Markets Update Thursday 01/10/2020 – Nothing goes in Tokyo

Frankfurt – 01/10/2020

Nothing goes in Tokyo

The tough negotiations on a new aid package for the US economy, which has been shaken by the corona crisis, are getting into motion a few weeks before the elections. The US government has proposed to the Democrats a new stimulus package worth more than $1.5 trillion that includes a $20 billion extension of aid to the ailing airline industry, said White House Chief of Staff Mark Meadows. 

The shares of airline shares such as American Airlines, Delta, United Airlines and JetBlue rose as a result.

For the coming weeks, stock market experts predict turbulent times. For example, corona-positive tests are still rising sharply, resulting in restrictions and putting a strain on the economy even without legal regulations, because people no longer dare go into stores or restaurants for fear of infection. On top of it all, the USA will elect a new president in early November. Investors fear that this might not go as smoothly as hoped.

US Markets at a glance

Mixed trends defined wall Street trading, but the direction was ultimately positive. The Dow Jones was only able to turn positive in late trading, closing 0.13 per cent higher at 27,817.37 points. The NASDAQ Composite moved stronger upward and closed 1.42 per cent higher at 11,326.51 points.

Market participants continue to look at both sides of the coin but mostly hope for a further government stimulus package. However, Democrats and Republicans are currently still at odds over the size of such aid. Today, Finance Minister Steven Mnuchin has indicated that progress has been made in the negotiations. 

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Good news came from the economic side: The number of first-time applications for unemployment assistance fell more sharply than expected last week. Personal spending rose slightly more than economists had predicted in August, although incomes fell slightly more sharply. However, the outlook for US industry looks somewhat bleaker. Although it has increased slightly, it has done so less strongly than previously estimated. The ISM index also fell back somewhat in September.

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Far East Markets at a glance

While the Chinese stock exchanges were on holiday, a technical breakdown on Thursday completely paralyzed trading in Japan.

In Japan, trading was suspended on Thursday due to a technical problem. The Nikkei remained unchanged at 23,184.93 points. Trading has been suspended since the opening of the exchange and was not resumed for the entire day. It is not yet clear whether trading will be possible on Friday.

In China, a holiday break of several days has also begun on the stock exchange, so here too nothing happened on Thursday. On Wednesday the Shanghai Composite lost 0.20 per cent to 3,218.05 points. In Hong Kong, the Hang Seng 50 index rose by 0.79 per cent to 23,459.05 points before the holiday break.

As a result of the stock market mishap, Japanese investors have so far been unable to react to the Tankan Report published on Thursday by the Japanese central bank. It turned out worse than expected. Although the index improved, economists had expected an even more significant brightening.

European Markets at a glance

European stock markets trended mostly positive on Thursday sideways. The EuroSTOXX 50 left the market only 0.02 per cent firmer at 3,194.09 points.

The Dax 30 also oscillated back and forth between profit and loss, but ultimately closed 0.23 per cent weaker at 12,730.77 points. The TecDAX left the shuttle day with a gain of 1.43 per cent to 3,114.14 points. Experts spoke of the Dax continuing to lack a clear trend. The slide in the price of the Bayer stock had a negative impact on Germany’s leading index, which fell by double digits following a profit warning.

Initially, the mood was supported by favourable US conditions and data. The previous day, the mood there was a clear upward trend. On the economic side, however, purchasing managers’ indices for the eurozone and various countries moved into focus on Thursday. These turned out to be mixed. In France, for example, the Purchasing Managers’ Index for the manufacturing sector exceeded expectations in September, while the German counterpart fell just short of them. 

Forex, gold, oil and crypto

The Greenback was also under pressure in the Forex market due to uncertainty about the US election outcome. Against a basket of currencies, it fell by 0.3 per cent to its lowest level in a week and a half. The euro exchange rate also rose slightly on Thursday. In the late afternoon, the common currency cost 1.1735 US dollars, little more than in early trading. On the other hand, the British pound came under heavy pressure. This was triggered by the EU Commission’s decision to take legal action against Great Britain. The background is the Brexit and the negotiations on a new trade agreement. The British government had torpedoed important parts of a deal with the EU utilizing a law. The Commission is now taking action against this.

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Oil prices fell sharply on Thursday, and WTI oil even dropped well below 40 US dollars. Most recently, a barrel of North Sea Brent crude cost $40.39, $1.91 less than on Wednesday. For WTI Oil was paid $2.11 less than the day before, down to $38.11.

The gold price continued to benefit from the rising uncertainties in the markets and moved above the $1,900 mark. Having reached levels above $1,910, it closed at $1,905 per troy ounce.

Cryptocurrencies took a hit after it was reported that the cryptocurrency exchange BitMEX was charged by the CFTC with illegally operating a derivatives exchange. BitMEX denies the allegations by the CFTC and says that they will continue to provide trading activities. Bitcoin dropped 3.17 per cent to $10,500, Ethereum lost almost 6 per cent to $343, and XRP declined by 3.8 per cent to $0.2380.

Corporate and world news

Economic data

Japan’s large industry is no longer as pessimistic after the severe slumps due to the corona pandemic as it was three months ago. According to a quarterly survey (“Tankan”) of around 10,000 companies in the country published by the central bank on Thursday, the sentiment index for major manufacturing companies calculated in the survey rose from minus 34 to minus 27 as of September.

The number of initial applications for benefits from the US unemployment insurance system decreased in the week ending September 26. Compared to the previous week, the number of applications on a seasonally adjusted basis fell by 36,000 to 837,000, the US Department of Labor reported in Washington. Economists surveyed by Dow Jones Newswires had predicted a decline to 850,000. In the week ending September 19, 11.767 million people received unemployment benefits. This was a decrease of 980,000 from the previous week.

Business activity in the eurozone manufacturing sector increased for the third consecutive month in September. The Purchasing Managers’ Index (PMI) for the sector rose to 53.7 points from 51.7 the previous month, according to a second release by the IHS Markit Institute. This is the highest value in more than two years.

Tokyo Stock Exchange halts trading

The leading Asian stock exchange in Tokyo was shut due to an apparent technical breakdown today. As the stock exchange management announced, a problem occurred in the morning with the transmission of data. Trading orders could not be processed either. Consequently, trading in all shares was suspended. Later in the day, the Japan Exchange Group decided to stop trading for the rest of the day. This was the most significant system failure so far. In 2005, trading in Tokyo was suspended for three hours.

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Bayer stock plummets

The Leverkusen-based pharmaceutical and agrochemical group Bayer has confirmed its outlook for 2020 and expects sales in 2021 to be at about the same level.

Core earnings per share in the coming year are expected to be slightly below the previous year’s level, the company announced in a mandatory announcement on Wednesday. Also, the Board of Management had decided “to initiate additional operational savings of more than EUR 1.5 billion per year from 2024”. Job cuts cannot be ruled out. The dividend policy is to be maintained.

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