Markets Update Monday 07/10/2019

Frankfurt – 07/10/2019

At the beginning of the week, things are starting rather quietly, both concerning the market-moving topics and the overall agenda. The trade talks between the USA and China are already looking ahead. 

Nevertheless, it should be noted that both the leading German index, the Dax, and the American Dow Jones have started a quarter as catastrophically as they have not since the 2008 financial crisis.

At 12,428 points, the Dax ended September and thus the third quarter. Only three trading days later, the German benchmark index is over 400 points lower, and on Friday it dropped out of trading at 12,013 points. This is a drop of 3.3 per cent.

The balance sheet for the first few days of October on Wall Street reads similarly miserably. The leading Dow Jones Industrial Average index plummeted by more than three per cent on the first two days of October alone – the worst start to a quarter since October 2008.

In the financial crisis year of 2008, the Dow Jones fell by a total of 19.4 per cent during the fourth quarter.

Eleven years later, it is above all the fear of a recession that is driving investors. Most recently, the shockingly weak ISM manufacturing index in the US showed that the unresolved trade dispute between the USA and China could put the brakes on the economy.

But that’s not all: now there is also the threat of a trade dispute between the US and the EU. Last Thursday, the US government announced fines on aircraft and other EU imports.

US Markets at a glance

Investors are hoping in vain for a tailwind from Wall Street: The futures on the Dow Jones, the S&P 500 and the Nasdaq 100 are currently each around 0.4 per cent down.

On Monday, Wall Street is looking for direction. The Dow Jones opened lower, but gained some ground over the day, swinging around its Friday close. By the end of the day, however, it had fallen again by 0.36 per cent to 26,477.61 points. The NASDAQ Composite tech index posted a loss at the start of trading. It also tended around the zero line in a narrow range, but then closed 0.33 per cent lower at 7,956.29 points.

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Far East Markets at a glance

The Asian stock markets again did not take a uniform direction on Monday. Japan recorded moderate losses, while the major stock indices in South Korea, India and Australia rose. In the People’s Republic of China, stock exchanges remained closed due to the “Golden Week” holidays, and Hong Kong is also celebrating the so-called “Golden Week” this Monday. Therefore the trading rooms remained closed there as well.

The Japanese Nikkei-225 ended the day 0.2 per cent lower at 21,375 points. Börsianer referred to the mixed failed job market data from the USA on Friday and further existing concerns around the trade conflict between the USA and China. While US President Donald Trump announced on Friday that talks with China had reached a crucial stage and a deal was now possible, China is increasingly hesitant.

European Markets at a glance

The European stock markets are showing green signs on Monday. The EuroSTOXX 50 still shows a small loss at the start of trading but is expected to be on green ground in the course of the trading day.

German industry again received fewer orders in August. Orders have decreased by 0.6 per cent compared to the previous month, the Federal Statistical Office announced on Monday in Wiesbaden. Analysts had only expected an average decline of 0.3 per cent. It was the second decline in a row and the fifth damper in the current year.

At its peak, the DAX lost 0.4 per cent to 11,969 points by midday. The provisional daily high is 12,046 points.

Forex, gold, oil and crypto

In the foreign exchange market, the euro can largely maintain its recent gains: The European single currency is trading at $1.0970 after falling to a two-year low of $1.0881 the week before.

Oil prices started the new week with price gains. The North Sea variety Brent is quoted at 58.50 dollars per barrel. On the other hand, the gold price cannot hold its early gains and turns negative. The precious yellow metal is currently losing 0.2 per cent to 1,502 dollars per troy ounce.

The cryptocurrency market is on the rise this Monday, lead by XRP, the third-largest digital asset by market volume. Currently, XRP is moving closer to the $0.28 mark with over 8 per cent gains. Ethereum can also record some gains around 5 per cent and is currently valued at approximately $180. The price of Bitcoin has increased as well, but only by roughly 3 per cent, to $8,250. 

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Corporate and world news

Brexit

There will probably not be any Brexit news today. However, the European Union reportedly wants to decide by the end of this week whether a Brexit deal with Britain is possible. French President Emmanuel Macron told British Prime Minister Boris Johnson in a telephone call on Sunday evening, British and French media reported. The BBC quoted a source from the Élyséepalast, according to which Macron Johnson said “that negotiations with the team of (EU chief negotiator) Michel Barnier should continue rapidly in the coming days to assess by the end of the week whether a deal is possible that recognises the principles of the European Union”.

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General Electric share moves little

The battered US industrial group General Electric (GE) is making several changes to its pension plans to reduce its pension deficit and debt.

The plans are to be frozen for approximately 20,000 US employees who are entitled to certain benefits. The same applies to 700 employees who became managers before 2011.

The measure, which comes into effect on January 1, 2021, does not affect retirees who are already receiving payments. GE also announced that a corresponding charge would be recorded in the fourth quarter. GE’s pension plans have been closed to new members since 2012.

GE intends to offer the option of a lump sum payment to approximately 100,000 former employees who do not yet receive monthly pension payments.

According to GE, the pension changes are part of the plan to reduce the pension deficit by $5 billion to $8 billion and reduce net debt by $4 billion to $6 billion.

In pre-trade trading on Monday, General Electric’s shares gained more than one per cent, but in official US trading, they are currently showing little change. In the end, the share price was minus 0.12 per cent at 8.56 US dollars.

HSBC: Up to 10,000 jobs at risk

According to a press report, the major British bank HSBC may face further job cuts. The Financial Times reported on Monday that up to 10,000 jobs could be cut as part of a new austerity programme by interim head Noel Quinn, citing two people familiar with the matter. This could affect Europe in particular.

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HSBC had already announced its intention to cut 4,700 jobs. The paper writes that the 10,000 would now be added to this figure. According to its figures, the bank recently employed a total of just under 238,000 people.

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