Markets Update Wednesday 11/03/2020 – Trembling volatility

Frankfurt – 11/03/20

Trembling volatility

Today, Wednesday, the panic was once again the order of the day. After the global indices skyrocketed on Tuesday, the mood today was one of a sell-out, and stock prices plummet. 

The markets thus remain firmly in the grip of the corona crisis, which is continuously producing new twists and higher infection rates – and which the WHO now calls a pandemic. In any case, there can be no talk of relaxation. Added to this was a weak Wall Street in the afternoon, which pulled the domestic market down.

In the USA, US President Donald Trump had met with US senators to discuss measures to combat the potential economic consequences of the coronavirus epidemic. He also promised aid for the particularly affected cruise and aviation industry. However, he made no concrete announcements at first. However, he will meet with bank representatives at the White House in the evening.

US Markets at a glance

The US stock markets presented themselves with deep red signs on Wednesday. The US leading index Dow Jones opened 1.65 per cent lower at 24,604.63 points and fell even more sharply as trading progressed. In the end, it fell by 5.86 per cent to 23,551.02 index points. The stock market barometer thus entered the bear market. Tech stocks also dropped significantly in the middle of the week, after the Nasdaq Composite had already fallen by 2.49 per cent to 8,136.25 points at the start. In the end, the decline amounted to 4.70 per cent – the tech stocks index closed at 7,952.05 index points.

This meant that the high volatility on the markets – caused by increasing uncertainty among investors – continued. Concern about the economic consequences of the novel coronavirus continued to dominate the mood on the stock markets.

Besides, investors reacted negatively to the lack of news from the US government on the action to be taken against the virus and its impact on the US economy. 

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Far East Markets at a glance

The Asian indices also lost points again at midweek. In Tokyo, the Nikkei fell by 2.27 per cent to 19,416.06 points by the end of trading.

On the Chinese mainland, things also went down again: The Shanghai Composite closed with a minus of 0.94 per cent at 2,968.52 points. The Hang Seng in Hong Kong dropped 0.63 per cent to 25,231.61 index points.

European markets at a glance

Europe’s stock markets showed small losses on Wednesday.

Although the EuroSTOXX 50 had entered trading with a plus, it was initially able to increase its gains significantly as the day progressed. However, weaker tendencies then also became apparent, so that the index ended the day with a minus of 0.15 per cent at 2,905.56 points.

The Dax 30 was initially able to make significant gains after the sharp price gain at the start. In the day, however, the mood changed, and the leading index even slipped into the red. In the end, it closed the day down 0.35 per cent at 10,438.68 points. Also, the TecDAX, after an initial attempt at recovery, turned negative and closed 0.58 per cent lower at 2,608.45 points.

Forex, gold, oil and crypto

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The euro continued to weaken in late US currency trading on Wednesday. Most recently the common currency was quoted at 1.1275 US dollars. In early European currency trading it had cost almost a cent more. As recently as Monday, the euro had risen to a one-year high. The European Central Bank (ECB) had set the reference rate at 1.1336 (Tuesday: 1.1390) dollars. 

In demand at midweek were mainly currencies that were perceived as safe. This includes first and foremost the Japanese yen, which rose by about one per cent against the American dollar. This was triggered by the US stock markets, which again came under heavy pressure due to the Corona crisis.

The currencies of countries with high raw material products such as Russia and South Africa were also under pressure. Market participants cited falling oil prices as the reason. On Monday, crude oil prices had fallen more sharply than they had not in thirty years, which had contributed to a panic in the financial markets.

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Meanwhile, the British Pound weakened as the Bank of England cut its key interest rate in an unscheduled move. The move of 0.5 percentage points, which is intended to cushion the effects of the virus crisis, corresponds to the extent of a reduction by the US Federal Reserve from about a week ago. The British Chancellor of the Exchequer, Rishi Sunak, announced government relief for companies that have been particularly hard hit by the crisis.

Oil prices initially broke off their recovery from the historic fall on Monday. Traders cited weak market sentiment, a stronger US dollar, and the prospect of an oil glut as main drivers. A barrel of North Sea Brent crude cost $36.28 in the evening. That was 94 cents less than the previous day. The price of a barrel of UUSgrade WTI fell by 89 cents to 33.47 dollars.

The troy ounce meanwhile costs a good half per cent more at $ 1,664. 

Cryptocurrencies joined equities this Wednesday and plummet. A Bitcoin currently costs $7,700 – more than 3 per cent less than the previous day. Ethereum fell with 10 per cent even sharper and trades presently just under $180. XRP declined by 7.3 per cent to $0.1960.

Corporate and world news

Central Banks to the rescue

After the Bank of England cut rates by half a point to 0.25 per cent today, investors now expect action from the ECB at its meeting tomorrow.

According to the news agency Bloomberg, ECB head Christine Lagarde had warned EU leaders of a crisis like the one in 2008, when the financial system was on the verge of collapse after a severe crisis in the US housing market. The Federal Reserve was, therefore, prepared to use all instruments.

The American Federal Reserve Bank (Fed) and the Bank of Japan could also make further interest rate cuts shortly.

PepsiCo with billion-dollar acquisition

The Coca-Cola competitor PepsiCo wants to buy the beverage producer Rockstar Energy Beverages. Both companies have agreed on a purchase price of 3.85 billion dollars (3.39 billion euros). PepsiCo announced this in “Purchase” on Wednesday. Rockstar mainly produces energy drinks.

The companies have been working together in sales for ten years. PepsiCo’s management expects the purchase to be completed within the first half of the year and is not expected to have a material impact on revenues or earnings in 2020. The acquisition is subject to regulatory approval.

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Pepsi-Cola’s producer and rival Coca-Cola are both expanding their beverage portfolios in a neck-and-neck race.

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