Markets Update Wednesday 25/03/2020 – Worse than the GFC

Frankfurt – 25/03/20

Worse than the GFC

The Ifo Business Climate and the Purchasing Managers’ Index have slumped to an unprecedented extent due to the corona crisis. Chief economists now see the economy in worse shape than it was during the financial crisis.

In March the Ifo Business Climate Index fell to 86.1 points, down from 96.0 points in the previous month. This is the sharpest drop in the most important German economic barometer since German reunification and the lowest value since July 2009!

In particular, the economic expectations of companies darkened in March as never before. The decline in expectations in the manufacturing sector is historically unique, given 70 years of industrial surveys.

Economic sentiment in the eurozone also dropped dramatically on Tuesday as a result of the Corona crisis. According to the market research institute IHS Markit, the Purchasing Managers’ Index fell by 20.2 points to 31.4 points in March. This is a record low – even the historical low from times of the global financial crisis was clearly undercut.

US Markets at a glance

Wall Street was again highly volatile on Wednesday.

The Dow Jones 30 Industrial index rose 2.33 per cent to 21,187.29 but gave up most of its daily gains in the last few minutes of trading. On Tuesday, it had already primarily anticipated the expected aid package in a rapid recovery and jumped 11.4 per cent. Such an enormous daily gain had not been seen since 1933. Meanwhile, the technology-heavy NASDAQ Composite failed to defend its profit zone and slipped 0.45 per cent to 7,384.30 points in the final minutes of trading.

Investors reacted with relief to the agreed US economic stimulus package, which is intended to mitigate the consequences of the global crisis for the economy with a sum of $2 billion. 

Far East Markets at a glance

In Asia, there was a steep uptrend in the middle of the week. In Japan, the Nikkei ultimately gained 8.04 per cent to 19,546.63 points. 

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Gains were also recorded in China. On the Chinese mainland, the Shanghai Composite finally gained 2.17 per cent to 2,781.59 points. In Hong Kong, the Hang Seng climbed by 3.81 per cent to 23,527.19 index units.

The strong US performance ensured that the positive countermovement on the Asian stock markets continued.

European Markets at a glance

The European stock markets also saw a further recovery on Wednesday. The EuroSTOXX 50 rose at the start of trading and maintained this trend in the morning. Later it fell back to red territory but was then able to gain sharply again. In the end, a gain of 3.13 per cent to 2,800.14 index units was on the board.

Volatility remained extremely high on the German stock market – but the leading German index ultimately managed to record further gains today. The Dax had already started the day almost three per cent stronger and then already exceeded the psychologically important 10,000 point mark. In the day, it gave up its gains and fell back into the red. In the evening, however, it managed to return to the profit zone, closing the day up 1.79 per cent at 9,874.26 points. The TecDAX also fell back into red territory in the day but showed renewed gains in the evening. It ended trading with a plus of 2.08 per cent at 2,543.12 points.

Forex, gold, oil and crypto

The euro rate rose on Wednesday in US trading. Just before the close of trading on Wall Street, the common currency traded at $1.0876. The European Central Bank set the reference rate in Frankfurt at 1.0827 (Tuesday: 1.0843) dollars, which meant that the dollar cost 0.9236 (0.9223) euros. 

Oil prices rose slightly on Wednesday. The agreement on a US stimulus package has added to confidence in the commodity markets. Most recently, a barrel of North Sea Brent cost USD 27.21. That was 6 cents more than on Tuesday. The price for a barrel of the American WTI variety rose by 44 cents to 24.43 dollars. 

Gold investors also have continuous reason to be happy. After the recent surge in the price of the precious metal, the price of a troy ounce of gold holds steady at $1,611.

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Cryptocurrencies consolidated on Wednesday with Bitcoin losing 1 per cent to $6,650, Ethereum declining 2.2 per cent to $135 and XRP staying put at $0.1610.

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Corporate and world news 

China covers itself with oil

China is taking advantage of the collapse in demand from Europe and is stockpiling a record quantity of Russian oil. According to traders, 1.6 million tons of Russian oil was purchased for loading at sea in the next four weeks. In addition to the lack of demand from European countries due to the coronavirus epidemic, the Chinese also took advantage of the low prices for oil, some experts said.

Nike surprises with sales increase

The US sports goods group Nike earned substantially less in the third quarter, partly due to the outbreak of the coronavirus in China. However, the experts’ expectations were exceeded.

The decline in sales in China as a whole amounted to 4 per cent after adjusting for currency effects. In particular, growth in online business and some regions such as North America offset the decline in China, the company said. Nike CEO John Donahoe was confident about China, as there are already signs of recovery there.

In the third quarter ended February, Nike Inc. had net revenues of $847 million, down 23 per cent compared to $1.1 billion in the same quarter last year. In US trading on the NYSE, the Nike share gained 9.24 per cent to 79.01 dollars.

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