorrow Wall Street will open again after today’s Labor Day, and on Thursday the ECB meeting is scheduled which will either continue to inspire or disappoint.

US Markets at a glance

The US stock exchanges were closed due to Labor Day (public holiday).

Far East Markets at a glance

The Asian markets showed red signs on Monday. In Tokyo, the Nikkei ultimately lost 0.5 per cent to 23,089.95 points. In mainland China, the Shanghai Composite fell by 1.87 per cent to 3,292.59 points. Hong Kong’s Hang Seng also lost some ground, closing 0.43 per cent lower at 24,589.65 index units.

Following the weak US performance before the weekend, investors in Asia also showed some uncertainty. However, better than expected Chinese export data provided some support. However, the US-Chinese trade dispute also remained an issue and weighed on the markets. A report about threatened US import restrictions also weighed on the Chinese stock exchanges in particular.

European Markets at a glance

The European markets were friendly on Monday. The EuroSTOXX 50 was friendly at the start of trading and rose steadily over the day. At the end of trading, the stock barometer recorded a gain of 1.64 per cent to 3,314.07 points.

The Dax 30 not only left the magic 13,000 mark behind but also the hurdle of 13,100 points. The stock barometer closed 2.01 per cent higher at 13,100.28 index units. The TecDAX was also firmer at the beginning of the trading session and remained in the black, closing at 3,074.45 points, which was equivalent to a 3.01 per cent increase.

Trade with the Best German Forex Brokers

Today the Dax was inspired by various factors. The latest data from the Bundesbank, for example, show the German economy on the road to recovery. The weekly activity index (WAI) for the calendar week to September 6 was 3.7, indicating that economic activity in the thirteen weeks to September 6 was 3.7 per cent higher than in the previous thirteen weeks. The increase was thus more vital than a week ago. The Sentix economic index also rose for the fifth consecutive week.

Although Chinese export data, which exceeded expectations, supported the European markets, the return of the Brexit theme weighed somewhat on the mood. The British Prime Minister Boris Johnson recently threatened a hard break after the Brexit transition phase. 

Forex, gold, oil and crypto

The euro and the British pound were under pressure on the Forex market at the beginning of the week. Dealers cited the escalating debate about an unregulated withdrawal of Great Britain from the EU internal market as a reason. However, the pound was hit much harder by this than the euro. However, due to the US Labor Day holiday, currency business in the USA is likely to be characterized by meagre sales. Most recently, the common European currency was traded at 1.1815 US dollars, which is slightly less than in early European trading. The British pound fell by just under one per cent against the dollar. It also weakened against the euro, although not quite as much as against the dollar. 

The pound was burdened by the threat of British Prime Minister Boris Johnson to renounce a trade agreement between Great Britain and the European Union (EU) if necessary. A deal had to be reached by October 15, Johnson said. The background: a Brexit transition period ends at the end of this year. If no agreement has been reached by then, Great Britain will leave the domestic market with all its economic disadvantages unregulated. The report in the British financial newspaper “Financial Times” that the British government was working on a draft law that disregards essential agreements between the UK and the EU also caused a stir. Among other things, the important border issue between Northern Ireland and the EU state of Ireland is to be dealt with. EU Commission President Ursula von der Leyen called on Great Britain to comply with the Brexit exit agreement.

Oil prices continued the losing trend of the previous week. A barrel of North Sea Brent cost 67 cents less than on Friday, and thus 41.99 US dollars. The price for a barrel of WTI oil fell by 70 cents to 39.07 US dollars. Last night, the cost of US oil had at times fallen to $38.55 a barrel, its lowest price level since the end of June.

Gold prices didn’t move much today and only posted a slight decline from $1,935 to $1,930 per troy ounce.

Cryptocurrencies are still under pressure, not gaining any upward traction lately. Negative comments from central banks about Bitcoin and Ethereum continue to weigh on all digital assets. Bitcoin thus lost 0.75 per cent to $10,040, while Ethereum dropped over 2 per cent to $333. XRP remained a bit more stable with a daily loss of just 0.25 per cent to $0.2360. 

Corporate and world news

Economic data

Despite the ongoing corona pandemic, China’s exports again recovered significantly in August. Exports of the second-largest economy increased by 9.5 per cent in dollar terms compared with the previous year, more robust than expected, according to the Beijing customs administration on Monday. As in the last month, however, Chinese imports were again lower. They fell by 2.1 per cent. The bottom line was that foreign trade was up 4.2 per cent to around 412 billion US dollars.

In December, the first infections with the coronavirus were discovered in China. The most populous country contained the pandemic with strict measures. According to official reports, there are hardly any new infections today, so that life and economic activities are returning to normal.

Despite the noticeable upswing in recent months, observers say that China’s exporters must continue to prepare themselves for risks that are difficult to calculate. Experts cite the uncertainties caused by the dispute between the USA and China in the trade and technology sector as well as a possible further decline in global economic output.

Munich Re expects price increases

The world’s largest reinsurer expects prices to rise this year and next year in both insurance and reinsurance. The background is the corona pandemic, which has already cost Munich Re EUR 1.5 billion in the first half of the year. The cancellation of major events had a particularly strong impact.

In reinsurance, the price increase is likely to continue beyond 2021. The Group got off lightly in the recent catastrophes outside the pandemic, such as the explosion in Beirut. The development of losses due to the corona crisis has also slowed down since the middle of the year compared with the first two quarters. The damage in Beirut is expected to cost the Group a low three-digit million euro amount. Management expects a similar burden as a result of the damage caused by the recent hurricanes “Hanna”, “Isaias” and “Laura” in July and August.

Tesla not to be included in S&P 500 Index

Tesla was not included in the S&P 500 share index, as the index operator S&P Dow Jones Indices announced. On the capital market, many had expected the electric car manufacturer to make the leap into the stock index.

In July, Tesla posted a quarterly profit for the fourth time in a row, thus fulfilling the last requirement for inclusion in the index. However, in its ascent to the index, the company preferred the online fashion retailer Etsy, the semiconductor manufacturer Teradyne and the medical technology manufacturer Catalent. H&R Block, Coty and Kohl’s have dropped out.

Howard Silberblatt, index expert at S&P Dow Jones, did not want to explain why Tesla was not included in the important US index: The market is constantly changing, we have to reflect this in our indices, he said. The S&P 500 is the benchmark index for many funds and ETFs and is considered to be much more meaningful than the more famous Dow Jones because of its market breadth.