Markets Update Monday 19/10/2020 – Nervousness

Frankfurt – 19/10/2020

Nervousness

The continuing intimidating news about the spread of the coronavirus, especially in Europe, has again burdened the stock markets today. Many traders, investors and investors became cold feet and sought safety, heading for safe havens and selling stocks. 

The big price question now is, if the US reporting season, which will get underway in the next few days, will bring a positive turnaround?

Today in the late evening, after the US stock market closes, IBM heralds the start of the tech reporting season. Netflix and Tesla with numbers will follow in the course of the week. Investors will most likely take a close look at the latter two companies in particular to see whether the substantial price gains of recent months are fundamentally justified. The course of the American tech reporting season will once again be a decisive factor in determining how the market as a whole develops. After all, the heavyweight tech stocks were and still are the main drivers of prices on Wall Street.

US Markets at a glance

The US stock markets trended significantly lower at the start of the week.

The Dow Jones opened higher but then turned negative, ending 1.44 per cent lower at 28,195.42 points. The technology-index NASDAQ Composite also ended the day in the red after a firmer start. At NYSE close, a loss of 1.65 per cent remained at 11,478.88 points on the price board. The broad-based S&P 500 was down 0.3 per cent to 3472 points.

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Market participants discussed the latest statements by US politician Nancy Pelosi, who had set a deadline until Tuesday, raising hopes that there might be some movement in the negotiations on new aid measures before the US elections after all. Nevertheless, investors on Wall Street were cautious at the start of the week. 

Far East Markets at a glance

Stock markets in Asia showed mixed results at the start of the new week.

The Japanese leading index Nikkei finally climbed by 1.11 per cent to 23,671.13 points, thanks to a weaker yen. On the Chinese mainland, the Shanghai Composite went down 0.71 per cent to 3,312.67 index points.

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In contrast, Hong Kong also recorded gains, and the leading Hang Seng index closed 0.64 per cent higher at 24,542.26 units.

While hopes of a US stimulus package were largely responsible for the positive mood among investors, China’s GDP slowed down. China’s economic growth did not accelerate as strongly as expected in the second quarter. In contrast, retail sales rose last month.

European Markets at a glance

The new record numbers of corona infections have again cautioned investors in Europe. The EuroSTOXX 50 was able to post a significant premium in early trading and initially remained on positive territory. In the further course, however, it slipped into the red and ended trading 0.32 per cent lower at 3,235.16 index units.

In the wake of the weaker Wall Street, the Dax 30 also failed to gain momentum in Frankfurt. Germany’s leading index closed 0.4 per cent lower at 12.854 points after jumping over the 13,000 point hurdle in the morning. The TecDAX also rose at first but was later slightly lighter. In the end, the index fell by 0.30 per cent to 3,151.98 points.

The European stock markets returned from their highs on Monday – there was talk of a lack of follow-through purchases. The corona situation, as well as renewed stimulus hopes from the US, were once again the main market drivers.

Forex, gold, oil and crypto

The euro held its ground in Forex trading at a higher level in US trading on Monday. Most recently, the European common currency was exchanged for 1.1766 US dollars, after it had crawled close to the 1.18 US dollar mark during the European session. In Asian trade, the euro was still exchanged at just over 1.17 dollars. 

Oil prices remained almost unchanged on Monday. North Sea Brent was slightly down just below 43 US dollars per barrel. The price for the US WTI grade light oil was quoted at 41 US dollars per barrel. The rising number of corona infections worldwide is weighing on the global economic outlook and thus on the prices for the “black gold”.

The price for “real” gold, on the other hand, appreciated amidst a renewed risk-off sentiment again today. During the day it reached highs of up to $1,918.50 per troy ounce but ultimately closed at $1,903.

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Cryptocurrencies were mostly on the advance as well with Bitcoin and XRP rising by over 3 per cent to $11,700 and $0.2480 respectively. Ethereum gained 1.3 per cent to $378 per coin.

Corporate and world news

Economic data

As a sign of continued recovery after the corona collapse at the beginning of the year, China’s economy grew again in the third quarter – albeit less than expected. The second-largest economy grew by 4.9 per cent year-on-year, the Beijing Statistics Office announced on Monday. Analysts expected a GDP growth of 5.2 per cent. However, retail sales came in at 3.3 per cent year-on-year, beating consensus of only 1.8 per cent. Similarly, Chinese industrial production rose 6.9 per cent while experts only anticipated output of 5.8 per cent.

Japan’s exports fell more slowly in September than in the previous month. Official data from the Ministry of Finance (MOF) on Monday showed a 4.9 per cent year-on-year decline. Economists, however, had only expected a decrease of 2.4 per cent.

Teamviewer major shareholder cashes in

Teamviewer’s rapid rise in the share price is being used by its major shareholder to make money. TigerLuxOne, an investment vehicle advised by the British investment company Permira, announced the sale of more than 10 per cent of the share capital of the provider of remote maintenance and video software. The sale would reduce Permira’s stake from the current 39 per cent to a good 28 per cent. Teamviewer’s share price collapsed by more than 5 per cent in late trading.

Billion-dollar takeover in the oil industry

The US oil company ConocoPhillips wants to swallow the oil shale company Concho Resources. This would be the greatest takeover in the oil shale industry this year. The shareholders of Concho are to receive 1.46 ConocoPhillips shares for one share. Concho thus comes to a company valuation of 9.7 billion US dollars. Concho management supports the deal. The shares of ConocoPhillips and Concho both fell slightly.

IBM continues to lose revenue

The IT veteran IBM suffered further business losses in the third quarter despite booming cloud services. In the three months to the end of September, sales fell by almost 3 per cent year-on-year to 17.6 billion dollars (15.0 billion euros), the Group announced on the Monday after the close of the US stock market. Net profit nevertheless increased by 2 per cent to 1.7 billion dollars.

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Although the results were generally in line with market expectations, the share price initially reacted with slight losses after the close of the trading session. Due to the continued increased uncertainty caused by the pandemic, IBM once again did not provide an outlook for the rest of the fiscal year. This was not well received by investors. 

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