17.02.2020 – Daily Report. Apparently everything is fine on the world’s stock exchanges. Wall Street is soaring to all-time highs. Even the DAX is conquering a new peak. Because in China there is a strong buying mood – the central bank is intervening. Yet the consequences of the corona virus are not yet foreseeable.
New record in Frankfurt
Attracted by the strong Chinese stock market, the DAX posted gains at the beginning of the week. Most recently, the leading German index was up by 0.2 percent to 13,772 positions. Right at the beginning, the DAX had marked a new all-time high of 13,793 points in passing. Last Friday, the high had been 13,789 points. The futures on Dow Jones and S&P 500 rose by around 0.3 percent in the morning.
So much carelessness is amazing. Global trade is relying on the intervention of central banks to prevent the economy from stalling in the wake of the epidemic spreading from China.
Cash injection in China
The tug-of-war between cheap money hopes and real economic desperation can best be observed in Asia. The central bank in Beijing, for example, cut interest rates and announced new repo tenders; the Ministry of Finance announced steps to cushion the economic consequences of Corona. Specifically, the People’s Bank of China (PBOC) reduced the interest rate for one-year medium-term lending facilities (MLF) from 3.25 to 3.15 percent. A larger interest rate step for the key interest rate Loan Prime Rate (LPR) is expected for Thursday.
As a result, the CSI-300 gained a solid 2.3 percent to 4,077 points in the People’s Republic in the morning. The Shanghai Composite also gained 2.3 percent to 2,984 points.
Japanese economy collapses
Meanwhile, the Nikkei 225 lost 0.7 per cent to 23,523 points on Monday. The economy on the Nippon shrank more than feared at the end of the year, mainly due to the increase in value-added tax on October 1. Calculated for the year as a whole, gross domestic product (GDP) in the three months to the end of December slipped by 6.3 per cent compared with the previous quarter. And now brokers fear an even harder blow to the economy because of corona.
New highs in the USA
Investors in the USA had taken it easy on Friday. The Dow Jones Industrial dropped 0.1 percent to 29,398 points for the weekend. On a weekly basis, this was a plus of 1 percent. The S&P 500 was up 0.2 percent to 3,380 on Friday. And the Nasdaq Composite gained 0.2 percent to 9,731 points. Both the S&P 500 and the Composite thus achieved new all-time highs.
Petroleum worry lines
The mood is quite different for oil. WTI rose by 0.1 percent to 52.10 dollars, but Brent fell by 0.2 percent to 57.22 dollars. There could soon be an oil flood here because of China. According to the information service S&P Global Platts, major oil exporters such as Russia or Brazil are currently drastically cutting their prices for delivery in April – the main reason is sluggish demand in China, but also in Japan. Given the cut in flights and the discontinuation of tourism in China, this is not surprising. The largest Asian refinery group Sinopec, for example, has reduced production by 600,000 barrels per day this month – an average of 12 percent compared to the average of 5 million barrels achieved in 2019. The number two in Asia, PetroChina, reduced processing by 320,000 barrels per day.
Goldman Sachs assisted that the oil market has not yet correctly classified the epidemic risks, a surrender of the speculators could send Brent into the 40s or even deeper. The Goldman Sachs reduced their price target for North Sea oil for the full year by 10 dollars to 53 dollars. Meanwhile, a tweet from a Bloomberg reporter in Singapore, “Tankers, tankers everywhere! The supertankers piled up in front of one of the largest ports in the world.
What the day brings
The week begins relaxed. There are no really important appointments. As always, you can find the overview here: Market Mover
In addition, Wall Street is closed for the holiday of Presidents’ Day.
The Bernstein-Bank wishes successful trades!
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