17.03.2020 – Daily Report. Short pre-market recovery, new losses, then resistance. After a hopeful start, the DAX slipped back into the red, only to rise again. Investors analyze the consequences of the total economic emergency stop. Meanwhile, Asia sent out signals of hope.
Ups and downs in Frankfurt
The gains fizzled out so quickly on Tuesday: The DAX initially rose by 4.6 percent to 9,145 points. Then it plunged again sharply to 8,448, while the leading German index was down 0.1 percent to 8,735 points. Brokers quickly put a stop to the expected sharp decline in the ZEW Indicator of Economic Sentiment. Yesterday, the index had temporarily collapsed to its lowest level since September 2013, only to recover a little at the end. In the end, a minus of 5 percent was on the scoreboard.
On Tuesday, the MDAX also quickly gave up its initial gains. The index of mid-sized stocks initially rose to 20,027 and recently lost 0.7 percent to 18,634 points. On the previous day, the indicator had fallen below the 20,000 point mark for the first time in almost four years.
Verbal intervention from the White House
US futures also went up and down. At first they had risen sharply following a tweet from US President Donald Trump. He had written: “The United States will be powerfully supporting those industries, like airlines and others, that are particularly affected by the Chinese virus. We will be stronger than ever before!” The market immediately suspected that there would be government support for the industries that Corona had shaken. But recently futures were still up about 1.4 percent.
Stabilization in Asia
Meanwhile, the situation on the Asian stock exchanges stabilized. The Chinese CSI-300 dropped 0.5 percent in the morning to 3,710 points. And in Tokyo, the Nikkei gained 0.1 percent to 17,012 points. Incidentally, the Philippine stock exchange was the first in the world to temporarily suspend trading. The drastic drop in the number of infections and deaths was encouraging. China reported only 21 new infections – 20 of which were imported. The determined action of the Asians is thus paying off – massive disinfections, rigorous and rapid border controls and closures, road checks with temperature measuring devices.
The crisis could last longer in our country
From much of it further missing in Germany – even Poland checks at the border with temperature scanners. And yet there are some warning signs in the person of Alexander Kekulé, head of the Institute for Medical Microbiology at the Martin Luther University Halle-Wittenberg. He was at least allowed to speak at “Anne Will” on Sunday, but was dismissed by the government as an alarmist and ignored. He has long warned that our policy is too hesitant. The link to the economy and the stock market: The crisis could last much longer in Western Europe than in Asia because of the lax reaction of our rulers.
And yet there is hardly any criticism of our policies in the media. Of course: The public-law entities are public broadcasters, you don’t want to annoy the boss. And since the newspapers are losing their readers, they too will soon receive state money as support – that’s where it’s all about hugging in conformity with power. So once again the appeal: inform yourself alternatively with small dissident media. And with us.
Conference Call from Goldman on Sunday
In keeping with the topic, an interesting piece of news from the blog ZeroHedge: Goldman Sachs held a major conference call on Sunday. About 1,500 customers are said to have dialed in. Among other things, the investment bank discussed some well-known facts about Corona, including the fact that half of America will probably be infected. The peak is expected to be over the next eight weeks, with a slowdown afterwards. Worldwide growth will probably be only 2 percent, the weakest in 30 years. The S&P 500 will probably lose 15 to 20 percent in 2020, but could also recover completely by the end of the year.
At that point, the Gold Men at least emphasised: From a technical point of view, the market had been looking for a reason to sell out in the longest bull market in history. There is no systemic risk, as governments are intervening and the banking sector is well capitalised. All in all, it currently looks more like 9/11 than 2008.
Irrespective of the content, we wonder how such an emergency call must have affected business partners against the backdrop of the Fed’s surprise rate cut. And whether this was not an accelerant for Monday’s wildfire. And whether Goldman didn’t by chance go short before.
New panic in New York
However, Wall Street yesterday posted its biggest minus since 1987. On the latest Black Monday, the Dow Jones slipped 12.9 percent to 20,188 points. Right at the beginning trading was automatically suspended. The S&P 500 lost 12 percent to 2,386. And the Nasdaq Composite slipped 12.9 percent to 7,103 points. Investors interpreted the Fed’s emergency rate cut as a sign of desperation. This is always the case when fear is rampant: positive things are reinterpreted negatively. Incidentally, the VIX anxiety index set the high from 2008 at 82.69 points.
What the day brings
Tuesday will bring some interesting economic dates, but these are unlikely to have much impact on prices in the corona tumult. As always, you can find the overview here: Market Mover
For example, US retail sales are reported at 1:30pm.
Industrial production follows at 2:15pm.
And at 3:00 p.m., inventories follow.
At the same time, the NAHB housing market index starts to rise.
The Bernstein-Bank wishes successful trades and good nerves!
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