News

02.07.2019 – Daily report. First pause and take yesterday’s profits. After the strong gain at the beginning of the week, the DAX slowed down by Tuesday midday. On the one hand, an agreement in the customs dispute between China and the USA still seems a long way off. In addition, Washington is now threatening the European Union with special tariffs.

Setbacks in Frankfurt

Rest after the summit storm: The DAX fell by 0.1 percent to 12,505 points by noon on Tuesday. On Monday, the indicator jumped to 12,619 points, the highest level since August 2018. Although it subsequently receded, the DAX has torn a gap in the chart – which is normally closed at some point.
Stock market participants referred as explanation to news from the USA: The administration of president Donald Trump threatens the European Union because of forbidden airplane subsidies with new special duties on EU goods in the value of four billion US dollars. In addition, profit taking was announced on the stock exchange.

Wait and see in Asia

Investors in Asia also held back on new commitments. The Nikkei 225 closed Tuesday with a minimal gain of 0.1 percent at 21,754 points. The Chinese CSI-300 left almost unchanged at 3,937 points.

New record in the S&P 500

Wall Street’s specifications had been positive the night before. No wonder, since China and the USA had announced a truce at the G20 summit in Osaka. However, the New York indices lost some of their profits. The Dow Jones closed Monday 0.4 percent higher at 26,717 points. The Dow is currently trading just under 1 percent below its all-time high of last October. The S&P 500 rose by 0.8 percent to 2,964 points. In the course of trading, it marked the highest level in its history with just under 2978 points. And the Nasdaq Composite rose by 1.1 percent to 8,091 points.

Oil under the spell of OPEC

The theme of the day was OPEC. The cartel and its allies will probably officially approve an extension of the production cut. If you read these lines, perhaps the fact has already been announced. OPEC+ agreed yesterday in Vienna to extend the existing production limits by nine months, according to Venezuelan Oil Minister Manuel Salvador Quevedo Fernandez. Now ten cooperating states have to commit themselves to this strategy. However, the leading states Saudi Arabia and Russia had already reached an agreement on this matter at the weekend of the G20 summit. Oil prices are likely to rise as a result, as demand could also rise as a result of a settlement of the Chinese-American customs dispute.

Bitcoin capers

At Bitcoin, the price slide continued and the artificial currency fell to 8,580 dollars. Last week there was an annual high of 13,880 dollars. By the end of 2017, the Bitcoin had even cost almost 20,000 dollars.

This is what the day brings

No new stimulus from the economic calendar is expected today, Tuesday. For CFD traders in the energy market it will be exciting at 10:30pm when the weekly crude oil inventory data of the American Petroleum Institute will run over the ticker.

The Bernstein Bank wishes successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

01.07.2019 – Daily report. Buying frenzy on the Frankfurt stock market: The DAX rose strongly at the beginning of the week – and marked a new high for the year with a leap up. The price driver was the G20 summit. And above all the positive signals in the customs dispute that US President Donald Trump sent out after the meeting with China’s head of state Xi Jinping.

DAX marks annual high

Perfect start into the new trading week fort he bulls: almost all DAX prices were in the profit zone on the trading platform. The outlier was only Deutsche Lufthansa, which suffered from a downgrade. But that did not change the general buying mood. By noon, the DAX had risen by around 1.2 per cent. In its high, the leading German index reached the 12,619 mark right at the start of trading. The best mark for the year to date was 12,438 points. The truce between China and the USA mainly fired chip stocks and carmakers.
Let’s pour a little water into the wine in view of the burgeoning euphoria: If the DAX with its current price movement tears an upward gap by the close of trading, you must assume that this gap will be closed at some point. For example, when the joy of an alleged agreement between Beijing and Washington gives way to disappointment as soon as new problems arise. But unlike online stock trading, short investments are no problem for CFD traders.

