Markets Update Tuesday 10/09/2019 – Worrying news from Far East

Frankfurt – 10/09/2019

Worrying news from Far East

After four strongly bullish trading days, markets are taking a deep breather, probably because of some alarming news from the Far East. 

In August, Chinese industry made the biggest price cuts in three years. According to the statistics office in Beijing, producer prices shrank by 0.8 per cent compared to the same month last year. The falling demand from home and abroad is causing companies to lower costs to win new orders. Share prices fell on the Shanghai stock exchange, as the price trend weighed on profit margins. On the Chinese mainland, the Shanghai Composite is meanwhile selling 0.09 per cent to 3,022.08 units, while in Hong Kong the Hang Seng is increasing 0.05 per cent to 26,695.83 points.

The Japanese stock market, on the other hand, showed a slight upward trend. The 225 value Nikkei index gained 0.3 per cent to 21,392 points. The market was boosted by the devaluation of the Japanese currency, which improved the competitive opportunities of Japanese companies on the world market. 

Another factor which is keeping investors off the markets, for now, is the approaching interest rate decision of the European Central Bank (ECB). Experts firmly expect the central bank to further lower the already negative interest rate on deposits with the central bank on Thursday. However, they do not agree on the question of whether outgoing ECB Chairman Mario Draghi will also announce a resumption of security purchases or promise further monetary loosening measures.

US Markets at a glance

Wall Street has lost momentum after the good run of the past two weeks. However, after a short excursion into the loss zone on Monday, the leading US index Dow Jones Industrial was still able to make a profit, while the other important stock market barometers fell slightly. The Dow, which in the previous week had been strongly driven by new hopes in the trade conflict, closed 0.1 per cent higher at 26.835 points.

The more broadly based S&P 500 was recently trading at 2,978 points with little change. In contrast, the Nasdaq technology exchange index fell by 0.2 per cent to 8,087 points.

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European Markets at a glance

European stock markets are running out of steam on Tuesday.

The EuroSTOXX 50 showed hardly any change at the start of the trading session with a minus of 0.03 per cent at 3,493.80 units. Subsequently, however, it falls back somewhat. 

The German equity market is dominated by restraint on Tuesday.

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The DAX rang in trading at a slight discount of 0.12 per cent to 12,210.88 points. It will also remain slightly negative afterwards. The TecDAX opened the day unchanged at 2,864.00 points but then fell low into the loss zone.

Due to a lack of impetus in the market, the DAX took a breather on Tuesday. Since an unregulated withdrawal from the EU on the Brexit issue was initially prevented, the German benchmark index has risen by almost 2.7 per cent. 

All eyes are on Thursday when the ECB announces its future monetary policy. Further easing is expected. 

Forex, gold, oil and crypto

On the currency market, the euro is now moving in the direction of 1.1060 US dollars. After a strong recovery for the Australian dollar signs point downwards once again on this early Tuesday morning. The AUD/USD pair is currently trading around $0.6860 after it had approached the $0.69 mark yesterday. The same goes for the Canadian dollar. The US dollar is gaining more strength again and is pushing the USD/CAD pair up towards $1.3190. 

Gold price took a big hit yesterday and this morning. Markets seem to be in “risk-on-mode” and turn away from the precious yellow metal. The price for the troy ounce of gold fell below $1,487 during the Asian session and has only stabilised slightly since. Oil prices are also trading slightly lower. A barrel of Brent crude oil costs around $62.60 and the WTI variety $57.90.

The cryptocurrency market hasn’t moved much in the past 24 hours. A Bitcoin trades around $10,300, an Ethereum $182 and one XRP $0.2650. 

Corporate and world news

Brexit chaos without end

For the second time in a week, the British Parliament has rejected a motion by Prime Minister Boris Johnson for new elections. A few hours earlier, Queen Elizabeth II enacted a law passed by the House of Commons requiring Johnson to request a three-month postponement of Brexit until the end of January if he fails to reach an exit agreement by 19 October.

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Johnson categorically rejects an extension. He wants to take his country out of the EU at the end of October as planned, if necessary, without an agreement. “This government will not delay the Brexit any further.

The Trump-Effect-Index

Twitter is the preferred communication channel for US President Donald Trump. In this way, Trump reaches more than 64 million people in one fell swoop. This also has an impact on the financial markets.

A tweet by the US President on the subject of the economy, key interest rates or trade policy and many investors are reacting nervously. The politician has contributed to one or another roller coaster ride on the stock markets in recent years. The US bank JPMorgan now wants to make the impact of Trump’s Twitter behaviour on the markets measurable with a specially created index.

The bank calls the index “Volfefe” and thus refers to a mysterious tweet by the US President in May 2017, when the US President twittered: “Despite the constant negative press covfefe” and at that time caused great astonishment because the word “covfefe” does not exist.

The index is intended in particular to highlight the impact of trump tweets on the bond market, which makes sense “since a large proportion of the President’s tweets are concentrated in the Federal Reserve and since trading tensions primarily affect short-term economic performance and also the Fed’s response to such developments,” according to a JPMorgan report.

Often the words “China”, “billion” and “products” would appear in trump tweets, according to the major bank. It is also increasingly unlikely that these tweets will receive positive reactions such as likes or retweets from the president’s supporters, the report continues.

The US President has sold a total of around 14,000 tweets since his election in 2016 – 10,000 of them since his inauguration alone. According to the analysis, he sends around ten tweets a day.

Even if the Twitter activity of the US President triggers some significant market movements, Trump’s stock market balance is still positive: Since his inauguration, the leading US index Dow Jones has risen by around a third.

PayPal grants instalment credits

The PayPal payment service is expanding its business with instalment payments in Germany. In the future, the option will be available when paying by PayPal, but was previously offered selectively by the merchant. The creditor is PayPal itself, the credit rating is checked online, and the merchant receives their money immediately.

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PayPal offers the instalment payment for purchases between 199 and 5,000 euro. The term is twelve months with an effective annual interest rate of 9.99 per cent.

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