Markets Update Wednesday 12/02/20 – All green

Frankfurt – 12/02/20

All green

Hopes for rapid economic recovery after the dampening effect of the coronavirus are encouraging more and more investors to reenter the stock market. In many places, stock market barometers are reaching new record levels. 

Investors expect the economic impact to remain mostly regional. The global economy, however, should not be sustainably burdened – also thanks to the intervention of the Chinese central bank. Also, the Fed has signalled that it will intervene with support if necessary.

But many a market expert warns against exaggerated optimism and sees a significant correction coming next. Because, if the number of new infections in China does not decrease further in the coming days, a change in trend could quickly occur. Thus, the coronavirus epidemic is hovering over the markets like a sword of Damocles. According to Deutsche Bank, the virus crisis could plunge Germany, for example, into recession.

US Markets at a glance

Wall Street continues to gain ground on Wednesday and is still chasing records. The Dow Jones opened at 29,406.75 points with a gain of 0.45 per cent and is expected to continue to expand as trading continues. The US leading index continued on its record course and climbed above the 29,500 point mark for the first time in its history. The tech index NASDAQ Composite is also currently rising, having already risen by 0.52 per cent to 9,688.60 points at the start.

Far East Markets at a glance

On Wednesday, investors in the Far East presented themselves in a friendly mood. In Tokyo, the Nikkei rose by 0.74 per cent to 23,861.21 points. Meanwhile, the Shanghai Composite rose by 0.87 per cent to 2,926.90 points, while the Hang Seng rose by 0.87 per cent to 27,823.66 index units.

European Markets at a glance

The European stock markets also showed green omens on Wednesday and set new records.

The EuroSTOXX 50 had started the day with a small premium and even marked a new high since 2008, reaching 3,854.43 points, 0.75 per cent higher than before.

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Furthermore, the bull run on the German stock exchange floor also continued in the middle of the week. The Dax 30 had already made a firmer start to Wednesday’s trading and, as things developed, exceeded the 13,700 mark for the first time. In the evening, the leading index closed with a substantial gain of 0.89 per cent at 13,749.78 points. The TecDAX also took advantage of its initial increase and ended the day 0.59 per cent higher at 3,270.00 units.

Forex, gold, oil and crypto

The euro extended its losses from European business in US trading on Wednesday and had fallen as low as $1.0868. This is the lowest level for the common currency since 2017. The European Central Bank (ECB) set the reference rate at 1.0914 (Tuesday: 1.0901) dollars. 

Strong gains registered the Kiwi (NZD) after the RBNZ kept interest rates unchanged at 1 per cent, followed by a hawkish statement by the RBNZ governor Adrian Orr. The bird flew from $0.6400 to as high as $0.6488. It was last seen trading at around $0.6470. 

Oil prices benefited on Wednesday from good sentiment in the financial markets and rose significantly. However, specific news from the crude oil market were largely ignored. A barrel of North Sea Brent crude cost $55.70 in the early evening. This was USD 1.69 more than the previous day. The price of WTI oil increased by USD 1.36 to USD 51.30.

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The gold price fluctuated between $1,562 and $1,570 and closed the trading day pretty much unchanged at $1,566. This is surprising since equities were soaring. Typically, a strong rise in equity prices leads to a notable decrease in gold prices. This notion could be interpreted, that many investors don’t trust that we’re out of the woods in terms of the coronavirus and its impact on the economy after all. 

Cryptocurrencies continued to soar on Wednesday. Bitcoin increased by almost 2 per cent to $10,300, but it was mainly the so-called altcoins that dominated the ongoing bull-run. As examples, Ethereum, the second most popular digital asset at present, gained another 15 per cent to currently $270. XRP also increased significantly by over 8 per cent to $0.3030. Other major cryptos, such as Tezos and Cardano, also increased by double-digits on Wednesday. 

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Corporate and world news

Anheuser Busch strong

The world’s second-largest beer producer behind Anheuser Busch has earned more in 2019 and expects growth in the current year as well. The operating result improved by 3.9 per cent to 4.02 billion euros.

In the autumn, the board of directors had reduced its forecast for the operating result to four per cent, which was at the lower end of the original targets. For the current year, the Executive Board announced growth in the mid-single-digit percentage range.

At the same time, CEO Jean-François van Boxmeer announced his resignation. After 15 years, he will hand over the management of the second-largest brewery in the world, Heineken announced in Amsterdam on Tuesday. His successor as of 1 June will be Dolf van den Brink (46), who is currently Heineken’s director for Asia. Van Boxmeer spoke of a necessary change of generations.

Lyft share weaker

Uber competitor Lyft posted strong business growth at the end of the year but was in the red.

Compared to the previous year’s figure, the loss in the fourth quarter increased from 249 million to 356 million dollars (326 million euros), the transport company announced on Tuesday after the US stock market closed. The balance sheet, however, suffered heavily from extraordinary high costs, with adjusted earnings of only 121 million dollars in the red. Revenues rose by 52 per cent to a record of 1 billion dollars.

The number of active users grew by 23 per cent to 22.9 million. This puts Lyft – whose business has so far been limited to the USA and Canada – far behind its rival Uber, which is also represented in many more countries. Growth already slowed down significantly in the second half of 2019 and Lyft expects it to continue to slow down in the current fiscal year.

According to the current financial figures and an outlook for the new fiscal year, Lyft’s shares fell by up to 10.16 per cent to their 21-day line in NASDAQ trading on Wednesday. They closed at 48.46 US dollars.

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