Trump bull market after G20 summit

The reason for the small course fireworks was the G20 summit that ended in Osaka on Saturday. After his meeting with China’s head of state Xi Jinping, US President Donald Trump spread optimism: The meeting had been excellent. The talks were “even better than expected”. America would continue with China “where we left off”. Trump promised to suspend the threatened extension of punitive tariffs for the time being, thereby meeting a precondition set by China. In return, China is buying more US agricultural products. The US President also loosened the blockade against the Chinese telecoms giant Huawei for the time being, which surprised most investors. The two sides had not met for official negotiations since Washington broke off talks at the beginning of May.
In response to the happy news, futures on Wall Street indices rose. In view of the new risk appetite, investors parted company with gold. It remains to be assumed that government bonds will also soon become a major feast for bears if an agreement is reached. In Australia, for example, last week’s 10-year bond marked a record low in yields of 1.26 percent.

Asian stock markets are taking action

Shareholders on the Asian stock exchanges also reacted with purchases. At the close of trading in Tokyo, the Japanese Nikkei was 2.1 percent higher at 21,730 points. And the Chinese CSI-300 even rose by 2.9 percent to 3,936 points.

Oil in demand again

Oil prices also rose in the energy market, preparing the market for the hoped-for economic stimulus from a possible agreement between China and the USA. In addition, the OPEC states and their allies are today discussing the extension of the production brake. The Israeli military attack on targets in Syria caused additional nervousness – the attack was aimed primarily at Hezbollah, which Iran supported.

Backlog in New York

It remains to be assumed that Wall Street will also gain ground today, Monday. A new record for the Dow is within reach. Investors were still cautious on Friday. The Dow Jones closed the day 0.3 percent higher at 26,599 points. The S&P 500 had advanced by 0.6 percent to 2,941 positions on Friday. And the Nasdaq 100 worked its way up by 0.2 percent to 7,671 points.

This is what the day brings

This afternoon, various economic data are coming into view. At 3:45pm , the Markit Manufacturing Purchasing Managers’ Index for June will be shown in the U.S. (2nd release). Finally at 4:00pm the American ISM Manufacturing Index will follow in June.
At the same time, US construction spending will be reported for May.

The Bernstein Bank wishes successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

28.06.2019 – Daily report. There is currently only one important topic on the Frankfurt Stock Exchange: the G-20 summit. Will Beijing and Washington get closer in the customs dispute? The shareholders hope that this will provide a stimulus for the global economy.

The music plays in Japan

The stock market can be so monotonous: Investors in global trading have watched the incoming news from Osaka with their eyes wide open. Will the US and China make a truce or not? Meanwhile, the first sceptical voices were heard that even a rapprochement between the two largest economies would not only be good for the stock market. Because then the Federal Reserve would probably give up its implied easing of monetary policy.

Whatever the case may be, optimism recently remained in Frankfurt and the DAX climbed by around half a percent by noon. Meanwhile, two domestic issues caused some distraction from the summit meeting. On the one hand, the VW commercial vehicle subsidiary Traton presented a rather moderate stock market debut. On the other hand, Deutsche Bank investors celebrated passing the US stress test.

Wait and see in Asia

In view of the summit, the stock market participants in the Asian market took cover for the time being. In Tokyo, the Nikkei closed 0.3 percent lower at 21,276 points. The Chinese CSI-300 fell 0.2 percent to 3,826 points.

Little impetus from the USA

Investors in the USA also showed little determination on Thursday evening. The Dow Jones closed almost unchanged at 26,526 points. Here, a nosedive of the index heavyweight Boeing pulled the Dow down. In contrast, the S&P 500 gained 0.4 percent to 2,924 points. In contrast, the Nasdaq Composite gained 0.7 percent to 7,967 positions.

Gold remains in demand

The winner of the current general weather situation was gold. In view of the possible easing of monetary policy in the USA and Europe and against the backdrop of an escalation in the Persian Gulf, buyers remained in the market. The troy ounce stood at around 1,414 dollars, just below the six-year high of 1,439 dollars marked by gold at the beginning of the week.

Tension in front of the OPEC meeting

In the case of oil, the tension persisted before the OPEC+ meeting, which is due to begin at the beginning of the week. Most analysts expect new production limits for the second half of 2019. However, the question arises as to whether the cartel and its allies will continue to cut production levels or only extend the current limit. In addition, Moscow had indicated several times in recent weeks that it did not want a higher oil price. Saudi Arabia, on the other hand, urgently needs to fill its state coffers. CFD traders should therefore keep an eye on the regular market updates in this segment.

