Frankfurt – 26/08/20
Tomorrow begins the high-level annual meeting of central bankers, at which Fed Chairman Jerome Powell will announce important changes to the Fed’s list of objectives, according to experts. This is also one reason why equity markets and foreign exchange trading have been relatively quiet this week so far.
It is expected that the Fed will no longer aim for a specific inflation rate in the future, but an average value. From today’s perspective, this would result in an even more extended phase of extremely low US interest rates and possibly even more Fed purchases of securities. US interest rates are a crucial factor influencing events on the global financial markets.
Thus, cheap money in abundance is expected, which caused the stock market but especially the tech rally to continue further today.
US Markets at a glance
While the Dow Jones made only little headway, tech stocks index NASDAQ posted huge gains once again.
By the end of the NY trading session, the Dow was up 0.3 per cent to 28,331.92 points. In contrast, the NASDAQ Composite tech stocks index closed 1.73 per cent higher at 11,665.06 index units.
Overall, investors were nevertheless somewhat cautious on Wednesday, waiting for the virtual central bank meeting in Jackson Hole on Thursday, where Federal Reserve Chairman Jerome Powell will deliver a speech.
Besides, the buying mood was slowed down by the current developments regarding new corona infections in the USA and other countries. Concerning individual stocks, the focus was on SAP rival Salesforce, which presented its figures for the second quarter on Tuesday after trading and will move up into the Dow Jones index on Monday.
Far East Markets at a glance
The most important Asian indices were mostly down today, despite the super-optimistic mood in other markets.
In Tokyo, the Nikkei lost a minimal amount of ground, falling 0.03 per cent to 23,290.86 points at the close of trading. On the Chinese mainland the signs were red: Here the Shanghai Composite was 1.3 per cent lower at 3,329.74 points while the Hang Seng in Hong Kong trended 0.02 per cent higher at 25,491.79 units.
The Asian markets were restrained: concerns about a further escalation of the corona pandemic remain high. Although there are still hopes for a breakthrough in the vaccine field in the near future, fears of renewed tightening of restrictions remain. “A renewed tightening of measures to contain the pandemic is likely to weigh on the markets,” Kiwoom Securities told Dow Jones Newswires.
European Markets at a glance
The European markets were driven on today’s trading day mainly by US American optimism and further money injection hopes. The EuroSTOXX 50 showed closed the day 0.81 per cent higher at 3,356.76 index points.
The Dax 30 had a somewhat hesitant start today, but then rose steadily during trading. In the end, the leading German index closed at 13,190 points, a daily gain of 0.98 per cent. The index thus remains at a high level and within sight of the old record levels. The TecDAX also gained further ground, closing 1.3 per cent higher at 3,172.26 points.
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After the stock markets rally of the last few days, investors took it a bit easier again in the middle of the week. Although the mood remained positive, one should not assume that the recovery from the corona crisis will be too rapid. The recently published US consumer data showed this without a doubt. These fell short of expectations in August. Nevertheless, market participants remained confident concerning the search for a corona vaccine and that the central banks will use their sheer endless liquidity to cushion the worst corona effect.
Forex, gold, oil and crypto
On the Forex market, the euro exchange rate has fallen slightly today. In the afternoon, the common currency was traded for 1.1816 US dollars, a little less than in the morning. Statements by ECB Director Isabel Schnabel weighed on the euro. She defended the negative interest rate policy of the ECB. Banks have to pay penalty interest for years if they want to park money at the ECB. Traders interpreted the statements to mean that the ECB could also act again on interest rates which could put a strain on the euro.
Oil prices developed somewhat differently today. While Brent oil recorded a discount of 6 cents to 45.80 US dollars, WTI was able to gain 5 cents and is currently trading at 43.40 US dollars.
Gold made a notable turnaround in the commodity market and shot up almost $50 during the day from a low of $1,902 to ultimately $1,952 per troy ounce, blasting through multiple tough resistance levels.
The cryptocurrency market also received some tailwind after dropping alongside other assets. Bitcoin rose 1.1 per cent to $11,500, while Ethereum gained 2.4 per cent to $389. XRP increased by 0.5 per cent to $0.2780, and ChainLink recovered 7.5 per cent to now $15.25.
Corporate and world news
During the current crisis, the SAP rival benefits from robust demand for its software from corporate customers. In the past quarter, sales rose by 29 per cent to 5.15 billion dollars. The quarterly profit rose – also thanks to a tax credit – to over $2.6 billion from $91 million a year earlier. Salesforce raised its annual revenue forecast. Salesforce will replace the oil giant ExxonMobil in the Dow Jones Industrial stock index next week.
Aid for small and medium-sized companies in Germany will be extended
The leaders of the coalition in the German Bundestag want to secure more jobs in the unprecedented Corona crisis by extending the short-time work allowance. State aid for small and medium-sized companies will also be available for longer than previously planned. Companies in Germany can continue to secure jobs in the corona crisis by facilitating short-time work. This is to be extended from the regular 12 to up to 24 months. The extended entitlement period is to apply to companies that have introduced short-time working by December 31, 2020. The short-time working allowance is to be extended until December 31, 2021, at the longest. To enable the Federal Employment Agency (BA) to shoulder the billions in costs for short-time work, the coalition government wants to make tax money easy – as a subsidy and not as a loan. Minister of Labor Hubertus Heil (SPD) wants to bring the plans to the federal cabinet already this Wednesday.
Massive outflows from equity funds
Upside-down world: Despite record highs in many stock indices, massive global outflows were recorded from equity funds in the first half of the year. This was reported by the fund rating agency Morningstar. As the German newspaper Handelsblatt quoted, a net outflow of around 51 billion US dollars was recorded in the first six months. Bond products, on the other hand, had collected about 50 billion dollars. However, most of the liquidity flowed into money market funds – they collected approximately 1.1 trillion US dollars net. Large investors, in particular, seem to want to play it safe in the corona crisis.
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