Markets Update Tuesday 27/10/2020 – “Lockdown Light”

Frankfurt – 27/10/2020

“Lockdown Light”

German politicians warn that the corona situation is far more dramatic than many believe – and announce tough decisions for tomorrow that will hurt the population and that hurt the markets already today. Chancellor Merkel even pleads for a “lockdown light”. 

The fear of the consequences of a lockdown in Germany, but also in other countries, is causing great uncertainty on the markets. In France, there is speculation about a possible extension of the night-time curfew already in force in 54 départements or even a full lockdown. Head of government Castex announced a statement in Parliament on Thursday.

US Markets at a glance

Wall Street started a stabilisation attempt on Tuesday, but only the tech sector was able to close higher in the end.

The Dow Jones Industrial ended trading down 0.8 per cent to 27,463.19 points. The Tech-Index NASDAQ Composite was 0.44 per cent higher at the opening of the stock exchange at 11,409.34 points and followed this trend afterwards. In the end, it went 0.64 per cent higher at 11,431.35 points.

Next to the critical corona-situation, investors focused on the reporting season, which provided a lot of food for discussion on Tuesday.

Far East Markets at a glance

Asian equity markets trended mixed on Tuesday. The Japanese leading index Nikkei closed at 23,485.80 points, only 0.04 per cent lower than yesterday. On the Chinese mainland, the Shanghai Composite closed 0.1 per cent higher at 3,254.32 units. In Hong Kong, however, prices fell stronger after the previous holiday. The Hang Seng fell 0.53 per cent lower to 24,787.19 points in the evening.

Rising corona numbers and the upcoming US election caused nervousness in Asia but did not seem to scare investors as much as in Europe and the US. In China, experts said that a low might have been reached in the meantime. The government’s new five-year plan, which is currently being prepared, would now be supported by the recovery of domestic consumption.

European Markets at a glance

Europe’s stock markets posted further losses on Tuesday. Although the EuroSTOXX 50 was a little firmer at the start of trading, it then fell by 1.12 per cent to 3,070.60 index points. The Cac 40 in Paris fell by 1.8 per cent and the British FTSE 100 by 1.1 per cent.

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The hoped-for stabilisation of the German stock market failed to materialise as well. The Dax 30 continued its downward trend and closed 0.9 per cent lower at 12,063 points. The TecDAX lost 0.2 percent to 2,914.46 index units.

Uncertainties remain abundant. For example, corona case numbers in Germany and Europe continue to rise, and US President Trump has again indicated that he will not recognise the outcome of the upcoming US election.

In addition to weak targets from the USA, investors were also unsettled by the continuing bad news on rising infection figures. Contrary to initial assumptions, bargain hunters are not taking advantage of the situation.

Forex, gold, oil and crypto

In Forex trading, the euro weakened slightly. At the same time, however, the euro remained within a narrow trading range. After it briefly fell below 1.18 US dollars during the European trading session it rose back slightly to 1.1813 US dollars at the end of trading on Wall Street.

Oil prices on Tuesday recouped some of the losses of the past trading days. The barrel price of Brent oil rose by 75 cents to US$ 41.21, while the price of WTI increased by 93 cents to US$ 39.49.

The price for the precious metal gold fluctuated in a tight range today, ending where it started at around $1,904 per troy ounce.

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The overall market capitalisation in the cryptocurrency space rose again today, mainly because the price for Bitcoin increased to now $13,500. Should Bitcoin break the $14,000 barrier, a run-up to the all-time-high of approximately $20,000 seems very likely. Other digital assets, as ever so often, are lagging behind Bitcoin’s leading trend. Ethereum, XRP, Bitcoin Cash, ChainLink, Litecoin and co thus remained widely unchanged today. But things could get very interesting very soon with parabolic run-ups of Bitcoin and the so-called altcoins should the bespoke $14,000 mark fall for Bitcoin.

Corporate and world news

Economic data

Durable goods orders in the US increased surprisingly strongly in September. As reported by the US Department of Commerce, orders were up 1.9 per cent on the previous month. This was the fifth consecutive month that orders were up. Economists had only expected an increase of 0.4 per cent. For order intake excluding the transport sector, a plus of 0.8 per cent was reported. Orders received outside the defence sector rose by 3.4 per cent.

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German companies’ export expectations deteriorated in October. The previous month had seen a peak since 2018. In October, the indicator for the manufacturing industry was 3.7 points lower than in the last month at 6.6 points, as the Munich-based Ifo Institute announced in Munich on Tuesday.

AMD wants to buy Xilinx

Chipmaker AMD intends to buy its competitor Xilinx in a share deal for around USD 35 billion.

With the purchase, AMD wants to expand its business in chips for data centres – an area in which its competitor Intel, in particular, has traditionally been strong. The chips from Xilinx have so far been used primarily in the telecommunications industry, but recently the group has also focused on the data centre business. This market is booming in the course of digitalisation with more and more services coming from the internet. 

According to insiders, however, there is resistance from Chinese technology companies. Huawei and other corporations have expressed their great concern about the deal to local regulators, as reported by Bloomberg. Since the transaction also requires the approval of the Chinese competition authorities, the deal could be put at risk.

On the NASDAQ, the Xilinx share ultimately shot up 8.56 per cent to 124.35 US dollars. In contrast, AMD shares fell 4.07 per cent to 78.88 US dollars.

Apple: a billion iPhones

The iPhone has been around for a good 13 years. In the meantime, more than one billion iPhones are actively used worldwide. This is the result of an analysis by the renowned market researcher Neil Cybart of Above Avalon. This does not include old devices that are no longer in use. According to estimates by multiple market research companies, around eight billion smartphones are actively used worldwide.

Airbnb chooses Nasdaq

The accommodation brokerage platform Airbnb chose the Nasdaq for its IPO. The shares are to be listed on the US technology exchange. The leap onto the trading floor is planned for later this year. Airbnb had already submitted the necessary documents to the US Securities and Exchange Commission (SEC) in August. According to insiders, Airbnb intends to collect three billion dollars and is aiming for a valuation of more than 30 billion dollars.

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