Markets Update Tuesday 07/04/2020 – More Hopium

Frankfurt – 07/04/20

More Hopium

On Tuesday the stock markets continued their dazzling recovery. More and more investors are returning in the hope that the coronavirus will soon be contained. However, is this a trend reversal already or just a bear market rally, a bull trap?

For the first time since the outbreak of the corona pandemic, China has not reported any new deaths. According to official figures, there have been hardly any new infections and only a few new deaths in the People’s Republic every day for weeks now. 

The infection rate in Germany is also declining – even if only slightly. According to a recent survey, the new coronavirus has so far hardly fueled German fears of a severe illness. Compared to 2019, this concern rose only moderately by six points from 35 to 41 per cent, according to an exclusive representative survey by R+V-Versicherung on the fears of Germans. This is the second-lowest value in this area since 1992.

British Prime Minister Boris Johnson is now being treated in the intensive care unit of a London hospital because of his Covid-19 disease. His condition has worsened. Politicians from all over the world wished him a speedy recovery during the night of Tuesday. A government spokeswoman said that Johnson had asked Foreign Minister Dominic Raab to represent him where necessary.

In the United States, more than 10,000 people have now died after infection with the virus. The number of known infections recently rose to around 368,000, considerably more than in any other country in the world. This is shown by data from the American University of Johns Hopkins.

US Markets at a glance

Wall Street was unable to maintain its gains on Tuesday. The Dow Jones began the session with a gain of over three per cent and initially maintained this trend. In late trading, however, it fell back and had to give back all its gains. It closed the session with a loss of 0.12 per cent at 22,653.86 points. The Nasdaq Composite also changed its sign in the end, closing 0.33 per cent lower at 7,887.26 points.

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In late trading, however, the uncertainties surrounding the oil price war again predominated. There were more and more voices saying that OPEC+ would decide on a cut in production at its meeting on Thursday, but that this would not be enough to stabilise prices. As a result, oil prices also turned negative again.

Far East Markets at a glance

In Asia, the positive sentiment continued on the second trading day of the week. In Japan, the Nikkei rose by 2.01 per cent to 18,950.18 points by the closing bell.

On the Chinese mainland, trading resumed after the holiday: The Shanghai Composite jumped by 2.05 per cent and closed at 2,820.76 points. In Hong Kong, the Hang Seng closed with a plus of 2.12 per cent at 24,253.29 units.

The substantial price gains on the US stock exchanges on the previous day also put Asian investors in a buying mood. Market participants were also confident that the measures to contain the coronavirus pandemic in Europe and the USA appear to be successful. In Japan, however, the fight against the virus is still in full swing. The Japanese government has launched an economic program worth billions of yen, and a state of emergency has been declared in major Japanese cities as of today.

European Markets at a glance

The Dax rose by 2.8 per cent to almost 10,357 points on Tuesday. Since the beginning of the week, the leading index has at times gained almost 1,000 points. The TecDAX was also much firmer after opening with strong gains. In the end, the index gained 1.32 per cent to 2,698.06 points.

Positive signals from the USA and Asia boosted the market. There are also continuing signs that the coronavirus pandemic in Europe is gradually coming under control. Now the decisive factor is when public life and production will resume in Europe, a trader said. Austria had already given a corresponding date on Monday.

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Forex, gold, oil and crypto

The euro stayed above $1.09 in US trading on Tuesday, continuing its recovery. In late US trading, the common currency, cost 1.0905 dollars. In Asian business, the euro was still quoted below 1.08 dollars. The ECB set the reference rate at 1.0885 (Monday: 1.0791) dollars.

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The US dollar, as the global reserve currency, was somewhat less in demand as sentiment shifted more towards risk. The Japanese yen, a safe alternative, also weakened against most major currencies. 

Oil prices rose slightly on Tuesday. A barrel of North Sea Brent crude for delivery in June last cost USD 33.18, 13 cents more than the previous day. The price of a barrel of the American WTI variety for delivery in May rose by 14 cents to USD 26.22. The price of oil had still fallen significantly on Monday in the wake of the faltering development in the price war between Saudi Arabia and Russia.

The gold price moved in a rather narrow trading range and closed the day almost unchanged at around $1,648 an ounce.

Most major cryptocurrencies consolidated after substantial gains on the previous day. Both Bitcoin and Etehreum lost 1.5 per cent to $7,120 and $165 respectively. The digital asset XRP, which is utilised through the company Ripple’s distributed ledger technology lost 1.7 per cent to currently $0.1920.  

Corporate and world news

IATA with flashing warning signs

The umbrella organisation of the airlines (IATA) fears the loss of 25 million jobs because of the corona crisis. The number of flights worldwide has now decreased by 70 per cent compared to the previous year. The situation is particularly severe in Europe, where 90 per cent of fewer flights are currently taking place. Numerous airlines could soon run out of money. The association’s chief economist explained that airlines only have sufficient liquid funds for two months on average. Due to the current shortfalls, there is significantly less income. In addition, the airlines could face claims for ticket refunds of up to 35 billion euros in the second quarter.

Economic data

In Japan, consumers spent less in February than a year ago. However, consumption did not collapse as much as had been feared. The decline in spending was 0.3 per cent, according to government data released on Tuesday. Analysts had expected a decrease of 3.9 per cent.

German industry showed a surprisingly strong performance in February before the corona crisis and continued its recovery. The total production in the manufacturing industry increased by 0.3 per cent month-on-month, the Federal Statistical Office announced in the morning. This was the second increase in a row. 

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However, the outlook is gloomy. According to a survey by the Ifo Institute, German industry is likely to suffer a massive drop in production in the coming three months due to the corona crisis. According to the research institute, the index of production expectations dropped by 22.8 points to minus 20.8 points in March. This was the sharpest drop since the survey began in 1991.

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