This is what the day brings

The same applies to investors who invest on Wall Street and in the dollar.
This afternoon at 2pm, personal income and expenses from the USA will arrive in May.
At 3:45pm, the Chicago Purchasing Managers’ Index follows. And at 4pm the University of Michigan reports consumer confidence for June.

The Bernstein Bank wishes successful trades and a sunny weekend without heat stroke!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

27.06.2019 – Daily report. New optimism on the stock exchange – News in the trade dispute between China and the USA pushes prices. Investors are putting their concerns about Iran back. US President Donald Trump gave an insight into what a blow to the mullah regime could look like.

Stock market analysts rely on Osaka agreement

Once again, investors on the Frankfurt stock market have bet that an open economic war between China and the United States will still be avoided. By midday, the DAX had gained around 0.6 percent. The star of the day was Bayer stock: the U.S. hedge fund Elliott confirmed its entry into the chemical group. According to initial statements, Bayer could be split up.
But the most important boost for the DAX was an announcement by the South China Morning Post and the U.S. publication Politico. The report, citing insiders, said that Trump had promised to postpone the threatened extension of punitive tariffs to all imports from China for the time being. This step had been the condition of China’s head of state and party Xi Jinping for the planned meeting on Saturday in Osaka, Japan. He added: “Details will be announced by both heads of state before the meeting on the fringes of the G20 summit. Yesterday, US Treasury Secretary Steven Mnuchin had already declared that 90 percent of the journey had been made with China.

Investors in Asia are taking up the offer

The News provided for rising prices in Asia. The Japanese Nikkei 225 climbed by 1.2 percent to 21,338 points. The Chinese CSI-300 gained 1.1 percent to 3,835 points. Wall Street was unable to react yesterday: The Dow Jones Industrial closed almost unchanged at 26,537 points, while the market-wide S&P 500 lost 0.1 percent to 2,914 points. The Nasdaq 100, on the other hand, gained 0.5 percent to 7,627 points.
We note: Should an agreement be reached in the customs dispute, then prices on the world’s stock markets should jump sharply upwards. And if the hopes are disappointed again, things will probably go downhill. Then the DAX, Wall Street and co. will perhaps soon be as turbulent as Bitcoin, which has recently suffered heavy losses. So make sure you can react quickly and professionally via direct market access and an ideal platform for online trading.

How specific is a blow against Iran?

Another exciting topic is Iran. The White House’s plans for a blow are obviously quite concrete. In any case, Trump said in an interview with the Fox Business Network that military action is not about boots on the ground, so ground troops should not be deployed. And a possible conflict would not last very long.
The scenario would probably be the same as in April 2018, when the USA fired over 100 Tomahawk missiles from warships on Syria in retaliation for the use of chemical weapons. “One and done” should be the motto of a fireworks display in the Persian Gulf.

Despite all this, the price of oil fell slightly. For the first time since the end of May, the price had just passed the 66 dollar per barrel mark again. Nervousness in the energy market is likely to persist until the meeting of OPEC and its allies at the beginning of next week – so be sure to keep an eye on your regular market updates. At Moscow’s request, the OPEC meeting was postponed until after the G-20 summit.

This is what the day brings

At 2:30pm the American gross domestic product in the first quarter will initially be shown on the screens. At the same time, the first applications for unemployment benefits are reported. At 10:00pm finally the second part of the US bank stress test is due.

The Bernstein Bank wishes you successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

26.06.2019 – Daily report. The optimists are back on track. Although there is a bouquet of unsolved problems hovering above the German stock market, the DAX wants to rise. Despite the Iran crisis and the customs dispute between China and the USA. And, of course, despite the heat wave over Frankfurt that paralyzes everything.

Buying mood on Main

Bad is good on the Frankfurt Stock Exchange: Brokers immediately reinterpreted negative economic signals from Germany into new arguments for a loose monetary policy. By midday, the DAX had risen by 0.6 percent.
Previously, the market research company GfK had reported that the buying mood of German citizens had declined for the second time in a row in June. For July, the experts forecast a consumer climate of 9.8 points after 10.1 points in June. All economic data can be found here: Market Mover

Restraint in Asia

Investors in Asia were cautious in the morning. Before the G20 summit in Osaka, only a few traders wanted to take new positions. The Nikkei 225 also lost ground on Wednesday, losing 0.5% at 21,087 points. In contrast, Hang Seng rose by 0.1 percent to 28,222 points. Hardly any broker currently believes that there will be an agreement between China and the USA. In addition, the sharp tones from Washington towards Iran slowed the bulls.

