26.08.2019 – Daily report. What a Bloody Friday – at least there are positive news for the bulls again at the beginning of the week. After the reciprocal escalation in the trade dispute between China and the USA, global trade dropped off. But US President Donald Trump raised the DAX again. Even the poor Ifo index hardly stopped the buying mood.
Up and down in Frankfurt
Green courses in Frankfurt. At the start of the week, the DAX was up 0.3 percent to 11,648 points. The German leading index recovered from its heavy early losses after Trump had provided new hope in the trade dispute with China. He also sent US futures up when he surprisingly announced on Monday morning at the G7 meeting in Biarritz, France, that China’s head of state Xi Jinping wanted to return to the negotiating table. “We will make another statement on China. He went on: “We had two telephone calls with China; they want a trade agreement.” The talks are due to begin shortly. “I think we’ll make a deal.”
The stock market players were cautiously courageous and also shook off negative data from the German economy. The business climate index of the Ifo Institute slipped for the fifth month in a row in August, reaching 94.3 points. This is the lowest figure since November 2012, but it makes economic stimulus and lower interest rates more likely. As always, you can find our economic calendar here: Market Mover
Beijing is numbered
Will the customs dispute now become an open trade war? Probably not, because America has sent China to the boards with its harsh reaction. On Friday, Beijing first announced new retaliatory tariffs on US goods worth 75 billion dollars. Trump announced that there would be additional duties on Chinese goods worth around 550 billion dollars. The US president also called on domestic companies to leave China. The People’s Republic has meanwhile sent out gestures of humility. Deputy Prime Minister Liu He told the “Chongqing Morning Post”, which is close to the state, that his country was willing to solve the conflict in prudent negotiations. He opposed further escalation. Liu is China’s chief negotiator in the customs dispute.
Losses everywhere
Investors in Mainland China had taken cover before the recent turnaround: The CSI-300 lost 1.4 percent to 3,766 points on Monday. In Hong Kong the Hang Seng fell by 1.9 percent to 25,681 points, in Tokyo the Nikkei 225 fell by 2.2 percent to 20,261 points. Of course, shareholders in New York had also pressed the sell button. The Dow Jones slipped by 2.4 percent to 25,629 points on Friday, the S&P 500 fell by 2.6 percent to 2,847 positions. The Nasdaq 100 lost 3.2 percent to 7,465 points.
Renminbi targeted by Americans
So keep an eye on your trading platform, regular market updates and the free real-time prices and direct market access open – in the news market, news in the customs dispute can take effect at any time and drive volatility sharply upwards. Especially since America has not yet fired a heavy cannon: The strengthening of the Chinese currency against the dollar through the massive purchase of offshore Renminbi. As recently explained in our Special Report, Beijing has apparently deliberately manipulated the yuan downwards to make its exports more attractive and thus undermine US punitive tariffs. Now the Chinese currency has slipped further – to 7.15 against the dollar; however, the 7 is regarded as the red line for the USA.
Flash Crash at the Lira
Speaking nicely of government intervention: The Turkish lira has just experienced a flash crash of around 15 percent before an invisible hand – the Turkish central bank? – the lira was raised again. There were no triggers in the news. Apart from the speculations that China will not support the lira. Previously, Beijing is said to have supported the Turkish currency with swaps amounting to 1 billion dollars.
This is what the day brings
Apart from the summit in Biarritz and possible new news in the customs dispute, there are only a few dates on the agenda.
In the USA, the Chicago Fed National Activity Index for July will be published at 2:30pm.
At the same time, orders for durable goods will be received for July.
The Bernstein Bank wishes you successful trades!
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