21.10.2019 – Daily Report. The DAX has started the new week surprisingly robustly. Despite the losses on Wall Street and despite the seemingly endless Brexit story. But this could soon lead to an unexpected happy end. In addition, Beijing has for the first time expressed optimism about the customs deal.
Frankfurt wants to go up
The German stock market worked its way up at the beginning of the week. The DAX rose 0.6 percent in the morning to 12,710 points. But beware: If you trade CFDs or are active in online stock trading, you have to keep an eye on the chart analysis. There is still a price gap of 12,200 points lurking in the DAX. And such gaps are normally closed. Because a strong price jump is a sign of euphoria – and this is usually followed by disillusionment. The crucial question is when.
Next act in the Brexit drama
The theme of the day was once again Brexit. The postponement of the Brexit vote again on Saturday initially caused a small dip in the pound, but the FTSE 100 showed a moderate increase. Do insiders already know more? In fact, there was a growing hope that Prime Minister Boris Johnson’s deal with the European Union might be accepted in parliament this Monday afternoon.
First positive remarks from China in customs deal
In the second stock market long runner, the stock market players also heard positive signals in global trading. At the World Conference on VR Industry (VR: Virtual Reality) in Jiangxi on Saturday, Chinese Vice Prime Minister and Chief Negotiator Liu He said that Phase 1 of the Customs Agreement meant substantial progress in many areas. He continued: “The continuation of the escalation in the trade war benefits China, the USA and the whole world”. So far, Beijing had remained silent about the rather meagre agreement and had even demanded renegotiations. But now Liu He has supported the optimistic statements of US President Donald Trump for the first time.
Waiting for the year-end rally
Our conclusion: If the Gordian knots in Brexit and in the customs dispute between China and the USA are to break through, a flood of capital could flow into the DAX and the Asian markets on Wall Street. After all, many funds have high cash holdings that want to be invested by the end of the year. So far, however, the time has not come. On Monday, the Chinese CSI-300 rose by only 0.3 percent to 3,881 points. The Nikkei-225 also advanced in Tokyo by 0.3 percent to 22,550 points.
Losses in New York
Investors on Wall Street also held back on Friday. Losses at Boeing and Johnson&Johnson as well as weak economic data from China depressed sentiment. The Dow Jones Industrial closed 1.0 percent lower at 26,770 points. In the previous week, the Dow thus recorded a minus of 0.2 percent. The S&P 500 lost 0.4 percent to 2,986 points on Friday and the technology-oriented Nasdaq 100 lost 0.9 percent to 7,869 positions.
Mixed interest rate signals
Meanwhile, Federal Reserve leaders have dampened investors’ expectations for a new rate cut – which could mean new strength for the dollar. Robert Kaplan, head of the Dallas Fed, said Friday that he was more convinced in July and September that the Fed needed to act. Now he is undecided. Esther George, head of Kansas City’s Fed, also does not see the need for a further rate cut at the moment. In contrast, Minneapolis Fed President Neel Kashkari said monetary policy should provide some support to the economy given the risks to the US economy.
The tug-of-war in the Federal Reserve could have an impact on Wall Street: Brokers expect the Fed to lower the rate again by a quarter of a percentage point by the end of October. The key interest rate currently lies within a range of 1.75 to 2.00 percent.
This is what the day brings
All traders can now concentrate completely on politics. The calendar is rather sparse. As always, you will find an overview here: Market Mover
The Bernstein Bank wishes you successful trades!
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