Markets Update Tuesday 17/12/2019 – Renewed fears about a hard Brexit paralyse markets

Frankfurt – 17/12/2019

Renewed fears about a hard Brexit paralyse markets

The renewed fear of a hard Brexit has put a damper on the stock market party. The Christmas rally was stopped for the time being, and there was profit-taking. However, hopes of a further rise in share prices remain.

British Prime Minister Boris Johnson, who wants to exclude an extension of the Brexit transitional period legally, caused disillusionment. In this case, Great Britain would have to negotiate a trade agreement with the European Union by the end of next year. Numerous experts assume that eleven months from the Brexit date of 31 January will not be enough. Thus the final EU withdrawal of Great Britain will once again become a game against time.

US Markets at a glance

Trading on Wall Street was characterised by restraint on Tuesday after reaching a record high the previous day.

However, profits quickly crumbled again. The Dow Jones index was only 0.2 per cent higher at 28,294 points at the close of trading in Frankfurt. Investors had recently retaken profits quickly on new record values of the Dow. This is not surprising given the excellent performance of the market this year.

Even robust data from industry and the construction sector in November have not been able to drive prices higher so far. Industrial production in November rose by 1.1 per cent compared with the previous month and was thus stronger than expected.

Far East Markets at a glance

On Tuesday, the Asian stock markets again showed a clear upward trend almost everywhere. New records on the US stock markets also supported the optimism of investors in the Far East. After the first agreement in the US-Chinese trade dispute, there is now hope for an economic revival. In addition, investors in China, in particular, are counting on the promised stock market reforms to be implemented more quickly in 2020. This had been promised last week.

In Japan, the Nikkei more than made up for its losses of the previous day and ended the trading session with a gain of 0.5 per cent to 24,066 points.

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The CSI 300 index with the 300 most important stocks on the Chinese mainland exchanges closed a robust 1.4 per cent higher at 4,041 points, thus approaching its April high again. In Hong Kong, the Hang Seng index recently gained 1.1 per cent to 27,808 points.

European Markets at a glance

Investors on Europe’s stock exchanges took profits on Tuesday, and index prices fell.

The EuroSTOXX 50 had started the new trading day with little change in quotations, but lost ground over the day and recorded a significant loss of 0.73 per cent to 3,745.28 points at the closing bell.

After a strong start to the week, the German stock market took a breather on Tuesday.

The leading index, the Dax, already fell slightly to the sound of the starting bell and then slipped further into the red. In the evening it closed 0.89 per cent lower at 13,287.83 points. The TecDAX also had a weaker start and ended the day with a loss of 0.85 per cent at 3,060.98 points. Only the MDax, the second series of listed companies, had already reached a new all-time high on Monday (28,307 points) and closed on Tuesday at 28,282.24 points, the highest level in its history.

Forex, gold, oil and crypto

On Tuesday, the euro barely moved off course in late US currency trading.

As in late European business, the common currency, the euro, was traded just over 1.1150 US dollars. The European Central Bank (ECB) had set the reference rate at 1.1162 (Monday: 1.1146) dollars. The dollar thus cost 0.8959 (0.8972) euros.

Meanwhile, the British pound was under pressure. Against the US dollar, it fell by significantly more than one per cent. In the meantime, the gains since the election victory of the conservatives in Great Britain have been largely relinquished. The British currency also fell against other currencies.

Oil prices rose slightly on Tuesday in a low-impulse trade. The price of a barrel of Brent rose to 66.91 US dollars by late afternoon. That was 57 cents more than the previous day. The price of a barrel of West Texas Intermediate (WTI) rose by 55 cents to 60.75 dollars.

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Gold was trading sideways on Tuesday. During the day it reached $1,480 but fell back to $1,475.

Cryptocurrencies, on the other hand, had to take another hard beating. Bitcoin fell by another 4 per cent to $6,600, while Ethereum lost more than 7 per cent to $124 and XRP suffered even heavier losses at almost 10 per cent to just $0.1840. Experts believe that this is another shake-out of weak hands before the next prolonged bull-run, but these are same experts that voiced this type of opinion numerous times before. 

Corporate and world news

US Congress approves creation of Space Force

The US Congress has agreed to the creation of a “Space Force” as the sixth US branch of the armed forces. The law for an independent space force is part of a package of legislation on the defence budget (NDAA) passed by the Senate on Tuesday. The House of Representatives had already voted in favour last week.

This is a success for US President Donald Trump, who initiated the creation of the Space Force. Vice President Mike Pence already spoke during the debate in the House of Representatives of a “giant step for the Americans” who were preparing to return to the moon and then fly to Mars. The White House had previously stated that this would fulfil a promise by Trump to “maintain America’s leadership in space.

The “Space Force” is to become the sixth independent branch of the US Army alongside the Army, Navy, Air Force, Marine Corps and Coast Guard. The draft law states that the “Space Force” should guarantee the freedom of operation of the USA in space and protect the interests of the Americans there. It is also the task of the new branch force to ward off aggression in and out of space and to carry out operations there.

The draft law does not provide for additional soldiers for the new “Space Force” – these are to be recruited from the air force. The position of a commander of the “Space Force” (“Chief of Space Operations”), who is subordinated to the civil head of the air force, is to be newly created. The commander is to be nominated by the president, and the Senate must then confirm the appointment.

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Significantly higher car sales in Europe

Car sales in Europe increased significantly in November. The number of newly registered passenger vehicles increased by 4.9 per cent to around 1.176 million, according to the industry association Acea. In 2018, sales slumped against the backdrop of the introduction of new emissions regulations (WLTP).

In November, four of the five most important European sales markets grew. At 9.7 per cent, the increase was most pronounced in Germany. Spain (plus 2.3 per cent), Italy (plus 2.2 per cent) and France (plus 0.7 per cent) followed. In the United Kingdom, however, the number of units sold fell by 1.3 per cent.  

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