Markets Update Thursday 29/10/2020 – ECB to the Rescue – Reloaded

Frankfurt – 29/10/2020

ECB to the Rescue – Reloaded

Corona, lockdowns, gloomy pictures and the whole shebang weighed on the markets again today. Thanks to the ECB, the picture was at least nicely framed later during the days, allowing for some of the markets to recover a little. 

This was after the ECB signalled that it would be ready with new aid as early as December. For the ECB boss does not expect any good to come from the corona restrictions on public life decided in Europe, at least in the short term. More or less openly, she announced new aid for December at the latest – this helped to free the Dax from its worst lethargy and to put an end to the latest series of losses, but nothing more than that. 

What might have caused price jumps in the past was just enough to prevent the European indices from falling further today.

US Markets at a glance

US stock markets showed a cautiously upward trend on Thursday.

The Dow Jones started trading with a slight loss, but then rose significantly. It left the day with a gain of 0.52 per cent to 26,659.17 points. The technology-heavy NASDAQ Composite index already started the day higher and then built on its gains. It finally closed the day 1.64 per cent higher at 11,185.59 points.

Support came from the economic side: Following the economic slump caused by the corona pandemic in the second quarter, the US economy picked up again in the third quarter. The gross domestic product exceeded market expectations. It rose by 33.1 per cent between July and September, projected for the year as a whole.

Also, the balance sheet season continued with numerous submissions for the past quarter.

Far East Markets at a glance

Asian stock markets were mostly weaker on Thursday.

Japan’s leading index, the Nikkei, was up 0.37 per cent to 23,331.94 points. On the Chinese mainland, the Shanghai Composite rose by 0.11 per cent to 3,272.73 units. In Hong Kong, the leading index Hang Seng lost 0.49 per cent to 24,586.60 points.

As on the previous days, Asian stock markets followed Wall Street’s and Europe’s lead, but only partly followed the heavy losses seen there. It seems that the mood in Asia is not being infected by the worries and bad news from the rest of the world.

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European Markets at a glance

The mood on the European stock exchanges was slightly better than the day before. However, hardly any investors were lured off the defensive, especially as they were waiting in suspense for the ECB.

The EuroSTOXX 50 fell 0.07 per cent to 2,961.49 units and continued to trade in a narrow range around the zero line throughout the day. Later, however, it fell back into the red. Its closing balance was minus 0.12 per cent at 2,960.03 index units.

The Dax 30 ultimately fell by 0.32 per cent to 11,598.07 points. The TecDAX also gained slightly, closing 0.20 per cent stronger at 2,835.10 units.

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Investors continued to focus on the rising corona infection figures, which are now increasingly leading to restrictions in many places. Also, the US presidential election is drawing ever closer.

Meanwhile, the Council of the European Central Bank (ECB) left its monetary policy unchanged. The key interest rate remains at historical zero, the marginal lending rate at 0.25 per cent and the bank deposit rate at minus 0.50 per cent.

The reporting season also attracted the attention of investors with numerous balance sheet presentations for the past quarter. VW, among others, already presented its figures for the third quarter before the stock exchange opened. MTU, Fresenius and FMC also presented their results.

Forex, gold, oil and crypto

The euro has recovered only marginally in the US Forex market after previous heavy losses. At the close of the US Wall Street market, the single currency was trading at 1.1673 US dollars. In the face of clear signals from the European Central Bank (ECB) for an additional easing of its already extremely expansive monetary policy, it had previously slumped to 1.1650 US dollars. 

Oil prices fell sharply again on Thursday. Since midweek, prices have been under pressure, partly due to the recent worsening of the corona crisis. Oil is currently cheaper than at any time since mid-June. At 37.42 US dollars, a barrel of North Sea Brent costs $1.70 less than the day before. WTI oil also fell by $1.56 to 35.83 US dollars. 

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The strong dollar is currently giving the gold price a hard time. The troy ounce of gold is worth 0.5 per cent less than the previous day at $1,870.

The most important cryptocurrencies followed the trend of the equity market today and consolidated at their previous day’s close. Bitcoin, Ethereum, XRP, Litecoin, Bitcoin Cash, Cardano and co stayed more or less stable.  

Corporate and world news

Economic data

After the economic slump due to the corona crisis in the second quarter, the US economy grew strongly in the third quarter. The gross domestic product (GDP) from July to September, projected for the year as a whole, increased by 33.1 per cent on a quarterly basis, as the US government announced on Thursday in a first estimate. Analysts had expected growth of 32.0 per cent for the third quarter.

In the months April to June, the world’s largest economy had slumped by an annualised 31.4 per cent. This was the sharpest economic slump since records began. According to GDP data, there were no major price reactions to the financial markets.

The number of initial unemployment claims in the US decreased more distinctly than expected in the week ending 24 October. Compared to last week, the number of applications on a seasonally adjusted basis fell by 40,000 to 751,000, according to the US Department of Labor in Washington. Economists interviewed by Dow Jones Newswires had predicted a decline to 778,000. 

Japan’s economy to shrink more significantly

According to the central bank of Japan, Japan’s economy will shrink slightly more than initially expected this fiscal year due to the corona pandemic. As the Bank of Japan (BoJ) announced on Thursday after two days of deliberations, economic output is expected to contract by 5.5 per cent in the fiscal year ending 31 March 2021. Previously, the BoJ had assumed that gross domestic product would decline by 4.7 per cent.

eBay share loses sharply

With the online trading platform eBay, business in the Corona pandemic continues to run smoothly. In the third quarter, sales grew by a quarter year-on-year to USD 2.6 billion, the company announced on Wednesday after the US stock market closed. The total volume of sales handled increased by 22 per cent to 25 billion dollars.

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The figures were well above the forecasts of financial analysts, and the sales forecast for the current fiscal year was also raised.

The share price initially rose on the NASDAQ after-market, but then turned negative and finally fell by 7.46 per cent to 49.28 US dollars on Thursday.

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