Markets Update Thursday 03/12/2020 – Euro Headaches

Frankfurt – 03/12/2020

Euro Headaches

At the current level, Mr Market is still giving a lot of advance praise for the time “after the virus”. However, corona and the way it is being dealt with by governments around the globe is still far from over. Some investors finally start realising this fact.  

The currently tightened lockdowns (for example in Austria) show that the corona crisis is far from over. Not much is to be expected from the current fourth quarter, as today’s October PMI data for the service sector in the eurozone show. In the US and also China, however, things are looking up, and some market participants took this as a good enough reason to fire up some of the markets – at least for a moment. 

“Eurozone economic growth in the fourth quarter of this year is likely to shrink significantly. The current situation is particularly bad in France, Spain and Italy,” said IHS Markit Chief Economist Chris Williamson. Bafin boss Felix Hufeld is also adding fuel to the fire with his horror scenario for the banking sector, as he predicts that some banks will not survive the current crisis.

US Markets at a glance

Wall Street ended Thursday’s trading with slight gains. In the end, the Dow Jones Industrial stock market barometer closed with a plus of 0.29 per cent at 29,970.50 points. The NASDAQ Composite went into the evening with a plus of 0.23 per cent at 12,377.18 points.

Good news came from the US labour market. The recent worsening of the crisis is thus apparently burdening the job market less than feared.

Apart from that, however, the US stock markets lacked new impetus. Investors are now eagerly waiting to see when the vaccinations against COVID-19 will be introduced in the USA and Europe.

Far East Markets at a glance

On Thursday, the Asian indices saw different trends. Japan’s leading index, the Nikkei 225, was stable with a marginal plus of 0.03 per cent at 26,809.25 points at the end of trading.

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In contrast, the Shanghai Composite fell 0.21 per cent to 3,442.14 points. The Hang Seng 50 index in Hong Kong, on the other hand, rose 0.74 per cent to 26,728.50 points. 

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The Asian stock markets continued to consolidate after large gains were made in the past weeks. The tense trade relationship between the USA and China were once again the subject of discussion – they are likely to remain under observation even under the newly elected US President Biden.

European Markets at a glance

The European stock exchanges didn’t make any major moves this Thursday. The EuroSTOXX 50 finally ended the day with a small minus of 0.07 per cent at 3,518.73 points.

Germany’s leading index opened only marginally weaker, but then widened its decline, closing 0.45 per cent lower at 13,252.86 points. The TecDAX also turned negative and ended the day with a 0.30 per cent minus at 3,085.33 points.

The mood remained depressed in the face of concerns about the economy. The IHS Markit purchasing managers’ index signalled a decline in economic output in the eurozone.

Other negative factors were the strong euro, the lockdown measures in numerous euro countries and a warning from the future US President Joe Biden about many more corona deaths.

Forex, gold, oil and crypto

The euro’s climbing trend in the Forex market continued, although the exchange rate retraced somewhat in late trading to 1.2142 US dollars. It is nevertheless the highest level since spring 2018.

Oil prices did not find a clear direction on Thursday. On the oil market, attention focused on the oil network Opec+, which is discussing its production policy. Representatives of the oil states are currently negotiating a change in production policy. The news agency Bloomberg reported progress in the talks. So far, however, the 23 countries have not been able to agree on the extent to which the previous sharp cutbacks in oil production should be lifted in the coming months. Due to the controversies, the meeting had already been postponed by two days anyway. North Sea Brent increased in price by 6 cents to 48.31 US dollars per barrel, while WTI oil rose by just three cents to $45.31.

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In the precious metals market, gold continues to shine. After a small setback when the US labour market report was published, gold rebounded from $1,828 to close at $1,841 per troy ounce. Another $10 increase on the day.

All major cryptocurrencies remained in a tight trading range, coiling up for another big move up? Bitcoin’s price increased by 0.5 per cent to $19,300, while Ethereum gained 1.2 per cent to $606 and XRP falling by 0.8 per cent to $0.6180.

Corporate and world economic news

Economic data

In China, the mood among its service providers brightened further in November. The index for the mood of purchasing managers surveyed by the Chinese business magazine “Caixin” rose by 1 point to 57.8 points, according to a release published on Thursday. Economists, however, had expected a slight decrease to 56.4 points. The “Caixin” indicator primarily reflects the mood in smaller and private companies.

Who would have guessed that? The service sector in Germany slipped even deeper into the shrinking zone in November due to measures to stem the second wave of corona. The purchasing managers’ index (PMI) for the service sector fell to 46.0 points from 49.5 in the previous month, as the IHS Markit Institute reported in a second publication. The first publication had reported a decline to 46.2 points.

The second wave of corona infections and the related measures taken by governments have also significantly dampened economic sentiment in the eurozone. The Purchasing Managers’ Index surveyed by the research company IHS Markit fell in November 2020 from 50.0 points in the previous month to 45.3 points, IHS Markit announced in London on Thursday following a second estimate. The indicator thus points to an economic contraction. 

Corporate sentiment in the UK deteriorated less than expected in November. The purchasing managers’ index fell by 3.1 points to 49.0 points, according to a second estimate by the research company IHS Markit in London on Thursday. Analysts had expected the initial estimate of 47.4 points to be confirmed. With a value of below 50 points, the indicator signals a decline in economic activity.

US initial unemployment figures decreased noticeably in the week ending November 28. Compared to the previous week, the number of applications on a seasonally adjusted basis fell by 75,000 to 712,000, according to the US Department of Labor in Washington. Economists interviewed by Dow Jones Newswires had predicted only a slight increase to 780,000 based on the original figure for the previous week.

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The Markit Composite PMI in the USA rose unexpectedly strong from 56.3 points to 58.6 points. Experts only anticipated an increase to 57.9 points.

In contrast, activity in the US services sector slowed down in November. The Purchasing Managers’ Index for the non-manufacturing sector calculated by the Institute for Supply Management (ISM) fell to 55.9 (previous month: 56.6). Economists surveyed by Dow Jones Newswires had forecast a decline to this value.

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