06.05.2019 – Daily report. Cold shower for all optimists in the matter of customs disputes: US President Donald Trump apparently loses patience with Beijing. He showed the communist rulers the tools of torture: if the Chinese don’t move in the negotiations, the punitive tariffs are to be increased on Friday. The German stock exchange and global trade react shocked.
Minus in Frankfurt – Crash in Asia
Small sell-off at the beginning of the week: The DAX fell by a good two percent in early Monday trading. On Friday, the leading index reached its highest level since the end of September at 12,436 points. Now all stocks except E.ON were in red on the trading platform. Oil prices also fell. In a bloodbath for the bulls, the Chinese CSI 300 fell by 5.5 percent to 3,685 positions. The Shanghai Stock Exchange lost 5.6 percent to 2,906 points and Hang Seng fell 2.9 percent to 29,210 points.
Trump loses patience with China
On Sunday, the US president was visibly angry about China, which wants to renegotiate the customs dispute. “No! had tweeted Trump and announced that on Friday customs duties for Chinese imports of goods worth 200 billion dollars would be increased from 10 to 25 percent. Further goods worth 325 billion dollars would remain untaxed for the time being, but soon tariffs of 25 percent would also be introduced here, Trump tweeted further. The US president stressed that the import duties paid by China so far had had a positive effect on the US treasury.
This Wednesday the Chinese negotiator, Vice Prime Minister Liu He, was supposed to arrive in Washington for new talks. That seems questionable. “China should not negotiate with a pistol on its head,” the Wall Street Journal quoted an insider.
Staying calm is the first trader obligation
As one would expect, the majority of the media have hysterically entered the doomsday mode – apparently global trade is about to collapse, and President Trump is often described as somehow incompetent. Professional CFD traders should be calm in their analysis of the situation. The fact is that volatility has risen sharply. But it had reached unnaturally low levels in recent weeks anyway, as the VIX and the VDAX showed.
Perhaps the latest threat was just a volte-face to discipline China. Maybe new punitive tariffs will actually come. So what? US corporations and Chinese companies that focus on their home market will benefit; export-oriented companies in the US and China will suffer. But the now talked about crisis for world trade does not have to come.
Otherwise, the US President will consistently keep his election promise to protect the domestic industry from unfair dumping competition. Just as Vladimir Putin has been doing for years in Russia, where in the face of horrendously high import duties for vehicles, international car manufacturers have flooded the country en masse, built factories and thousands of Russians have been trained as qualified skilled workers. What, you don’t know that wonderful St. Petersburg has become the Detroit of the North? Our media probably didn’t have the capacity for critical reporting on protectionism at the time.
Threatening storm on Wall Street
The fact is that the stock market will settle down again under turbulence, punish the losers of the new situation and reward the winners. Needless to say, the tariff dispute on Monday will also affect Wall Street. Especially as other important economic data is not on the agenda. All major indices should now test the 50-day and 200-day lines above which they have hovered for weeks.
By the way, the US indices had a nice run on Friday. The leading US index Dow Jones Industrial went into the weekend with a plus of 0.8 percent at 26,505 points. The S&P 500 gained around 1 percent to 2946 points and the Nasdaq 100 advanced 1.6 percent to 7846 points.
So Monday’s motto is: Stay cool when weak hands are shaken out of the market and react quickly with CFDs. We wish you successful trades!
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