09.03.2020 – Daily Report. Historic times on the stock exchange: The DAX plunges over 1,000 points at the opening The German leading index thus heads for the biggest daily loss since September 11, 2001, and not only that: Brent oil loses a staggering 30 percent at times due to an impending price war.
Bears in bloodlust
On Monday, prices could no longer hold steady: due to the drastic spread of the virus – especially in Italy – the DAX slipped by 7.8 percent to 10,637 points at the opening. Then it continued downhill to a low of 10,572 points – a drop of 8.4 percent. As a reminder: after the attacks on the World Trade Center, the DAX had fallen by 8.5 percent. Most recently, the index recovered minimally and was still down a full 5.6 percent to 10,896 positions.
Since the high of 13,795 points on February 17, the leading German index has thus fallen by around 23 percent at times. We are thus officially in a bear market, which applies from 20 percent. The shares of Deutsche Bank and Daimler suffered double-digit losses on Monday. The Deutsche Bank share lost a good 15 percent in the morning and reached a new record low of 5.61 euros.
Panic is also likely to rage on Wall Street today: The futures on the US indices dropped by around 5 percent. According to MarketWatch, trading in contracts on the S&P 500 was briefly halted on Sunday, as prices fell by more than 5 percent.
Crude oil in sell-off
As if Corona wasn’t enough, the oil market hit the stock markets hard. Traders fear a price war between Saudi Arabia and Russia – and thus a huge supply surplus. Negotiations on a production brake failed last week, destroying some hopeful long investors. On Monday morning, the price of North Sea crude oil fell by 31.5 percent to 31.02 dollars a barrel. This was the biggest percentage drop since January 1991, when the First Gulf War broke out. Most recently, Brent recovered and, according to Oilprice.com, cost 36.37 dollars (down 19.6 percent).
A barrel of WTI grade US oil was initially 27.5 percent cheaper at $30 per barrel. Oil prices had thus fallen to their lowest level since the beginning of 2016. Most recently, WTI changed hands at minus 21 percent for 32.65 dollars.
Euro and Bunds in demand
Once again, investors begged to be allowed to take their money to the European Central Bank and pay a small fee for it: The yield on ten-year German bonds slipped 0.13 percentage points in the morning to minus 0.846 percent – a new record low. This was out of fear that their own bank could topple over.
Interestingly, the euro rose against the dollar to 1.1492. EURUSD was thus more expensive than it had been for over a year. This movement indicates that European addresses are currently selling more US assets and exchanging the dollars they have earned for euros – perhaps because they urgently need money at home.
Yen long – Asian equities short
The same game could be observed in Japan. The yen rose due to asset repatriation, with one dollar buying only 102.52 yen. This put a strain on the export-oriented Japanese stock market: the Nikkei slipped by around 5 percent to 19,699 points. In China, the CSI-300 lost 3.4 percent to 3,997 jobs.
Losses also in cryptos
Even more interesting: Investors in the crypto-market are also apparently clammy or fearful – although virtual currency has always been regarded as a kind of Internet gold. And thus as disconnected from the real economy. Especially since no bank can tip over in cyberspace. The website CoinMarketCap reported that within one day over the weekend, the entire crypto market had shrunk by 21 billion dollars. Specifically, the market capitalization of all cryptos on Saturday evening was 251.5 billion dollars. 24 hours later, it was only 230.8 billion dollars. Bitcoin recently stabilized at 7,850 euros
New York on Friday moderately in minus
On Friday, the Dow Jones had still posted a modest minus. The leading index closed the day at 25,864 points with a loss of around 1%. Unbelievable but true: In the course of the week, the yield even rose by 1.8 percent. The S&P 500 lost 1.7 percent to 2,972 jobs on Friday. And the Nasdaq 100 dropped 1.6 percent to 8,530 points. The strong US job data was hardly noticed.
Goldman Sachs swam a little against the current trend: Before the current panic, analyst David Kostin wrote on Friday that there is currently only one topic among customers: Corona. Kostin, however, assumed that Covid-19 would only rage for a short time. The S&P 500 will therefore rise to 3,400 points by the end of the year. In the event of a recession, however, the broad market index could slip to 2,450. Well, with the exception of the oil sector, the entire real economy should be happy about the flash-crash in oil and gladly take it along as a stimulus
What the day brings
There are no important events in the diary on Monday – nobody would pay attention to them anyway. As always, you can find the overview here: Market Mover
The Bernstein-Bank wishes successful trades in these turbulences!
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