Markets Update Tuesday 22/09/2020 – FUD Revived

Frankfurt – 22/09/20

FUD Revived

Yesterday, the corona theme, in particular, had put a strain on trade. Fed Chairman Jerome Powell told a Congressional committee today that the economy remains on a “very uncertain” path and repeated his recent warnings. A full recovery could only be expected once the virus was under control, he told the House of Representatives’ Financial Services Committee.

Meanwhile, the US Corona figures continue to speak a clear language: the number of virus deaths in the USA exceeded the 200,000 mark on Tuesday, according to a census by the news agency “Reuters”. According to the census, there are currently about 800 more deaths per day. The number of people tested positive for Covid-19 recently rose by around 44,000 to 6.87 million.

US Markets at a glance

After the sell-off of the previous day, the US stock markets recorded profits today. 

However, the Dow Jones Industrial was able to fight its way back into the profit zone, closing 0.51 per cent higher at 27,287.39 points. The tech stocks saw a more pronounced upward trend: the NASDAQ Composite closed with a premium of 1.71 per cent at 10,963.64 points.

Although the initial panic from the previous day has abated, some analysts fear that the risk of another lockdown still exists. According to reports, the corona infection figures continue to rise in various countries, leading to increasing restrictions on public life again. Although governments around the world are trying to avoid renewed lockdowns, the UK, for example, is already considering this step.

Far East Markets at a glance

In Asia, the stock markets in China and Hong Kong were again weak on Tuesday. In Japan, the stock markets remained closed on Tuesday due to a public holiday also. The Nikkei thus rested at 23,360.30 index points, its closing level on Friday.

On the Chinese mainland, the Shanghai Composite lost 1.29 per cent to 3,274.30 points by the end of trading. Hong Kong’s Hang Seng index ended the day with a loss of 0.98 per cent to 23,716.85 points.

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Weak signals from Europe and the USA ensured that Asian investors also shied away from the risk. Larger sell-offs occurred especially in late trading. The rising infection figures, first and foremost in Europe, also continued to weigh on the mood. The dwindling hopes of a US economic stimulus program and the ongoing dispute with the US over the TikTok video platform also had a negative impact on the mood of investors.

European Markets at a glance

On the European stock markets, Tuesday trading was quite friendly.

The EuroSTOXX 50 was slightly higher at the start of trading and remained firm for the rest of the day. It ended 0.1 per cent higher at 3,164.13 index units.

In Germany, the Dax was already able to gain ground at the opening and remained in the profit zone for the rest of the day. By the closing bell, it had gained 0.41 per cent to 12,594.39 points. The TecDAX it even managed to gain 1.08 per cent to 3,027.68 points.

After the setback on the US stock exchanges in Monday trading was limited, the European stock exchanges were also able to recover somewhat on Tuesday from their price slide at the start of the week. Fears of a second corona wave remain, however, and could put renewed pressure on the markets at any time.

Forex, gold, oil and crypto

On the Forex market, the euro was suffering further from the worsening of the corona situation in Europe. Although it was initially able to make up for initial losses, it fell back and is currently trading just above the 1.70 US dollars mark. The strengthening of the greenback is putting heavy pressure on all other currencies, as well as precious metals. For example, the British pound dropped to $1.27, and the Australian dollar declined close to the $0.71 round-mark.

Oil prices have stabilized somewhat after dropping together with other assets yesterday. The costs of a barrel of North Sea Brent rose by 31 cents to 41.47 US dollars. WTI oil rose by a marginal 7 cents to $39.38.

The price of gold continued to drop today and at times, fell well below $1,900. At the end of today’s sessions, $1,904 was paid for the troy ounce again.

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Cryptocurrencies still seem to be unattractive for institutional investors. Thus also today the prices of the most popular cryptos declined further with Bitcoin losing 0.24 per cent to $10,420. Ethereum 1.89 per cent to $335 and ChainLink fell a whopping 10 per cent to $8.02. XRP, on the other hand, remained stable at $0.2320.

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Corporate and world news

Greek central bank warns

According to new forecasts by the central bank, Greece’s economy may shrink more than previously expected due to the Corona crisis. 

In the basic scenario, the central bank now expects economic output to slump by 7.5 per cent this year instead of 5.8 per cent as in an earlier forecast, said Yannis Stournaras, head of the central bank, on Tuesday. Gross domestic product in the first quarter had shrunk by 0.5 per cent for the year as a whole. In the second quarter of the year, there was a slump of 15.2 per cent.

For next year, however, the central bank expects growth of 5.6 in its base scenario. “A major factor that will influence developments is the observed increase in savings and when this turns into consumer spending or investment,” Stournaras said.

Deutsche Bank closes branches

Deutsche Bank is counting on further digitization and plans to close every fifth branch in Germany. “We are planning to reduce the number of branches from a good 500 to around 400 as quickly as possible,” Philipp Gossow, head of private banking for the Deutsche Bank brand, told Reuters news agency. “We want to do this mainly in cities where we have several branches anyway. In more rural areas, the bank wants to stay to maintain a nationwide branch network. The closures will also involve job cuts, but the number of consultants should remain stable. The jobs that will be lost are already among the 18,000 jobs that CEO Christian Sewing announced in July 2019 as part of the new Group strategy.

GE focuses on renewable energies

General Electric wants to pull out of the construction of coal-fired power plants. The Siemens rival announced that the company would concentrate more on renewable energy sources. GE did not name a date for the production stop, but it will fulfil existing obligations to customers. The company left open what will become of the division.

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The end of coal-fired power plants could mean plant closures and job losses, and a sale was also possible. Most recently, GE’s annual turnover was around one billion US dollars, with the construction of turbines for coal-fired and steam power plants. However, the maintenance and service contracts with the operators are more profitable and generate higher revenues.

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