Markets Update Tuesday 27/08/2019 – A little bit of stress-relief – but nothing more…

A little bit of stress-relief – but nothing more… 

Signals of an easing in the US-China trade dispute gave Wall Street gains at the beginning of the week. “I think we will make a deal with China,” Trump said on Monday at a press conference at the end of the G7 summit in Biarritz, France. But he will only agree to a trade agreement with China if it is a fair agreement that is good for the USA. China’s Vice President and Chief Negotiator Liu He said China was ready to resolve the dispute through “calm” negotiations. “We believe that the escalation of the trade dispute is not good for China and the US and is not in the interest of the peoples of the world,” he said.

For many weeks now, the Dow has been fluctuating around the 26,000 mark, depending on the latest news on the trade dispute and the economy. 

The Dow Jones Index closed 1.1 per cent higher at 25,898 points. The broader S&P 500 also rose by 1.1 per cent to 2,878 points while the composite index of the technology exchange Nasdaq improved by 1.3 per cent to 7,853 points.

Far East Markets at a glance

The renewed turnaround in the US-Chinese trade conflict was also largely acknowledged by the stock markets in Asia on Tuesday with price gains again. Japan’s leading index, the Nikkei 225, closed up one per cent at 20,456 points. On the Chinese mainland stock exchanges, the CSI 300 recently rose by 1.4 per cent to 3,819 points. Taiwan and Korea also saw a slight increase.

In Hong Kong, on the other hand, the Hang Seng index recently fell again by 0.3 per cent to 25,607 points. Given the ongoing protests against the Chinese government’s influence on the Special Administrative Region, concerns about economic development in the region are serious.

European Markets at a glance

The European stock markets are not able to continue their recovery from the previous day for the time being. The EuroSTOXX 50 opened almost unmoved and is now showing small discounts.

The more conciliatory tones of Donald Trumps in the trade dispute with China are seen as attempts to de-escalate the trade conflict. Besides Italy stands politically with the consultation over a formation of a government in the view.

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In Germany, the DAX started with a minus of around 0.3 per cent and 11,613 points. The TecDAX also lost around 0.25 per cent and is currently close to the 2,715-point mark.  

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The Euro index was hit by the combination of downbeat German data (IFO business climate) coupled with the recovery of the risk environment. This had led to a rapid unwinding of longs in funding currencies such as Europe’s common currency. The index is currently trapped in a tight range, having found a solid floor of support from where multiple rebounds have occurred.

The euro has moved very little this early Tuesday. In the morning, the common currency, the euro, traded just over 1.11 US dollars, at about the same rate as yesterday. The European Central Bank (ECB) last set the reference rate at 1.1116 dollars on Monday afternoon.

Data on Germany’s economic performance in the second quarter could not provide any significant impetus for currency trading. According to a second estimate, the gross domestic product had shrunk by 0.1 per cent in the months April to June as expected by experts.

The Australian dollar has lost ground once again after it had recovered close to the $0.68 handle yesterday and is currently trading around the $0.6750 mark. 

Gold depreciated after the positive turn of events in the China-US trade dispute. The price for an ounce of the precious metal is currently approximately 1,530 US dollars. At the same time, oil prices picked up again. A barrel of the Brent variety is currently trading around the $59 mark while WTI costs $54.10 a barrel. 

The cryptocurrency market has stayed fairly stable on Monday and early Tuesday. The overall market cap registers at $265 billion. Bitcoin lost about 1 per cent in value and is currently trading just above $10,100. 

Corporate News

High penalty for Johnson & Johnson in opioid trial

The pharmaceutical company Johnson & Johnson (J&J) has been sentenced to a hefty fine for illegally marketing addictive painkillers. Judge Thad Balkman ordered a payment of $572 million on Monday for contributing to the drug addiction epidemic in the state of Oklahoma. Oklahoma’s prosecutor Hunter had demanded an even higher fine of over $17 billion. 

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Johnson & Johnson immediately announced that they would appeal the decision. Investors reacted relieved to the ruling, Johnson & Johnson’s shares temporarily rose by more than five per cent after trading.

PNE: Purchase offer in sight

An infrastructure fund of the US investment bank Morgan Stanley wants to take over the wind farm developer PNE. The Cuxhaven-based company confirmed a non-binding offer from Morgan Stanley Infrastructure Partners on Tuesday night for 3.50 to 3.80 euros per PNE share. This corresponds to a market value of 268 to 290 million euros and would be a premium of up to 25 per cent on the closing price of 3.05 euros on Monday. “The outcome and schedule of the talks have not yet been determined,” the company stressed. Among other things, the detailed company audit is still pending. It remains to be seen whether the takeover will take place.

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