New tension in the oil market

US President Donald Trump tested the nerves of CFD traders in the oil market on Tuesday. Trump announced on Twitter that every attack by Iran on Americans would be answered “with great and overwhelming force”. In some areas this could also mean “extinction”. So please keep an eye on the real-time prices of Brent and WTI on your trading platform. In the Persian Gulf, the situation can escalate subito. Especially since the OPEC meeting with its allies could bring news on oil.

Losses in New York

The Iran issue had already slowed the buying mood in New York the previous evening. The Dow Jones Industrial closed Tuesday down 0.7 percent at 26,548 points. The S&P 500 crumbled by one percent to 2,917 points and the Nasdaq 100 even lost 1.7 percent to 7,592 points.

Mixed signals from the Fed

Fed Chairman Jerome Powell had shown himself open to interest rate cuts before the Council on Foreign Relations in New York. However, he stressed unusually clearly the independence of the central bank – a clear side blow against Trump’s pushing for a rate cut. In addition, James Bullard, President of the Fed in St. Louis, dampened interest rate fantasies. In an interview with Bloomberg, he called the hope of a rate cut of 50 basis points in July “exaggerated”.

Bitcoin wants to go up

Meanwhile, the crypto currency Bitcoin continued to rise. The price approached the $13,000 mark. The reason for this is Facebook’s plans for its own virtual currency.

This is what the day brings

The appointment calendar is rather manageable in the middle of the week. New orders for durable goods are reported at 14.30 in May. And at 16.00 the weekly oil report of the Ministry of Energy follows.

The Bernstein Bank wishes you successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

25.06.2019 – Daily report. The German leading index started trading today (Tuesday) with a red sign. The German market seems to be waiting for the upcoming G20 summit.

Global equity markets under cover

After a weak start to the week, the current lull on the floor appears to be continuing. On Monday, the Dax failed to reach the 12,300 mark and finished trading at 12,274 points. This corresponded to a daily loss of around 0.5 percent.
The targets set by the US stock exchanges have not yet been able to boost trading in Germany. The U.S. stock markets exited the trading session almost unchanged yesterday. The Dow Jones closed unchanged at 26,727 points. The broader S&P-500 recorded a minus of 0.2 percent and closed at 2945 points.
The Asian stock markets present a similar picture. The Japanese Nikkei lost 0.25 percent to 21,233 points.

Speech by Fed Chairman Powell

The head of the Federal Reserve will make a speech in New York today. As is always the case at such events, even the smallest subordinate clause will be viewed with suspicious eyes. US President Trump recently blamed Powell via Twitter for what he considers to be the US Federal Reserve’s overly tight monetary policy.

Security consultations in Jerusalem

The security advisors from Israel, Russia and the USA meet in Jerusalem to discuss regional security policy. The presumed main points on the agenda are likely to be the conflict over the states of Syria and Iran.

Dates of the day

Important economic data from the USA could at least provide impetus today. CFD traders may want to watch out for the following dates.
At 4:00pm, the Conference Board Consumer Confidence for June will be released in the U.S.. Analysts are expecting a level of 131.1 points after 134.1 points recently. Also at 4:00pm, sales to new homes in the USA for the month of May are scheduled. The forecast is for an increase to 680,000 homes sold in this period.
Anticipated with excitement, US Fed Chairman Jerome Powell steps in front of the microphones at 07:00pm.

The Bernstein Bank wishes you successful trades.

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

24.06.2019 – Daily report. Lethargy on the Frankfurt Stock Market. No activity in the heat wave. And by no means ill-considered commitments before the upcoming G-20 summit in Japan. There could be a breakthrough in the customs dispute. Or the outbreak of an open trade war. Especially as the Iran crisis continues to smoulder. The ifo index also offers no incentives to buy.

The DAX crumbles

The DAX fell by around half a percent by Monday midday. In line with the international negative factors, the Ifo index has also been included in the most recent bear scenario on the Frankfurt Stock Exchange. The business climate index fell to 97.4 points in June. “The mood on the German executive floors has cooled further,” commented Ifo President Clemens Fuest. Daimler has also lowered its profit forecast for the third time this year. The share was the biggest loser in the benchmark index. This is bad news for Chancellor Angela Merkel’s car summit today.

