24.02.2020 – Daily Report. Heavy losses on the Frankfurt stock market: The German leading index loses around 500 points. Fear of corona spreading in Europe and Asia keeps global trade under control. The US futures are submerging. Gold climbs to a new record high. Bunds are also in demand.
Severe losses in Italy
Here we go: Covid-19 is at the door. The plague has now reached the financial centre of Milan. In northern Italy, almost a dozen towns have been sealed off, Venice has shortened the carnival. FTSEMIB Italy slipped by over 4 percent. In times of open borders, it is therefore only a question of time before it spreads in Germany.p>
Frankfurt Stock Exchange crashes
Ergo, the DAX fell like a stone on Monday. The low so far is 13,050, and the index recently recorded a minimal recovery to 13,102 digits, which represents a minus of 3.5 percent. Meanwhile, the last little hope for the bulls died: The DAX broke through the 50-day line at 13,401 points without any resistance. Such moving averages normally act as stable support. The next stop could thus be the 200-day line at 12,626 points. Let’s wait and see if there is a rebound.
Investors on the German stock exchange ignored the surprising rise in the Ifo Business Climate Index, which rose minimally from 96.0 to 96.1 points. Instead, shareholders looked spellbound at US futures, which fell by around 2.5 percent.
Safe haven escape
As always in a budding panic, investors fled into US government bonds. The yield on ten-year Treasuries slipped to a three-and-a-half-year low of 1.402 percent. At minus 0.475 percent, the yield on German ten-year Treasuries was as low as it had been four months ago. The Euro-Bund-Future increased by 0.2 percent to 175.34 points.
New record high for gold
Gold rose in dollar terms by 2.1 per cent to a seven-year high of 1,678.58 – the biggest daily gain in seven months. Calculated in euros, the troy ounce at 1,548.36 was more expensive than ever before.
It’s the end of the world as we know it
We do not want to deprive you of an interesting – though not entirely surprising – opportunity to speak about gold: The blog Goldmoney.com suspects that the world could return to the gold standard because of Corona. The plague is possibly the trigger for the rapid decline of financial stocks, Keynesian mythology and paper currencies. This would be accompanied by political instability and unrest.
Oil and Aussie on sale
Back to the present. For fear of a total collapse of the Chinese economy, the Australian dollar slipped sharply. It has meanwhile lost 0.7 percent to 0.6581 US dollars – making it as cheap as it was eleven
years ago. Investors also had to accept a slump in the price of oil: WTI most recently cost 51.72 dollars, Brent 56.07 dollars per barrel – that was a drop of a good 3 percent in each case.
Losses on the stock exchanges in Asia
The Chinese CSI-300 lost only a moderate 0.4 percent to 4,133 points in the morning. But the Hang Seng in Hong Kong finally dropped 1.8 percent to 26,821 points. The Kospi in South Korea lost 3.9 percent to 2,079 due to the rapid spread of corona. No action was taken in Tokyo because of the holiday in honour of the emperor.
Loss on Wall Street
The US stock markets had already indicated the way south on Friday. The Dow Jones Industrial lost 0.8 percent to 28,992 points. The weekly balance was thus minus 1.4 percent. Incidentally, the Dow had almost touched the 50-day line on Friday, before moving back up again. The S&P 500 lost 1.1 percent to 3,338 digits on Friday. And the Nasdaq 100 was down 1.9 percent to 9,447.
Is the bubble going to burst?
By the way, the blog “Valuewalk” published a statement by the broker Crescat Capital on Saturday, in line with the current crash. He argued that the largest speculative bubble of all time had recently built up – and the most overvalued stock market in history. At the same time, he said, there is the biggest debt bubble ever in China – and it has just begun to implode. This is globally contagious. For these reasons, precious metals offer an incredible opportunity.
This is what the day brings
In view of the corona fears, current economic data are likely to take a back seat.
For example, the CFNA index for January will be reported at 14:30.
And at 16.30 the Dallas Fed will report its manufacturing data for February.
As always, you can find the overview here:Market Mover
The Bernstein Bank wishes strong nerves and successful trades!
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