Markets Update Thursday 09/07/2020 – Worries

Frankfurt – 09/07/20

Worries

The trend change came late, but it came quite quickly and surprisingly. After an initially relatively calm trading day with only mild price caprioles, traders changed from risk-on to risk-off fiercely and sent stock market indices downhill at a rapid pace.

And that’s just the way it is on the stock market when the herd suddenly changes direction. The trigger was Wall Street where tech shares and the indices of the Nasdaq technology exchange were once again on a record hunt – despite all the health crisis figures and worries. Currently, more than 60,000 Americans are newly infected with the virus every day and voices blaming the government around Donald Trump are getting louder, which in turn fuels new lock-down fears. 

US Markets at a glance

Uncertainty continued to prevail on the US stock markets on Thursday.

The US leading index Dow Jones opened the trading day 0.11 per cent higher at 26,094.92 points. In the day, however, profits melted away and the leading US index slid into the red. In the end, it fell by 1.38 per cent to 25,706.71 index units. Meanwhile, the NASDAQ Composite index rose by 0.53 per cent to end trading at 10,547.75 units. 

Although the pre-trade US job data release came out better than expected, it did not manage to have a positive impact on trading and risk sentiment. Furthermore, investors were torn between forward-looking statements by the US Federal Reserve and the harmful effects of the corona pandemic. The number of new infections in the USA remained high and hopes for a rapid, v-shaped economic recovery faded.

Far East Markets at a glance

The Far Eastern stock markets gained by a majority on Thursday. They benefited from the strong performance of the US financial markets, where technology stocks were again in demand. On the Chinese mainland stock exchange, the rise of the previous days continued.

In Tokyo, the Nikkei closed with a gain of 0.40 per cent at 22,529.29 points. The mood was also good in China, where the Shanghai Composite rose by 1.39 per cent to 3,450.59 units by the end of trading. In Hong Kong, the Hang Seng increased by 0.31 per cent to 26,210.16 points.

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But tailwind came not only from good US figures. Some economic data, among others from China and New Zealand, were also encouraging.

European Markets at a glance

After initial gains, European markets finally posted losses on Thursday. The EuroSTOXX 50 started 0.17 per cent higher at 3,291.70 points and continued to rise afterwards. In the second half of trading, however, it then went down and closed with a minus of 0.76 per cent at 3,261.17 points.

The Dax 30, for a long time showing a large plus, gave up all its gains within a short time and closed the day almost unchanged at 12,489 points. In contrast, the TecDAX closed with a plus of 0.76 per cent at 3,042.99 units.

Wall Street initially provided tailwind, and the Asian and European stock exchanges took this momentum with them at times. Investors are counting on further government stimulus to boost the US economy after the president of the Atlanta Fed, Raphael Bostic, warned that the recovery of the US economy could come to a standstill. Nevertheless, the current uncertainty prevailed given continuing high corona infection figures.

Forex, gold, oil and crypto

The sudden risk-off move in the financial markets also hit the foreign exchange market (Forex). The euro, which was already unable to maintain its early gains until midday, even dropped back below the 1.13 US dollar mark in the late afternoon. Most recently, the common currency is exchanged for $1.1292. In the Asian trading session, the euro was up to $1.1371 and was thus worth more than it had been for almost a month.

In an environment of negative sentiment on the financial markets, oil prices in US trading also declined. The Brent price per barrel in the evening was $42.34, 95 cents less than the previous day, while the Texas Intermediate barrel price fell by $1.25 to $39.65. 

Even gold was unable to continue its strong bullish trend and fell below the $1,800 per troy ounce mark. Here, it was rather profit-taking that led the bulls to take a breather. The safe haven is currently valued at $1,797.

Last but not least, the digital assets space also took a little set-back today with traders taking profits and cryptocurrencies consolidating, following the negative sentiment in equities. Bitcoin slid by 2.3 per cent to $9,150, while Ethereum and XRP both lost over 3 per cent to $238 and $0.`979 respectively. 

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Corporate and world news

Economic data

The price development in China in June points to a continuation of the economic recovery. Producer prices did not fall quite as sharply as in the previous month, and consumer prices rose slightly. Compared with last year, producer prices fell by 3.0 per cent in June. The decline in prices at producer level thus weakened surprisingly significantly. Economists surveyed by Bloomberg had expected an average decline of 3.2 per cent.

The weekly data from the US labour market initially supported the market. But at second glance they also show that the recovery is by no means as fast as the bulls hope. Last week, 1.31 million Americans applied for unemployment benefits, up from 1.41 million the week before.

Meanwhile, German foreign trade recovered somewhat in May from the slump in the corona crisis. Exports rose by 9.0 per cent compared to the previous month, according to the Federal Office of Statistics in Wiesbaden this morning. Imports increased by 3.5 per cent compared to April. The improvements, however, remained below the experts’ expectations. Analysts had expected an average of 14.0 per cent more exports and 12.4 per cent more imports.

SAP on Cloud 9

Europe’s largest software manufacturer SAP has had an unexpectedly strong second quarter during the coronavirus crisis. Once again, the driving force behind revenue was business with cloud software.

Earnings before interest and taxes adjusted for special factors climbed 8 per cent year-on-year to EUR 1.96 billion. This was significantly more than analysts had previously expected at around EUR 1.8 billion on average. Sales also showed a surprising increase of 2 per cent to 6.74 billion euros. The majority of experts had expected a decline.  

Lufthansa founds platform for holiday flights

The Lufthansa Group has established a new platform for holiday flights. The “Ocean GmbH” for flight operations and related services was entered in the Frankfurt commercial register. A group spokesman confirmed information from “Welt” on Thursday. However, Ocean will not appear as a new brand, the spokesman explained. It would rather be a matter of bundling functions that had previously been scattered throughout the group.

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Ocean will offer flights to tourist destinations in Europe and overseas from the major Lufthansa hubs. Lufthansa CEO Carsten Spohr considers the tourism business after the Corona crisis to be more promising than the business travel segment. In the past, there had already been repeated attempts to reduce personnel costs on tourist routes.

Coinbase wants to go public

According to insiders, Coinbase wants to go public as the first trading platform for cryptocurrencies like Bitcoin. The debut is planned for this year or early next year said several people familiar with the matter. Although the company has not yet filed an official application with the US supervisory authority SEC, it is already looking for accompanying investment banks and law firms.

Based on the latest financing round in 2018, the value of Coinbase is more than eight billion dollars. The owners include the New York Stock Exchange, the Spanish bank BBVA and the head of the US institution Citigroup, Vikram Pandit. A stock exchange listing would be a milestone on the way to a broad acceptance of digital currencies as an asset class. These were developed after the financial crisis of 2008 to send money over the Internet in seconds, independent of banks.

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