Markets Update Wednesday 07/10/2020 – Wall Street shakes off Tuesday’s woes

Frankfurt – 07/10/2020

Wall Street shakes off Tuesday’s woes

After yesterday evening Donald Trump soured the mood of investors, the bulls took charge again. And that, although also today again fierce headwind arose. 

The fronts in the eternal Brexit drama became increasingly entrenched. EU Council President Charles Michel has demanded a clear position from Great Britain regarding the negotiations on future relations.

It was “time for the United Kingdom to put its cards on the table”, Michel wrote on Wednesday on the online service Twitter after a conversation with Prime Minister Boris Johnson. He referred to the EU summit at the end of next week. Michel emphasised that the EU still wants an agreement, “but not at any price”.

Britain had left the EU on February 1. But the talks have made little progress for months. They have recently been further burdened by the British plans to unilaterally change parts of the Brexit Treaty, which has already come into force. 

In addition, corona remains a sensitive topic because rising infection figures are driving shivers down the spine of politicians and market participants alike. 

US Markets at a glance

The Dow Jones ended trading 1.91 per cent higher at 28,303.39 points, while the NASDAQ Composite ended similarly strong with a 1.88 per cent gain to 11,364.60 units.

Thus, the share prices recovered somewhat from their previous day’s slide. After Donald Trump had declared negotiations on a new Corona aid package to have failed the day before, the US President now put his statements into perspective and announced government aid for families, airlines and small businesses. This provided relief on the stock markets. The White House Chief of Staff, Mark Meadows, also stated on television that although he was not too optimistic that a comprehensive agreement could be reached, the government was now trying to pass individual projects instead of a complete package.

Far East Markets at a glance

Japan and Hong Kong’s stock exchanges didn’t show a common trend on Wednesday. The Nikkei ultimately lost 0.05 per cent to 23,422.82 points.

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In metropolitan Hong Kong, the Hang Seng 50 index rose 1.09 per cent to 24,242.86 points at the close of trading on Wednesday. Trading in Shanghai is still at a standstill due to public holidays. Last Wednesday, before the public holidays, the Shanghai Composite stood at 3,218.05 index units. 

The news that President Donald Trump has put negotiations on another comprehensive corona aid package on ice for the time being weighed on the Asian market. Market participants had hoped that the stimulus package would be passed before the presidential elections in November.

European Markets at a glance

On Wednesday the European markets moved sideways. The EuroSTOXX 50 ended stable and almost unchanged at 3,233.43 points.

Although the leading German index rose slightly in the middle of the week, it is currently having difficulty making more sustained advances. The Dax 30 closed the evening with only a small plus of 0.17 per cent at 12,928.57 points. In contrast, the TecDAX decided to take a downward path after a little changed start and ended the day 0.3 per cent weaker at 3,101.19 points.

The US corona rescue package, on which many investors are pinning their hopes, is off the table for the time being. Besides, an investigative report by the US Competition Commission was a burden: It states that the US technology companies have too much power and should therefore be curbed more. 

In addition, economic fears due to the intensification of the corona pandemic restrictions, but also dark clouds concerning Brexit, continue to slow down the market.

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Forex, gold, oil and crypto

The euro exchange rate recovered on Wednesday from its losses of the previous day. The common currency was exchanged at a rate of 1.1772 US dollars in the Forex market in the evening. Meanwhile, the Turkish lira has slipped to a new record low. In return, the US dollar rose by 1 per cent to a record high of 7.89 lira. The Caucasus conflict, tensions with the EU and the depleted reserves of the central bank are putting the Turkish national currency under pressure. 

Oil prices fell on Wednesday due to ongoing economic concerns. A barrel of Brent Crude cost 95 cents less than the day before, and thus 41.71 US dollars. For West Texas Intermediate oil (WTI) 1.08 dollars less was paid compared to Tuesday, sending the barrel price down to 39.60 US dollars.

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Gold prices recovered after the heavy drop on Wednesday, gaining almost $10 to $1,888 per troy ounce on the daily chart.

Cryptocurrencies consolidated further but stabilised around their previous day prices. Bitcoin is thus currently traded at $10,600 per coin, Ethereum at $336 and XRP at $0.2440.

Corporate and world news

Economic data

Damper for the German economy: after three consecutive increases in August, companies cut back their production. Industry, construction and energy suppliers together cut their output by 0.2 per cent compared to the previous month. Economists had expected growth of 1.5 per cent. Compared to February 2020, the month before the start of the corona-related restrictions, production is still 10.8 per cent lower.

CropEnergies increases profit 

The ethanol producer CropEnergies has recorded a jump in profits thanks to higher ethanol prices. 

Net income rose to EUR 31.5 million in the second quarter of the financial year (prior-year period: EUR 21.2 million). According to the company, the reason for this increase is higher sales prices for ethanol in conjunction with almost unchanged raw material prices. The Mannheim Südzucker subsidiary’s second-quarter sales of EUR 229 million were down on the figure for the same period last year of EUR 245 million. A CropEnergies spokesman cited lower sales volumes and lower revenues for the food and animal feed products sold as the main reasons for this development.

Levi’s back in trend

The jeans manufacturer Levi Strauss (Levi’s) returned to the black in the summer despite the heavy burden of the corona pandemic. The company reported a profit of 27 million dollars in the third quarter. Although Levi’s thus earned 78 per cent less than a year earlier, it at least managed to return to profit following a high loss in the previous quarter. Online sales developed strongly, with revenues rising by 52 per cent year-on-year.

LSE sells Borsa Italiana to Euronext

According to a press report, the winner of the battle for Borsa Italiana has been determined. The former owner London Stock Exchange (LSE) apparently sold the Milan stock exchange to a group consisting of the European stock exchange operator Euronext, the majority state-owned Italian development bank Cassa Depositi e Prestiti (CDP) and the bank Intesa Sanpaolo, the “Börsen-Zeitung” (Thursday edition) reported, citing Milanese financial circles. The purchase price should be 3.75 billion euros. The official announcement is scheduled for this Friday.

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In the bidding race for Borsa Italiana, the Dax group Deutsche Börse and the Swiss Exchange Six had also thrown their hats into the ring and submitted bids. However, the LSE had decided a few weeks ago to hold exclusive talks with Euronext. In any case, analysts had not expected the German stock exchange operator to make a move on Borsa Italiana, or even to be serious about doing so.

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