Markets Update Tuesday 22/10/2019 – No Direction

Frankfurt – 22/10/2019

No Direction

Investors continued to hold back after mixed quarterly results from major US firms, as well as the ongoing China-USA trade dispute. Investors in the stock market still do not want to be caught on the wrong foot.

Another annoying and limiting factor is the ongoing issue of Brexit, where a solution is still not clearly in sight. In the evening, the British House of Commons was scheduled to discuss laws on the country’s withdrawal from the EU. BayernLB economist Charlotte Heck-Parsch said that the MEPs would probably decide on amendments to the negotiated Brexit deal: “It is too close to say how the vote in the British Parliament will turn out,” said investment strategist Daniel Lenz of DZ Bank.

US Markets at a glance

The US markets closed in the red this Tuesday.

The Dow Jones oscillated around its previous day’s level during trading and went into the evening with a slight minus of 0.14 per cent at 26,789.19 points. Meanwhile, the NASDAQ composite recorded a more pronounced minus: The tech stocks index closed 0.72 per cent lower at 8,104.30 points.

The focus was on the reporting season, which was in full swing and whose most recent results were received very differently. Mixed signals came from major US firms such as McDonald’s, UPS and Procter & Gamble. Meanwhile, the still unresolved trade conflict between the USA and China continues to smoulder in the background.

Far East Markets at a glance

The Chinese stock market did not find a common direction on Tuesday. While the CSI 300 with the 300 most important stocks on the Chinese mainland stock exchanges fell by 0.2 per cent, the Hang Seng index in Hong Kong rose by 0.2 per cent. Most recently, progress in the trade dispute between the US and China had driven prices.

China’s central bank has recently made an unusually large amount of liquidity available to the country’s commercial banks. In a repo transaction with a term of seven days, the central bank pumped 250 billion yuan (uncalculated about 35 billion US dollars) into the market, according to an announcement published on Tuesday. The transaction, in which banks deposit securities as collateral, has the highest volume since May.

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In Japan, the stock exchanges remained closed due to public holidays.

European Markets at a glance

On the European stock exchanges, there was little change on Tuesday towards the end of the previous day.

The EuroSTOXX 50 had already shown little movement at the start of trading, remained true to this trend over the rest of the day and finally went into the evening with only a small gain of 0.13 per cent at 3,604.82 points.

The German market moved only sideways on Tuesday. The DAX had hardly changed its start and fluctuated between moderate gains and losses in the further course of trading. In the end, it closed with a small plus of 0.05 per cent at 12,754.69 points. The TecDAX ended the day with a loss of 0.26 per cent at 2,828.72 points, whereas it had gained somewhat at the start.

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Investors were torn between hope and concern on the Brexit issue and mixed signals from the reporting season.

Forex, gold, oil and crypto

On the currency market, the euro has lost some ground against its daily highs. The common currency is trading at 1.1125 dollars this afternoon.

The British Pound finally lost its momentum after it shot up to almost $1.30 in the late afternoon and closed at around $1.2880. 

Oil prices went up on Tuesday. A barrel (159 litres) of Brent crude from the North Sea cost 60.13 US dollars most recently. That was 1.18 dollars more than the day before. The price for a barrel of the American variety West Texas Intermediate (WTI) rose by 97 cents to 54.28 dollars.

Traders referred to reports that the Organization of Petroleum Exporting Countries (Opec) and allied states such as Russia want to limit their production even more. Apparently, the cartel wants to discuss this in November. The countries are worried about the outlook for crude oil demand in the coming year.

The price of gold also appreciated this Tuesday and closed at around $1,488 after it was oscillating between $1,483 and $1,488 the entire day.

Digital assets such as Bitcoin, Ethereum and XRP continued to trend sideways. The overall market cap did not change much compared to Monday and is currently sitting at around $222 billion. 

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Corporate and world news

McDonald’s and the robot restaurant of the future

McDonald’s is becoming more and more of a tech company. Personalized experiences for the hungry, time savings, convenience – the fast-food chain is in the middle of digital transformation. However, the current figures disappoint the market. McDonald’s has again sold more burgers on its home market than last year. On a comparable basis, revenues there were 4.8 per cent higher than in the same period of the previous year. The share lost 3.5 per cent before the stock exchange trading.

Overall, consolidated sales worldwide rose only slightly by 1.1 per cent to USD 5.43 billion, which was also just short of analysts’ expectations. The operating result was USD 2.41 billion, a slight decline. On balance, McDonald’s earned around 1.6 billion dollars, 2 per cent less.

Procter & Gamble raises forecast

The US consumer goods group Procter & Gamble has started the new financial year with strong growth. Sales and earnings in the first quarter (as of the end of September) were higher than market experts had expected. The share price rose pre-market by around four per cent. Procter & Gamble now expects organic growth of three to five per cent for 2019/20 (end of June). This is slightly more than the previously announced three to four per cent. In the first quarter, the Group achieved organic sales growth of seven per cent to almost 17.8 billion dollars with brands such as Pampers diapers, Braun razors and Ariel detergents. Net income improved by twelve per cent to just under $3.6 billion, core earnings per share by 22 per cent to $1.37 billion.

Biogen share with a boost of hope

Following encouraging study results, the US pharmaceutical company Biogen plans to launch an Alzheimer’s drug on the domestic market. This is well received on the stock exchange: On Tuesday, the shares jumped by almost 19 per cent in pre-IPO trading, thus heading for the most substantial daily profit since 2004. The company explained that after data analysis, it had concluded that the drug Aducanumab slows down the mental impairment of patients at an early stage of the disease. Following consultations with the FDA, the company now plans to apply for approval at the beginning of 2020.

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What’s going on, Harley?

The motorcycle manufacturer Harley-Davidson continues to suffer from trade conflicts and weak demand in the US home market. In the third quarter, profits fell by nearly a quarter year-on-year to $86.6 million. Sales fell by almost five per cent to $1.1 billion. However, analysts had expected even worse figures.

Harley-Davidson continues to have a hard time with American buyers in particular, where the manufacturer is suffering from an ageing customer base and was at times caught in the crossfire of criticism from Donald Trump.

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