Wait and see in Asia

Investors in Asia were also reluctant to rush into equities. US President Donald Trump and China’s head of state Xi Jinping want to meet at the end of the week on the fringes of the summit in Osaka. The Hang Seng climbed 0.1 percent to 28.513 points. The Nikkei also closed Monday 0.1 percent higher at 21,286 points.
Meanwhile, Washington once again cracked the whip: After Huawei, the USA has put five more companies and organizations from China on the black list. The five are thus classified as a risk to national security.

Wall Street is stagnating

In view of the general weather situation, New York’s stock exchange investors had also kept a low profile. The S&P 500 lost 0.1 percent to 2950 points on Friday. The Dow Jones Industrial also fell by 0.1 percent to 26,719 points. After all, the Dow still managed a weekly gain of 2.4 percent. The Nasdaq 100 also lost 0.1 percent to 7,729 jobs on Friday.

New sanctions against Iran

The news remains that the USA is planning new sanctions against Iran. Which, in view of the sluggish market, should at least bring a little movement in real-time prices in the energy market. Trump wrote on Twitter on Saturday that “significant additional sanctions” would be announced this Monday. At the same time he offered Tehran to repeal the sanctions. The condition for this is that the leadership in Tehran must make a permanent commitment not to build a nuclear bomb. He went on to say that the military option was also “always on the table until we get a solution”. Needless to say, in view of a possible escalation, you need to keep a regular eye on your market updates.

This is what the day brings

The appointment calendar is only thinly filled at the start of the week. The Chicago Fed National Activity Index is due for May at 2:30pm.
And at 3:45 it could be interesting for bond traders. The European Central Bank announces the weekly change in the Eurosystem central banks’ holdings of government bonds, covered bonds, corporate bonds and ABS.

Bernstein-Bank wishes you every success with your trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

21.06.2019 – Special report. Please buckle up for the ride to hell: the world’s stock markets are threatened by a new financial crisis. If the pessimists are right, then the events of 2008 will repeat themselves at some point. This time Collateralized Loan Obligations (CLO) could drag banks, funds and insurers into the abyss. And with it Wall Street, Nikkei, DAX and co. at the same time. Stand by – we’ll shed light on the background.

Crash prophet warns of the next bubble

A few days ago, an article with a catchy and rather apocalyptic title tore us out of our summer apathy: “The storm is coming – The Collateralized Loan Obligations bubble and the parallels to the 2008 financial crisis”. Written by Professor Max Otte, Crash Prophet and financial expert. He referred to Brian Moynihan, CEO of Bank of America, who had been critical about the CLO. Otte himself noted that he had already warned of this bubble at the 2018 Fund Congress in Mannheim.
That’s what it’s about, let’s Otte speak for himself: “Collateralized loan obligations are securitisations of loans to private individuals, but primarily of loans to companies that are either highly indebted and/or have a lower credit rating. Nonetheless, around two-thirds of these junk securities are currently rated “AAA” by the relevant rating agencies.”
The link to 2008: A CLO “is comparable to a Collateralized Mortgage Obligation (CMO), with the exception that the underlying debt is a corporate loan instead of a mortgage. With a CLO, the investor receives scheduled debt payments from the underlying loans and assumes most of the risk in the event that a borrower defaults. In return for assuming the risk of default, the investor is promised an above-average return.”

Danger of a bear market due to rising interest rates

There is a danger of being tied to the interest rate: the lending rate is tied to the US Libor, among other things. If this rises, companies would no longer be able to service their debts. Then a wave of sales to CLO threatens. Otte writes: “If the interest burden for the debtors in the CLOs continues to rise, the first of these “securities” could soon catch fire. Then – as we already know – a wave of sales would be triggered that would cause the market to collapse and dry up. We already had a foretaste of this for a few days in December 2018. Papers were no longer traded at that time because there were no buyers. The gaps in investors’ books are filled in such phases by the sale of other assets, such as shares.”
According to Otte, there is no longer any security. After the financial crisis, the US supervisory authorities introduced a risk retention of 5 percent for issuers. This was overturned by a court order in February 2019. According to Otte, the entry hurdles for new market participants are thus lower.

