Markets Update Tuesday 07/07/2020 – Infectious

Frankfurt – 07/07/20

Infectious

After the strong start to the week, the stock markets have today shifted back a gear. Recent horror reports about continuously rising infection numbers, especially from the USA, made more and more investors and traders nervous on today’s trading day. Some investors also cashed in and took profit after the stock market rallied in the past few days.

US Markets at a glance

The US leading index Dow Jones showed a minus of 0.44 per cent at 26,172.01 points at the start of trading, but slipped deeper into negative territory and ended the day with a loss of 1.51 per cent at 25,890.53 points. The NASDAQ Composite also closed 0.86 per cent lower at 10,343.89 points. 

The possible consequences of the recent rapid spread of the virus continue to smoulder in the background as stress factors. In the USA, for example, the number of new infections has risen steadily since mid-June as a result of the relaxation of regulations. However, the fact that caution has currently increased again is probably also connected with the coming reporting season in the USA. The quarterly reports are likely to paint a rather bleak picture. 

Far East Markets at a glance

On Monday, the Asian stock markets did not find a common direction.

In Tokyo, the Nikkei closed 0.44 per cent lower at 22,614.69 points. On the Chinese mainland, however, the Shanghai Composite rose by 0.37 per cent to 3,345.34 index units by the end of trading. In Hong Kong, the Hang Seng fell by 1.38 per cent to 25,975.66 points.

After the substantial gains on Monday and in the previous week, some trading centres experienced a setback. The sentiment was depressed by a six-week curfew over Melbourne, Australia’s second-largest city, due to a renewed “sharp rise” in coronavirus infections. Market participants put heavy selling pressure on Australia’s ASX index after the drastic measures were announced. Overall, Australia did not see high infection numbers, not even speaking about corona related deaths during the global health crisis, which makes the newly introduced measures appear strange at least. 

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European Markets at a glance

European markets showed heavy losses on Tuesday. The EuroSTOXX 50 started 0.34 per cent weaker at 3,338.72 points and then extended the losses further. In the end, it fell by 0.85 per cent to 3,321.56 points.

The Dax 30 closed 0.9 per cent lower at just over 12,600 index units. At times it slipped as low as to 12,525 points. The TecDAX also ultimately lost ground, having lost 0.46 per cent to 3,027.53 points at the start. It left trading 0.33 per cent weaker at 3,031.69 points. Chart experts continue to see the Dax in a positive light. Strong support can currently be found at 12,471 points.

After the strong start to the week, profit-taking occurred. Given the strong recovery in recent months, investors’ fear of “sensitive setbacks” is latently great, according to some market observers. Furthermore, traders were concerned about the spread of the coronavirus in the USA and other regions.

Forex, gold, oil and crypto

One of the main take-aways from today’s price action in the Forex and commodities markets was the meteoric in the price of gold. Hitting its highest level since 2011, alongside the eruption in buy-side flows in the Pound Sterling amid speculation of a revival in Brexit talks were the theme of the day.

In the currency market, the euro weakened somewhat on Tuesday. Disappointing economic data from the EU currency area weighed on the euro. In the afternoon, the European common currency is exchanged for 1.1286 US dollars, after trading above $1.13 during the Asian session.

Oil prices rose again somewhat on Tuesday. A barrel of Brent crude last cost 43.29 US dollars, 21 cents more than the day before. A barrel of the American type West Texas Intermediate (WTI) rose by 6 cents to $40.71. 

Gold, the “anti-crisis currency”, continued its incredible ascend and rose by 0.5 per cent to 1,794 US dollars per troy ounce and reached its highest level in over eight years (November 2011).

In the cryptocurrency space, we are witnessing a renewed trend of altcoins outperforming the two largest digital assets by market capitalization Bitcoin and Ethereum. Especially Cardano is flying and even surpassed Bitcoin SV with a 25.6 per cent gain on the daily and a weekly increase of a whopping 56.2 per cent to now over $0.13. XRP, the most controversial digital asset, also continues to make big moves with a 7.6 per cent gain on the day to now $0.1980. Bitcoin, on the other hand, only posted a marginal value appreciation of 0.1 per cent to $9,270, while Ethereum managed to increase by 1.9 per cent to $240. 

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Corporate and world news

Deutsche Bank and Google become partners

Deutsche Bank is teaming up with Google. The financial institution announced that it is entering into a global strategic partnership. A corresponding letter of intent has been signed. In the coming months, a multi-year contract is to seal the future business relationship between Germany’s largest financial institution and the US technology group. According to the agreement, Google will provide Deutsche Bank with cloud services and new technology-based products will be developed.

More passengers at Fraport 

Passenger numbers at Frankfurt Airport continued to improve slightly last week but remain at a very low level due to the corona crisis. In the week from June 29 to July 5, the airport operator Fraport counted about 251,000 passengers at Germany’s largest airport, 83.3 per cent less than a year earlier, according to a list on the Frankfurt Group’s website. This was approximately 78,000 passengers more than a week earlier when the decline had been 89.3 per cent.

The number of aircraft movements fell last week by 71.2 per cent year-on-year to 3,074 takeoffs and landings. This figure also improved in a weekly comparison. Many airlines have been offering more flights again since June after passenger traffic had collapsed since the end of March due to global travel restrictions.

ECB Director mildly positive

German ECB Director Isabel Schnabel sees signs that the recession in the eurozone could be milder than feared.

This was suggested by some positive “confidence indicators” from the past few weeks, she told the Dutch newspaper NRC Handelsblad. “Overall, however, we are within the range of our baseline scenario.” The ECB and also the EU Commission expect the eurozone economy to fall by 8.7% this year, but to recover in the second half of the year.

This is also supported by the so-called purchasing manager index of the IHS Markit institute. The barometer for the eurozone rose to 48.5 points in June from 31.9 points in May, thus approaching the growth threshold of 50 points. “This signals that the eurozone has been remarkably quick to extricate itself from its corona pandemic emergency,” said Markit chief economist Chris Williamson.

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