Markets Update Wednesday 28/08/2019 – Investors stay at the sidelines

Investors stay at the sidelines

The global stock markets continue to look at the various political conflicts, like the news that came out of Italy and from Brexit. Furthermore, the German GfK consumer climate index is expected later on today. Finally, in the evening (from 20:00 CET) the Fed’s economic outlook for the USA, the Beige Book, is awaited. 

The American stock markets used up their initial gains on Tuesday and closed in negative territory. The stock markets have referred to statements by Chinese officials that have questioned US President Donald Trump’s optimistic comments about resolving the trade dispute between the two countries. Recent US economic data had little impact on prices. There were no new Twitter messages from Donald Trump.

The leading index Dow Jones Industrial closed with a loss of 0.47 per cent at 25,777.90 points. At the start of the week, the leading index had risen by around 1 per cent after US President Donald Trump had raised new hopes for a solution to the tariff conflict. The market-wide S&P 500 fell by 0.32 per cent to 2,869.16 points on Tuesday. The technology-heavy Nasdaq dropped 0.3 per cent to 7,826.95 points.

Among the individual stocks, the companies Altria and Philip Morris, which were willing to merge, were the focus of attention. Both shares fell. Dow member Johnson & Johnson gained 1.4 per cent after a legal dispute over addictive painkillers had been favourably decided for the group.

UnitedHealth’s share certificates fell by a further 3.5 per cent and increased their losing streak over the past two weeks to around 10 per cent. The continuing burden on the share price comes from the “Medicare for All” plans, which are becoming increasingly popular in the Democratic Party. According to dealers, this would have very negative consequences for private health insurers such as UnitedHealth.

“The previous day’s small rally in response to Trump’s words that China wanted to resume trade talks was exaggerated,” explained asset manager James Athey of Aberdeen Standard. The new friendship was not followed by any action. “As long as there are no clear signs of progress in trade negotiations, risk aversion will continue to dominate market sentiment, with supposedly safe investments maintaining their attractiveness among investors,” says FXTM market analyst Han Tan.

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Far East Markets at a glance

The stock markets in Asia did not find a uniform line on Wednesday. The trade dispute between the USA and China remains the determining issue. There are still no signs of a solution, and positive signals are fading. In Tokyo, the Nikkei 225 closed 0.2 per cent higher at 20,488 points. In Hong Kong, the market was also friendly. The Hang Seng gained 0.04 per cent.

European Markets at a glance

On the European stock markets, investors are unlikely to venture out of cover in the middle of the week. The EuroSTOXX 50 is slightly down before the start of trading.

Since news about progress in the Sino-American trade dispute is currently scarce, there should be no major leaps in the markets in Europe. On the other hand, investors are focusing their attention on Italy. President Sergio Mattarella will decide on the future composition of the government there today.

On Tuesday, the corporate calendar was relatively empty while today, some important figures are going to be released.

The DAX recorded a plus of 0.62 per cent to 11,730.02 points at the end of trading on Tuesday. The TecDAX shows a slight discount in pre-market indicators.

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GfK’s consumer confidence was already published in the morning. Despite the weakening economy, consumer behavior remains stable and thus, an important pillar of the German economy. According to the consumer climate study by the market research institute GfK, although the economic expectations of German citizens have fallen to their lowest level for more than six years, the development of their income is still seen as positive. For September, the market researchers forecast an unchanged value of 9.7 points compared with the previous month. Previously, the value had fallen three times in a row.

There were also new inflation data. Prices for goods imported into Germany fell more sharply than expected in July. The Federal Statistical Office reported that there had been a decline of 2.1 per cent year-on-year. It was the most substantial decline since September 2016. Analysts had expected an average price decline of 2.0 per cent and thus the same rate of change as in June.

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Forex, gold, oil and crypto

The euro remains depressed and is trading below the 1.11 dollar mark once again. The GBP/USD pair is gaining further momentum and is moving closer to the 1.23 US dollar handle while the Aussie is feeling the pressure, being pushed below $0.6750. 

The gold price further appreciates and is now above $1,541. Oil prices fluctuated but didn’t change much in the end. One barrel of the Brent variety currently costs $59.10, and WTI oil stands at 54.20 dollars. At 14:00 GMT, investors in the oil market are waiting for data on US crude oil inventories. In addition, some speeches from regional Fed presidents are scheduled this evening.

The cryptocurrency market remained widely unchanged. The total market cap is still fluctuating around the $265 billion mark. One Bitcoin currently costs $10,150, Ethereum stands at $185, and XRP holds steady around the $0.27 mark. 

Corporate News

Opel eyes Russian market

Carmaker Opel plans to return to the Russian market in 2019 after a long interruption. “We are going back to Russia this year. The withdrawal has hit us hard,” said Opel boss Michael Lohscheller before the start of production of the Grandland SUV in Eisenach. Lohscheller announced that the SUV from the Thuringian plant, for which a hybrid version will be available in 2020, will also be sold in Russia. After the takeover by the French PSA Group, Opel can now again “enter all markets of the world”.

Aroundtown at its best

The Luxembourg commercial property specialist Aroundtown, a member of the MDax, continued its growth course in the first half of the year and raised its forecast. Thanks to further rising rents and falling vacancy rates, the operating result (FFO 1) increased by 26 per cent to EUR 239 million, as the company announced in Luxembourg on Wednesday. Rental income rose to EUR 359 million – an increase of 23 per cent compared to the same period last year.

Due to the good result in the first half of the year, the Luxembourg company has raised its forecast for the current financial year. Management now expects the operating result (FFO 1) to exceed EUR 490 million. Previously, the target had been 460 to 470 million euros.

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Teamviewer aims to go public

The software company Teamviewer intends to go public on the Frankfurt Stock Exchange this year. Only shares of the current owner Permira are expected to be placed, as the company announced in Göppingen on Wednesday. The British financial investor wants to cash in five years after its entry.

For Permira, the IPO should be worthwhile. Teamviewer did not provide any information about the target volume on Wednesday. However, experts assume that the rapidly growing and highly profitable company will be valued at a total of 4 to 5 billion euros when it goes public.

Besides, there has recently been speculation that Permira wants to get rid of 30 to 40 per cent of the shares. The volume of the IPO could thus amount to up to two billion euros. Permira bought the company, which was only founded in 2005, in 2014 for 870 million euros.

Altria: Great reunion with Philip Morris?

The tobacco giants Philip Morris International and Altria (Marlboro) are considering a merger. In Tuesday’s announcements, the companies confirmed that they were negotiating a merger by means of an exchange of shares. However, it is unclear whether the talks will lead to an agreement. A possible deal would also require the approval of the Board of Directors, shareholders and regulators.

A merger would be equivalent to a reunification: the companies known above all for the Marlboro cigarette brand already belonged together until 2008. Philip Morris was then spun off to manage the international business, while Altria focused on the US market.

Space X on its way to Mars

The US space company SpaceX, led by Tesla CEO Elon Musk, has successfully tested a prototype for its heavy-duty rocket, which will, one day, carry people and cargo to the moon and Mars. 

The “Starhopper” took off on Tuesday afternoon (local time) at a site in Boca Chica, Texas, as the company announced on Twitter and showed in a short video. The barrel-shaped, silver device made of stainless steel rose about 150 meters, flew 100 meters and then landed safely back on Earth after just one minute.

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