Markets Update Wednesday 04/09/2019 – European Markets benefit from new hope in Brexit drama

Frankfurt – 04/09/2019

European Markets benefit from new hope in Brexit drama

After an extended Labor Day weekend, US stocks made a weak start to September yesterday. The Dow Jones index closed 1.1 per cent lower at 26,118 points. The broader S&P 500 lost 0.7 per cent to 2,906 points. The composite index of the technology exchange Nasdaq fell by 1.1 per cent to 7,874 points.

The trade conflict between the two superpowers USA and China, as well as disappointing US data, had a negative impact on investors. The latest economic data fuelled fears of a recession. The purchasing managers’ index for the US industry fell surprisingly sharply to 49.1 points, thus falling below the growth threshold of 50 points for the first time since 2016.

“The production sector of the world’s largest economy cannot escape the trade conflicts,” said Thomas Gitzel, Chief Economist at VP Bank. “When US President Donald Trump says that trade wars are easy to win, he’s wrong.”

Far East Markets at a glance

The most important stock exchanges in the Far East can gain ground on Wednesday. Japan’s leading index, the Nikkei, ultimately gained 0.12 per cent to 20,649.14 points. On the Chinese mainland, the Shanghai Composite meanwhile gains 0.56 per cent to 2,946.64 points. The Hang Seng in Hong Kong meanwhile posted a substantial gain of 3.24 per cent to 26,354,13 index points. 

Positive market data for the Chinese economy are creating a good mood in the markets in the Far East. Economic data from Chinese service providers have improved somewhat in the past month. “The Chinese economy showed clear signs of recovery in August, particularly in the employment sector,” comments Director of Macroeconomic Analysis at CEBM Group Zhengsheng Zhong, to Dow Jones Newswires. It appears that the measures introduced by the government in Beijing are bearing fruit.

In Hong Kong, the Hang Seng is rallying after speculation that the highly controversial extradition law, which led to massive protests in the Special Administrative Zone, could be withdrawn, is gaining the upper hand.

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European Markets at a glance

After British Prime Minister Boris Johnson lost the majority in the House of Commons on Tuesday, a postponement of the EU withdrawal is likely to become more probable again. This supports the European market. 

Investors are also pleased with the latest news from Italy. The members of the 5-star movement voted by a large majority in favour of an alliance with the Social Democratic PD. Prime Minister Giuseppe Conte can now put together a new cabinet to propose it to President Sergio Mattarella.

Der EuroStoxx 50 gained almost 1 per cent is currently sitting at around 3,450 points. The French FRA 40 is up more than 1.1 per cent with 5,533 points, and the German DAX 30 crossed the 12,000 points barrier to currently 12,055 points – an increase of almost 1.2 per cent. 

Forex, gold, oil and crypto

Economic data releases today

In the middle of the week, the focus shifts to the mood in the service sector. The data for Japan and China have already passed the ticker. The China General Services PMI Index rose in August from 51.6 to a three-month high of 52.1 points.

The figures from Germany are expected in the morning. Those from the eurozone follow a bit later. Towards evening, the market looks at some speeches by regional Fed presidents. The US Federal Reserve publishes its economic report Beige Book at 6 pm GMT.

On the currency market, the euro has recovered somewhat to USD 1.0969. The same goes for the Cable (GBP/USD): after a heavy drop to under $1.20, the Sterling recovered to over $1.2140. 

Yesterday, the gold price rose to over 1,550 US dollars, but in the morning it retraced to about $1,535. 

Oil prices increased this early Wednesday morning slightly. A barrel (159 litres) of Brent North Sea variety cost 58.48 US dollars in the morning. That was 22 cents more than the previous day. The price for a barrel of the American West Texas Intermediate (WTI) rose by 27 cents to 54.21 dollars.

The weaker US dollar was cited in the market as the reason for the slight price recovery. Since oil is traded in the American currency, a falling dollar exchange rate outside the dollar zone leads to rising demand. This usually supports crude oil prices. On Tuesday, a significantly strengthening dollar still weighed on oil prices.

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The cryptocurrency market remained stable on Tuesday with a total market capitalisation of approximatey $269 billion. One Bitcoin (BTC) currently costs $10,600. 

Corporate and world news

Australian economy with lowest growth since financial crisis

The prosperous Australian economy is feeling the effects of the global economic slowdown. The gross domestic product grew by 1.4 per cent in the 2nd quarter compared to the same period last year, the slowest rate since the global financial crisis a decade ago, according to data published by the statistical office on Wednesday. 

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Consumers held back on consumption, while government spending and exports increased. Australia hasn’t experienced a recession for more than a quarter of a century – no other major industrialised country has had such a long run of success.

However, experts expect growth to be below average in the coming quarters as well. “There is a strong headwind from weak wage growth and productivity, which is weighing on consumption,” said economist Andrew Hanlan of Bank Westpac. “The global economy is growing more slowly, and the downside risks have increased.

According to economists, the central bank is likely to cut interest rates to record lows in the autumn given the bleak outlook, to stimulate investment and consumption with cheaper money. She had recently pointed out the negative consequences of the trade dispute between the world’s largest economies, the US and China. Both countries are important trading partners for Australia.

Adidas and Puma in analyst’s sights

The analysis house RBC has left the rating for Adidas at “Outperform” and for Puma at “Underperform”. A survey conducted by RBC of US consumers on their buying behaviour in sporting goods allows positive conclusions to be drawn about the shares of Adidas and Puma, analyst Piral Dadhania wrote in an industry study. However, the popular athleisure trend, i.e. sportswear for everyday use, could harm premium fashion manufacturers such as Hugo Boss.

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