Markets Update Monday 25/05/2020 – Joyful dancing on a powder keg

Frankfurt – 25/05/20

Joyful dancing on a powder keg

Hopes for a return to normality created a positive trend in many financial markets today, even with the New York Stock Exchange bein closed due to a public holiday. The London leading stock exchange was also closed this Monday. Looking ahead, investors are currently hardly able to curb their enthusiasm, and it almost seems as if the virus crisis is already over. 

However, the dispute over the security law for Hong Kong only weighed on the Chinese stock exchanges in the meantime. Macro instability in Hong Kong is coming up once again as a significant risk for the financial markets. The debasement of the Hong Kong Dollar (HKD) peg would be like a nuclear explosion for global financial markets. Therefore, the market participants not jumping on board of the “Let’s-Buy-Again” are currently on standby for what soon could become a blood-bath.

US Markets at a glance

On Wall Street, trading was suspended due to Memorial Day. 

Far East Markets at a glance

The Asian stock markets showed a friendly trend at the beginning of the week. In Tokyo, the Nikkei gained 1.73 per cent to 20,741.65 points by the end of trading. The trend of daily new corona infections in Japan is now pointing downwards. On Monday, it was expected that the remotest regions of the country to be affected would be the greater Tokyo area and the northernmost province of Hokkaido.

On the Chinese mainland, the Shanghai Composite was 0.15 per cent higher at 2,817.97 index points. In Hong Kong, the Hang Seng also turned positive, ending trading 0.10 per cent higher at 22,952.24 points.

Hopes for a return to normality provided a positive trend in many markets. The dispute over the security law for Hong Kong only weighed on the Chinese stock exchanges in the meantime.

European Markets at a glance

The European stock markets also presented themselves in a friendly light on Monday. The EuroSTOXX 50 continued to trend in green territory over the day. It had previously opened the session with a gain of 0.47 per cent at 2,919.10 index units.

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The German leading index Dax 30 gained 1.01 per cent to 11,186.04 points at the opening of trading and was subsequently able to increase its gains further. Finally, it ended the day with a gain of 2.87 per cent at 11,391.28 points. The TecDAX was also able to post significant profits and ended the short trading day 0.64 per cent higher at 3,107.94 points. 

As the Federal Statistical Office published in the morning, German GDP shrank by 2.2 per cent in the first quarter compared to the previous quarter. In contrast, the ifo business climate index surprised positively. The mood in the German economy brightened up more than expected in May, rising to 79.5, which helped the Dax 30 jump to its highest level since the beginning of March.

Forex, gold, oil and crypto

The forex market was relatively calm today, and the euro exchange rate moved little on Monday. The European common currency was last trading at $1.0897, the same level as at the start of the day. The European Central Bank (ECB) set the reference rate at 1.0910 (Friday: 1.0904) US dollars. The dollar weakened slightly against the euro following the Ifo report.

Oil prices rose slightly on Monday. Most recently, a barrel (159 litres) of North Sea Brent crude cost $35.20. That was 17 cents more than on Friday. The price of a barrel of the US variety West Texas Intermediate (WTI) rose by 24 cents to $33.48.

The gold price fluctuated between $1,731 and $1,722 an ounce today and remained almost unchanged at the end of the day. 

Digital assets remained under pressure since the weekend and posted some smaller losses. Bitcoin is currently valued at $8,800, while Ethereum costs $204 and XRP $0.1980.

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Corporate and world news

German government’s Lufthansa rescue package is complete

The rescue package for Deutsche Lufthansa is in dry cloths. As the Group announced, the Economic Stabilization Fund (WSF) has approved the package. It provides for stabilization measures of up to 9 billion euros, 3 billion of which are KfW loans. Also, the Economic Stabilization Fund of the Federal Republic of Germany is to provide silent participation of up to 5.7 billion euros.

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The Federal Government will acquire a 20 per cent stake in Lufthansa in the course of a capital increase. The share can be increased to 25 per cent plus one share to prevent a takeover of the airline with a blocking minority.

The Kranich Group will be subject to the conditions that it will waive future dividend payments and limit management compensation.

Thanks to the good news, Lufthansa shares were the third-best performer in the Dax with a jump in price via XETRA of 7.49 per cent to 8.64 euros. 

Exasol with furious start on the stock market

On Monday, the Nuremberg database provider Exasol was the first company this year to celebrate its stock market debut in Frankfurt. The shares started at 14.00 euros, almost 50 per cent above the issue price of 9.50 euros. The IPO in the growth segment Scale brought in 87.5 million euros. Of the proceeds, 48.5 million will go to the company itself, which intends to use it to finance its further growth. The remainder will go to the former owners, which include the state-owned development bank KfW.

Hertz files for bankruptcy

The US car rental company takes refuge in insolvency during the Corona crisis. The company, which is almost 19 billion dollars in debt, applied for creditor protection under Chapter 11 of the US Bankruptcy Code. According to its statements, the more than 100-year-old company had tried in vain for state aid. The foreign subsidiaries in Europe, Australia and New Zealand are not affected by the creditor protection proceedings for the time being.

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