Markets Update Wednesday 10/06/2020 – “No new Great Depression”

Frankfurt – 10/06/20

“No new Great Depression”

The US Federal Reserve did not come as a surprise at its press conference today on the last meeting. As expected, the US Federal Reserve has not touched its key interest rate. It remains in a range of zero to 0.25 per cent, according to a statement by the Fed after its interest rate meeting in Washington. Economists had unanimously expected this decision. 

The Fed’s reaction to the corona crisis so far is unprecedented and dwarfs even its intervention in the financial crisis. In addition to interest rate cuts, securities were purchased on an unparalleled scale, and numerous credit programs were launched to support the economy.

Besides, the central bank specified the extent of its purchases of securities to stimulate the economy. The Fed of New York, which is responsible for handling the investments, announced that it would invest around USD 80 billion per month in American government bonds. Approximately 40 billion dollars per month will be invested in mortgage-backed securities (MBS).

Overall, investors held back before the announcement of the results of the Fed meeting in the evening. 

US Markets at a glance

The US leading index Dow Jones opened with a small loss and then expanded on it. It temporarily went into positive territory, but by the end of the trading session in the USA, the Dow had lost 1.04 per cent to 26,989.99 points. In contrast, the NASDAQ Composite started off stronger, defended its gains and ultimately rose 0.67 per cent higher to 10,020.35 units.

Investors were in a waiting mode. In late trading, the US Federal Reserve had published its economic projections and monetary policy signals.

Far East Markets at a glance

The most important stock markets in the Far East did not make any major leaps on Wednesday and showed mixed trends. Stock market experts spoke of breathing space after the recent price rally. Many investors were waiting for further monetary policy signals from the US Federal Reserve, they said.

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In Tokyo, the Nikkei closed with a gain of 0.15 per cent at 23,124.95 index points. However, the somewhat firmer yen had a braking effect here. On the Chinese mainland, the Shanghai Composite fell by 0.42 per cent to 2,943.75 points by the end of trading. In Hong Kong, the Hang Seng also fell by 0.03 per cent to 25,049.73 units.

European Markets at a glance

Europe’s stock markets posted losses again on Wednesday. After a firmer start, the EuroSTOXX 50 fell sharply as the day progressed. It ended the day 0.81 per cent down at 3,293.71 index units.

The leading German index ended regular Xetra trading at 12,530 points, a daily loss of 0.7 per cent. The TecDAX also lost 0.24 per cent and closed at 3,154.48 index points.

After the recent rally, many investors started taking profits. In addition, the OECD had spoiled the economic mood of investors with its critical assessment. As a result, there was a growing concern that a V-recovery would not occur after all. 

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Forex, gold, oil and crypto

In the Forex market, the euro gained significantly in late trading and is currently traded at 1.1419. The European Central Bank (ECB) set the reference rate at 1.1375 (Tuesday: 1.1294) US dollars. Market observers spoke of widespread dollar weakness, even before the Fed’s monetary policy decisions, which in turn boosted the euro.

On the oil market, prices often changed their sign in the day. In late trading, however, prices increased more strongly. A barrel of North Sea Brent is currently quoted at just over $41, and the US light oil variety WTI at over $39.

The troy ounce of gold gained again and in the wake of the Fed’s decision and costs $1,738 per troy ounce at the close of trading.

The digital assets space continues to hold its strong position, sneaking up higher slowly and steadily. Today, Bitcoin gained 1.1 per cent and is currently quoted at $9,900, while Ethereum increased even more substantially by 1.65 per cent to $249. The third-largest cryptocurrency by market capitalization XRP rose 0.5 per cent to $0.2035. The biggest winner of the top-ten digital assets was Cardano, gaining 2.55 per cent to $0.084.

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Corporate and world news

Economic data

In China, continued weak price development indicates a sluggish economic recovery from the consequences of the corona crisis. Producer prices fell by 3.7 per cent in May, the sharpest fall in four years. This points to weak demand from manufacturing companies. Economists had expected a somewhat smaller decline on average.

Tesla shares rise above $1,000

For the first time, the paper of e-car manufacturer Tesla broke through the $1,000 barrier on Wednesday. On the Nasdaq technology exchange, $1,005.98 are currently being paid in a friendly market environment. The share is thus rushing from one record high to the next.

At $1,000, Tesla is worth 185.5 billion US dollars or the equivalent of 164 billion euros on the stock exchange. In comparison: The three German carmakers bring the total to just under 156 billion euros. The share price development in October had taken off. At that time, the Californians surprised with a quarterly profit. Many experts did not expect the Group to achieve this, given the high costs of expansion.

Starbucks expects quarterly loss

The world’s largest café chain, Starbucks, expects billions of dollars in charges in the current quarter due to the Corona pandemic. In the three months to the end of June, store closures and sales losses are likely to depress operating profit by up to 2.2 billion dollars (1.9 billion euros), the company announced on Wednesday.

Starbucks expects an adjusted quarterly loss of between 55 and 70 cents per share. In China and the USA, the company’s most important markets, sales on a like-for-like basis fell by 21 per cent and 43 per cent respectively last month. According to the company, however, more than 95 per cent of all US stores and 99 per cent of all stores in China have recently reopened.

On the Nasdaq, Starbucks stock lost 4.08 per cent to $79.01.

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