Markets Update Monday 24/08/2020 – Wall Street Rally continues

Frankfurt – 24/08/20

Wall Street Rally continues

On Wall Street, there is still an enormous amount of euphoria, and traders are in a party mood. Driven by hopes of a cure for the coronavirus, the US indices climbed to new highs. US President Donald Trump granted emergency approval for the so-called immunoplasm therapy – the treatment of corona with blood plasma from people who had formed antibodies after a natural infection.

There was also, once again, a spark of hope in the negotiations between the USA and China. 

The buying mood shows how important it is for the stock markets to defeat the virus. However, these hopes are ultimately based on the false assumption that a virus can ever be defeated. Therefore, it remains questionable, how long this rally can last, since fundamentally not as much has improved since the corona-collapse in March as the stock markets seem to indicate. 

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At the start of the week, the economic calendar was almost empty, which made investors and traders focus on other news.

US Markets at a glance

The Dow Jones opened already firmer after the S&P 500 Futures had indicated a rise in stock prices. Ultimately, the Dow closed 1.35 per cent higher at 28,308.46 points. The NASDAQ Composite tech stocks index also remained on green ground apart from a few brief setbacks, marking an all-time high of 11,462.05 points and closing 0.6 per cent higher at 11,379.72 points.

Meanwhile, economic activity in the USA weakened in July: As the Federal Reserve Bank of Chicago announced, the Chicago Fed National Activity Index (CFNAI) fell to a level of plus 1.18. However, the more meaningful three-month moving average improved significantly. In July, it stood at an increase of 3.59.

Far East Markets at a glance

Asian stock exchanges also started the new week with gains. In Japan, the Nikkei 225, the leading index, closed 0.3 per cent higher at 22,985 points. The CSI 300 index with the 300 most important shares of the Chinese mainland stock exchanges gained 0.8 per cent while the Hang Seng in Hong Kong climbed by 1.4 per cent.

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European Markets at a glance

Supported by hopes for a vaccine soon, European markets also rose at the beginning of the week. The setback in Europe on Friday afternoon proved to be a bear trap and thus a failed sell-signal – these are interpreted as buy-signals in the technical analysis.

The EuroSTOXX 50 opened 0.29 per cent up and continued to climb afterwards. In the end, a plus of 2.21 per cent to 3,331.74 points was on the board.

The German leading index Dax rose to 13,104 points at its peak today, only to leave the market at 13,066 points. In percentage terms, the Frankfurt Stock Exchange’s display board thus showed an increase of 2.4 per cent. The TecDAX started 0.34 per cent higher at 3,098.38 points and continued to rise, ending with a gain of 0.97 per cent at 3,117.56 units.

Forex, gold, oil and crypto

In the Forex market slid the euro back below the 1.18 US dollar mark in US trading on Monday costing 1.1796 US dollars at the end of the day. In the meantime, it had risen to 1.1850 US dollars. As the week progresses, Forex investors will be looking ahead to the annual Federal Reserve meeting, which is usually held in Jackson Hole, Wyoming. Due to the Corona crisis, this year’s conference will be held online. On Thursday, Federal Reserve Chairman Jerome Powell will give a speech, which observers hope will provide clues regarding the Federal Reserve’s longer-term monetary policy strategy. Experts can imagine that the Fed will change its inflation target.

A similar fate to the euro is hitting the precious metal gold today. The gold price is currently trading slightly down at 1,933 US dollars per troy ounce after a series of ups and downs. 

Oil prices, on the other hand, are showing clear gains at the beginning of the week. The Corona reports are providing more economic optimism, which is driving prices. Oil investors are also focusing on the two hurricanes “Laura” and “Marco”, which are currently moving towards the US Gulf Coast after having already caused significant damage on the island of Hispanola. The Gulf of Mexico is home to numerous oil platforms, and during hurricane season people usually stockpile crisis supplies, including petrol. A barrel of North Sea Brent crude ended up costing 52 cents more today at 44.89 US dollars. The costs of a barrel of the US variety West Texas Intermediate (WTI) rose by 31 cents to 42.65 dollars. 

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The most major cryptocurrencies remained widely stable on Monday, with Bitcoin trading at $11,660. Ethereum gained 0.9 per cent to $398 while XRP lost a marginal 0.2 per cent to $02860. 

Corporate and world news

All new in German indices

From today, the shares of the Berlin food delivery service Delivery Hero are traded in the Dax 30 for the first time. The company replaces the scandalous Wirecard group in the leading index. This is based on new stock exchange rules for the exclusion of insolvent groups, which Deutsche Börse had adopted as a result of the accounting scandal and the insolvency of Wirecard.

The Wirecard expulsion also affects the other major stock exchange indices: The plant engineering company Aixtron joins the MDax of medium-sized companies for Delivery Hero. Its place in the SDax of the subsequent smaller companies, in turn, is taken by the DIY store Hornbach. The mechanical engineering company LPKF takes over Wirecard’s place in the TecDax.

Bidding war for Milan stock exchange

According to insider information, Deutsche Börse and three other interested parties are involved in the bidding contest for Italy’s stock exchange company. Two persons familiar with the matter said that Swiss Exchange Six and a consortium of the French stock exchange group Euronext and the Italian state bank CDP had also shown interest. The parties had submitted non-binding takeover bids for the 62.5 per cent majority share in the government bond trading platform MTS. This is owned by the Borsa Italiana Group, which also owns the Milan Stock Exchange and a settlement system. The aforementioned interested parties were seeking to take over the entire Italian stock exchange business, said one of the insiders.

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