Fast money on the hunt for returns

We started researching, which proved to be difficult in view of the thin reporting situation. The borrowers are small and medium-sized companies, often start-ups. According to a Bloomberg report from December 2018, these are Harbor Freight Tools, a company that sells tools at a discount price. After all, Harbor Freight Tools has a turnover of 5 billion dollars. Other CLO borrowers include AppLovin, a company that markets advertising online. Or Anastasia Beverly Hills, a provider of beauty products.
The tenor of the Bloomberg story is that the financiers are pushing their way through CLO lending. The first winner in this game is Eric Smidt, the head of Harbor Freight Tools. According to Bloomberg, he owns a super yacht as well as a pretty estate in Beverly Hills filled with works of art. According to Bloomberg, the various loan fees of the structured loans for syndicate banks, CLO distributors and rating agencies amounted to around 10 billion dollars last year.

A gigantic and intransparent market

Buyers of such CLOs are investors looking for a seemingly safe investment with a relatively high yield in a zero interest rate environment. As a structured loan with a regular interest payment, a CLO is also interesting for all investors who rely on reliable distributions such as pension funds or insurance companies. The magazine “Forbes” quotes the Bank of England in an article from June 2019, according to which the value of the CLO market worldwide amounts to around 750 billion dollars. A third of this is in the balance sheets of banks in the USA, Europe and Japan. However, this data comes from the end of 2017. It is unclear who exactly currently owns these three-quarters of a trillion dollars. So “Forbes” could locate only a small part of the owners.
US banks, for example, hold around 87 billion dollars in CLOs, 81 percent of which are held by Wells Fargo, Citibank and JP Morgan. In March 2018, four Japanese banks had CLOs worth 108 billion dollars; the lion’s share, 68 billion dollars, was held by Norinchukin Bank, while other buyers were Japan Post Bank, Mizuho and Sumitomo. Forbes” continues: “The California Public Employees Retirement System (Calpers) with 6.7 billion dollars is the largest holder among the non-banks. This is followed by the New York State and Local Retirement System with a good 3 billion US dollars. In addition, US insurers had purchased around 51 billion dollars from CLO by the end of 2017. Around 9 percent of the CLO value is held by various funds worldwide.

Risk of contagion in the event of a wave of bankruptcies

The problem is that if a recession strikes, many borrowers could topple over at once. And the alleged collateral would then be worthless. What would hit the buyers of the CLO. And what the financial industry likes to override. According to Guggenheim Investment’s full-bodied self-advertising, the bulk of the collaterals packaged in the CLOs consist of first-rate bank loans, so they are serviced first if the company tips over. However, there is also a small proportion of second-rank loans and unsecured loans.

The next “big short”?

Our conclusion: the whole thing is indeed a striking reminder of the financial crisis of 2008. A good decade ago, the danger came from supposedly high-quality synthetic bonds backed by junk mortgages. Buyers of these high-risk investments were mainly pension funds and unsuspecting commercial and investment banks such as WestLB, Bear Stearns and Lehman Brothers. They stood at the end of the chain and burned their fingers with the thrown hot potato. Only a few clever investors saw through the nasty game and bet against the naive buyers. All this can be read in the book “The Big Short” by Michael Lewis.

Now it’s CLO. On the one hand, the risks now lie in a rising interest rate, which makes corporate loans more expensive. And on the other hand, in a recession in which loans could burst and creditors could topple by the dozen in the wake of a massive default. Which is likely to result in a chain reaction in the CLO market. A crash in global trade seems quite possible due to the global dispersion of CLOs and uncertainty about who exactly bought the bonds. Investors should therefore be vigilant here. And CFD traders should also keep an eye on the issue – fortunately they can hedge against risks with Germany’s best CFD brokers with a Bafin licence via short engagements.

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

21.06.2019 – Daily report. One step forward, one step back: Investors will sound out the direction on Friday. And behind the scenes, big investors are pulling and pushing prices. Because it’s a big expiration day on the stock market. Thus, the DAX will not get beyond its just marked high for the year. Especially as tensions in the Persian Gulf are rising.

