Markets Update Tuesday 04/08/2020 – Gold Rush

Frankfurt – 04/08/20

Gold Rush

The ongoing flight to safe havens continues to go against the tech rally trend and rising stock prices in the USA. Today, for example, the gold price reached a new record high and broke through the $2,000 mark for the first time in history, even rising above $2,027 at times.

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Other safe havens such as German government bonds, whose yield fell to minus 0.549 per cent, were also in demand. Italian bonds also yielded significantly lower returns of 1.017 per cent. 

US Markets at a glance

Investors in the US were hesitant to take action on Tuesday but pushed the markets higher in the end.

After a mixed performance, the Dow Jones closed 0.62 per cent higher at 26,830.04 points. The NASDAQ Composite technology index also closed on green ground, gaining 0.35 per cent to 10,941.17 index points and thus reached a new record high.

Positive US economic data supported the US stock market. Orders to industrial companies rose more sharply than expected in June. Besides, investors’ attention continues to be focused on the US House of Representatives, where there are still arguments about new corona aid: “The market assumes that the US economy cannot yet stand on its own feet. There seems to be a consensus that more needs to be done. It’s all about the shape of this package,” says market strategist Hugh Gimber of JPMorgan Asset Management to Dow Jones Newswires.

Far East Markets at a glance

The Asian stock markets also saw an upward trend in Tuesday trading.

In Tokyo, the Nikkei also had a tailwind on the second trading day of the week, gaining 1.70 per cent to 22,573.66 points.

On the Chinese mainland, the Shanghai Composite showed only minimal markups, rising by 0.11 per cent to 3,371.69 points on Tuesday. The market in Hong Kong showed a stronger plus, with the Hang Seng index rising by 2 per cent to 24,946.63 points.

Robust US data drove prices in Asia after domestic economic data on Wall Street had fueled the desire to buy. The purchasing managers’ index for the manufacturing sector in the USA calculated by the ISM rose much more strongly than expected into the expansionary range. The fact that there had been fewer new corona infections in the USA recently also created a buying mood – investors are hoping that the corona pandemic will subside.

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The fact that investors in China were comparatively restrained was due to the ongoing Sino-American conflict. Donald Trump’s announcement that a US company would buy the Chinese platform TikTok raised concerns that the dispute between the two countries could increasingly be carried out on companies.

European Markets at a glance

Europe’s markets showed little change in Tuesday trading. The EuroSTOXX 50 rose 0.17 per cent to 3,253.84 points at the start but ultimately hovered around the zero line. It ended the day 0.19 per cent higher at 3,254.29 index points.

The German stock market started trading with profits thanks to positive balance sheet presentations, but was unable to defend the profit zone even in the early stages and slid into the red.

The Dax 30 ended trading 0.36 per cent lower at 12,600.87 points, while the TecDAX lost 1.18 per cent to 3,020.24 index units.

The ongoing concerns about the corona pandemic continued to fuel uncertainty among investors. Even though there was an apparent upward movement on the previous day, the recovery remained fragile. Also, there is still no agreement in the USA on new measures given rising infection figures. Democrats and Republicans are not yet getting anywhere in this regard, which, according to market observer Thomas Altmann of QC Partners, harbours potential dangers: “A failure of the negotiations could trigger a small price shock.

Moreover, the focus on Tuesday was on a series of quarterly reports. Besides the Dax 30 stocks Bayer and Infineon, Fraport, Evonik, TeamViewer and HUGO BOSS also opened their books.

Forex, gold, oil and crypto

The exchange rate of the euro weakened on Tuesday. Rising new infections with the coronavirus in Europe slowed down the euro. In the afternoon, the European common currency traded at 1.1738 US dollars. In the morning, it had briefly risen above $1.18. 

Oil prices fell on Tuesday, further extending the losses from early trading. In afternoon trading, a barrel of North Sea Brent crude cost 43.44 US dollars. That was 71 cents less than the previous day. The price of a barrel of the American variety West Texas Intermediate (WTI) fell by 67 cents to 40.34 US dollars.

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Meanwhile, the gold price continues to rise and reached a new record high today. In the meantime, the precious yellow metal made it up to $2,027 and closed at $2,012 per troy ounce.

Cryptocurrencies consolidated after their strong run-up in the past days. A Bitcoin currently costs $11,270, while Ethereum is traded at $389. After the substantial gains in the last trading days, XRP lost over 4 per cent and is currently worth $0.2980 per coin. 

Corporate and world news

Bayer loses billions

Provisions for the glyphosate settlement in the United States have cost Bayer billions of dollars in losses. 9.5 billion in the second quarter, compared with a profit of 404 million in the same period last year. Analysts had expected an average loss of around 7.9 billion euros. The pharmaceutical and agrochemical group had sales of 10.05 billion euros in the corona crisis, a decrease of 2.5 per cent after currency adjustments. EBITDA before special items rose by 5.6 per cent to EUR 2.8 billion thanks to growth in the agricultural business.

Drought for Diageo

The absence of events and the closure of bars has created a hangover atmosphere at the Diageo liquor and beer company. The British company sold 8.4 per cent fewer spirits in the past fiscal year (until the end of June). Turnover fell by almost nine per cent to 11.8 billion pounds (13.1 billion euros). Diageo was only able to grow in the USA. The operating result fell by 15 per cent to 3.5 billion pounds. Diageo’s product range includes brands such as Johnnie Walker whisky, Smirnoff vodka and Tanqueray gin, but also the Guinness beer brand. The stock is plummeting.

Sixt cuts outlook for 2020 and 2021

The car rental company Sixt is cashing in on the outlook for 2020 and 2021. The SDAX group announced on Tuesday that demand had increased significantly. However, due to the “still considerable travel restrictions” in air travel, the company could not maintain the forecasts, Sixt continued.

On the stock market, the news caused frowning. Sixt stocks reduced their previous profit, but still closed 2.77 per cent up at 65.00 euros via XETRA.

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The high demand of Americans for small arms and ammunition gave the big gunsmiths a strong boost on the stock market on Monday. The FBI reported on Monday for July an almost 80 percent year-on-year increase in “NICS Background Checks”, which are checks made before buying weapons. The US weapons boom has been continuing for some time now during the Corona crisis and anti-racism protests; last month the background checks had even reached a record level.

The shares of the major US weapons manufacturers are also profiting from this development. The shares of Smith & Wesson increased at times by more than 8 per cent those of their rivals Vista Outdoor and Sturm Ruger by more than five and four per cent respectively.

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