Markets Update Wednesday 17/06/2020 – Fear vs Hope

Frankfurt – 17/06/20

Fear vs Hope

The global indices continue to fluctuate within a clearly defined range. It therefore currently looks as if investors are acting more cautiously after the past wave of euphoria and the subsequent sharp setback. 

The most significant risk for the equity markets at the moment is a second severe wave of infection in the major industrialized countries. These fears are currently being fuelled by the latest developments in China and the USA, where the contagion situation remains tense. The situation in Brazil looks even worse. There, there is even the threat of a real disaster with currently 37,000 new infections in just 24 hours. On the other hand, the continental European figures, including a stable development in Germany, offer hope.

The fear of a resurgence of the virus is countered by the continued gigantic liquidity injections by governments and central banks to mitigate economic risks. So there remains a high risk for short investors to brace themselves against this historic flood of money, especially since the crisis is likely to bottom out in the second quarter at the latest. A development that has already been taken into account in detail on the stock market. 

However, should a second wave of infection lead to a renewed shutdown of the world and the declaration of states of emergency, this would have devastating consequences for the world economy and stock markets.

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US Markets at a glance

The US stock markets experienced sharp fluctuations in Wednesday’s trading. The US leading index Dow Jones gained 0.15 per cent to 26,330.52 points at the start of trading but was very volatile over the day. In the end, it dropped by 0.65 per cent to 26,119.13 points. Meanwhile, the NASDAQ Composite saved a small plus of 0.15 per cent to 9,910.53 points in the evening but had to leave its daily highs far behind.

On the economic side, the US construction starts for May were published before the start of trading. These fell well short of expectations. While economists had expected a rise of 22.3 per cent, the increase was only 4.3 per cent.

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Far East Markets at a glance

After the previous day’s price rally due to speculation about further US economic measures, investors in Japan and China held back on Wednesday. The tensions between North and South Korea have caused investors to take a wait and see approach. Besides, the corona pandemic in May had put a more significant strain on Japanese exports than had been feared.

In Tokyo, the Nikkei ultimately fell by 0.53 per cent to 22,455.76 points. The Shanghai Composite in mainland China ended 0.14 per cent higher at 2,935.87 index points. In Hong Kong, the Hang Seng stock index climbed 0.56 per cent to 24,481.41 units by the end of trading.

European Markets at a glance

European markets recorded slight gains in the middle of the week. The EuroSTOXX 50 showed little movement when the starting bell sounded, but ended the day 0.76 per cent stronger at 3,267.26 index units.

The Dax 30 opened almost unchanged from its close of the previous day and then managed to gain 0.54 per cent on the day to 12,382.14 points. The TecDAX was slightly lower in early trading, but then also climbed into positive territory. 

UBS chart experts estimate that the bulls have become more robust; the jump above the 12,000 point mark of the Dax 30 has created a solid basis.

On the corporate side, the focus was once again on Lufthansa, among others: major shareholder Thiele has increased its stake. At the same time there are also some concerns about the failure of the multi-billion dollar rescue package.

Forex, gold, oil and crypto

The euro exchange rate stabilized in US trading on Wednesday at the lower level from European business. The European Central Bank (ECB) had set the reference rate at 1.1232 (Tuesday: 1.1308) US dollars. 

Oil prices fell slightly on Wednesday in a somewhat directionless trading environment. Most recently, the barrel North Sea Brent costs $40.70 – 26 cents less than on Tuesday. The price of a barrel of US West Texas Intermediate (WTI) fell to $37.90.

Gold was again able to recover from an interim low of $1,713 an ounce. The troy ounce costs $1,727 again at the end of trading.

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There was again only little movement in the digital assets space this Wednesday. The most popular cryptocurrency Bitcoin lost slightly to currently $9,400, while Ethereum and XRP held stable at their values of $233 and $0.1930 respectively. Top gainer of the ten most popular cryptocurrencies was Cardano with a gain of 7.5 per cent to $0.084 on the daily. 

Corporate and world news

Steve Dobler leaves Aurora Cannabis

As Aurora Cannabis announced in a press release on 16 June, Dobler is relinquishing his position as president and director with effect from 30 June 2020, thus helping to “streamline” the leadership. On behalf of the CEO Michael Singer, the corporate release reads: “On behalf of our Board of Directors and our management team, I would like to thank Steve for all his contributions to Aurora Cannabis and for his tenure as a Director on our Board”. His business acumen and entrepreneurial passion would be missed in the future. But the decision to retire, he said, was in line with the business transformation plan. The focus is on making Aurora Cannabis profitable, including streamlining the management team. The Board of Directors of the Canadian cannabis producer now has nine members.

The shares of Aurora Cannabis temporarily dropped by 2.59 per cent to 12.77 US dollars on the NYSE. On the Toronto stock exchange, the loss amounted to 3.20 per cent, where the share was valued at 17.24 Canadian dollars.

Corona crisis burdens Oracle

Weaker demand for software due to the corona pandemic is affecting SAP’s rival Oracle. In the three months to the end of May, revenue fell six per cent year-on-year to $10.4 billion, the company announced on Tuesday after the close of the US stock market. Net income fell 17 per cent to 3.1 billion dollars.

Although the cloud business with IT services on the Internet continued to grow, the US group had to make cutbacks due to the pandemic. The share price initially reacted with significant losses after the stock exchange close.

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