05.09.2019 – Daily report. New optimism on the Frankfurt scene: A trade war between the Middle Kingdom and the USA seems to have been averted. These are at least the latest signals that Beijing has just sent out. Moreover, the signs in Italy and Great Britain are no longer pointing to a storm. Even German industry has not stopped buying.
Profits on the German Stock Exchange
The shareholders in Frankfurt are once again taking action: a tame government in Rome that does not cause Brussels any trouble; defeats for the Brexit hardliners in London; and, above all, signals of relaxation from China in the customs dispute with the USA caused a buying mood early on Thursday. The DAX climbed 0.8 percent to 12,126 points. Even poor figures for German industry did not stop the trend: the order volume in July fell by 5.6 percent compared to the previous year, according to the Federal Statistical Office.
No (chaotic) Brexit
The focus on the British pound continued to be on the currency market. The gloating German media celebrated the events in London – many brokers were supposedly pleased that there was now no chaotic Brexit. The planned law against unregulated EU withdrawal is intended to force Prime Minister Boris Johnson to apply for a three-month extension of the deadline of 31 October if no agreement with the EU has been ratified by 19 October. In fact, the egg dance around the Brexit is now likely to drag on indefinitely because of the parliamentary revolt. Because Brussels can rely on the opposition in London to back down a hard negotiating line of the UK government. The Eurocrats only have to sit back with this Parliament and do nothing at all to undermine the Brexit. Not only will there probably be no chaotic Brexit, there will probably be no Brexit at all.
De facto, a small, elitist British caste of officials has ignored the will of its own people and handed Britain over to Brussels. And as expected, MEPs did not have the courage to face the voters’ verdict again because they did not want to lose their benefices – new elections are off the table. Or is it not? If Johnson asks the vote of confidence and loses it, a new election will be held. Then Labour will be destroyed if the recent polls hold true. So surprises are always possible on this issue – when you trade CFDs you should always keep an eye on your regular market updates.
Hope for Customs Agreements
The most important issue for shareholders was once again the customs dispute between China and the USA. According to the Chinese state television channel CCTV, new direct talks between the chief negotiators of the USA and China are to take place in Washington at the beginning of October as part of the regular strategic economic and trade dialogue between the two countries. More importantly, “significant progress” at the working level is to be prepared by mid-September.
The Chinese Ministry of Commerce confirmed on Thursday that there will be a meeting at the beginning of October, which will be attended by high-ranking officials. The decision had been made in a telephone conversation between Chinese Deputy Prime Minister Liu He and US Secretary of the Treasury Steven Mnuchin as well as US Trade Representative Robert Lighthizer. Also in attendance were Trade Minister Zhong Shan, the Governor of the Chinese Central Bank, Yi Gang and Ning Jizhe, Deputy Head of the National Commission for Development and Reform. So the Chinese are obviously serious.
Asia predominantly stronger
Ergo, investors in Asia seized the opportunity. They were also hoping for new stimuli in the People’s Republic – the otherwise rather powerless Council of State had just spoken out in favour of the “timely” use of several instruments to support the economy. The Council of State is the executive authority of the National People’s Congress, that is the inflated illusory parliament, which may meet once a year. But if the apparatchiks are allowed to announce this in public, the plans of the leader Xi Jinping are probably already in the drawer. The Chinese CSI-300 increased by 1 percent to 3,925 positions.
In Japan, the leading index Nikkei 225 closed with strong gains of 2.1 percent to 21,085.94 points. But: The Hang Seng, which had climbed by almost 4 percent the previous day and recorded the largest daily gain since 2011, slipped by 0.9 percent to 26,291 points. Despite the withdrawal of the extradition law, the demonstrations continued for the time being.
Winnings in New York
Investors on Wall Street had reacted hopefully to the turnaround in Hong Kong the night before: Head of government Carrie Lam withdrew the law on extradition to Red China. And this is also an issue in the customs negotiations: Donald Trump demanded a “humane attitude” from Beijing regarding the situation in the special administrative zone. The leading Dow Jones index closed the day 0.9 percent firmer at 26,355 points and almost at its daily high. The S&P 500 even rose by 1.1 percent to 2,938 points. And the Nasdaq 100 gained 1.4 percent to 7,719 points.
This is what the day brings
The calendar today contains some important events. As always, you will find an overview here: Market Mover
ADP’s employment figures for August start at 2.15 pm.
At 14.30, the first weekly applications for unemployment benefits will follow.
Further at 15.45 the Markit purchasing manager index for services is reported in August.
Shortly thereafter, at 16:00, the industry’s new orders in July will be reported via the ticker.
At the same time, the ISM Services index for August is reported.
At 17.00 finally the Energy Information Agency reports the storage quantities of crude oil.
Bernstein Bank wishes you successful trades!
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