Slight plus in Frankfurt

Until Friday midday, the leading German index remained just under 12,400 points up by 0.3 percent. In today’s trading, volatility is guaranteed, which pleases everyone who trades CFDs – because they can use even the smallest back and forth for profits and thus have higher return opportunities than investors in online stock trading. On the Witches’ Sabbath, futures contracts on stocks and indices on the futures exchanges expire. Brokers always speak of “big decay” when the last trading day of all four types of derivatives, i.e. options and futures on indices and individual stocks, falls on the same day. Since large addresses often try to steer the indices in their direction via the heavyweights, chart analysis is pointless.

Double high in the DAX

And so the just marked double high in the DAX initially has little significance. On yesterday’s holiday Corpus Christi, Germany’s leading index reached a new high for the year at 12,438 points. But this was not really convincing – on the one hand the volume was low, on the other hand the new peak was only two points above the previous record level at the beginning of May. A double high often marks the beginning of a bear market.

Danger of war in the Persian Gulf

Otherwise, the decisive topic on the floor was the USA’s attack against Iran, which apparently came to an end at the last minute. According to the “New York Times”, US President Donald Trump had initially approved the air and sea attack against the Mullah regime as retaliation for the shooting down of a US drone military strike, but then cancelled it. We wonder whether the suspension has also been lifted.

Oil, gold and treasuries in demand

In view of the worsening crisis, the price of oil rose sharply before falling back somewhat. In addition, investors fled to American government bonds. For the first time since the end of 2016, the yield on ten-year US bonds slipped below 2 percent and reached 1.99 percent. And what else do risk-averse investors buy when interest rates are likely to fall further and the risk of war increases? Exactly: gold. The August contract rose to 1,415.40 US dollars for the first time since 2013 before sales began.
Although the Federal Reserve had left interest rates unchanged on Wednesday evening, it had signalled its willingness to act and interest rate cuts in the further course of the year. Following the interest rate decision, the greenback came under considerable pressure, making the yellow metal more attractive.

Caution in Asia

In Asia, investors played it safe in the morning. In addition, they fled into the yen, which reduces the export opportunities of many corporations. The Nikkei closed in Tokyo with a minus of around 1 percent at 21,259 points. In Hong Kong, the Hang Seng index fell by 0.5 percent to 28,409 points.

Record hunting in New York

American equities benefited from hopes of lower interest rates. The S&P 500 reached a new all-time high of around 2958 points on Thursday. In the end, it was around one percent higher at 2,954 points. At the closing bell, the Dow Jones Industrial recorded a gain of 0.9 percent to 26,753 points, just under 1 percent from its all-time high. The Nasdaq 100 also closed 0.9 percent higher at 7,738 points.

This is what the day brings

The focus today is on Deutsche Bank. The Federal Reserve publishes the first part of the latest stress test of the big banks after the close of the US stock market. If Deutsche Bank does not pass the test, as it did in 2015, 2016 and 2018, it will be threatened with restrictions on US business operations.
In addition, reports from the EU summit of heads of state and government are likely to run through the tickers, which could interest traders in the euro and European government bonds.
At 15:45 the Markit PMI for manufacturing and services will be launched in June.
And at 16.00 the figures for sales of used real estate in the USA are announced.
The Bernstein Bank wishes you successful trades and a sunny weekend!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

19.06.2019 – Daily report. Investors on the Frankfurt Stock Exchange are initially taking it easy after the previous day’s profits. On Wednesday midday, the DAX is moving sideways, but the mood is far more confident than in the days before. Before the Federal Reserve’s interest rate decision in the evening, however, only a few stock market participants dare to leave the cover. And the overseas targets are positive – because now there is to be a meeting between the presidents of the USA and China.

Monetary policy provides confidence

The bulls fueled their strength and digested their profits from Tuesday. The DAX recently held up 0.1 percent. On the German stock exchange, as in global trading, there was renewed confidence that the Federal Reserve would verbally prepare the market for interest rate cuts in the evening. Most analysts expect the currency guardians to leave the key interest rate in the range of 2.25 to 2.50 percent this time.
In addition, the announcement by ECB President Mario Draghi on Tuesday that the European Central Bank could loosen monetary policy further if the economic outlook does not improve also had an impact. This looks like a devaluation race between the dollar and the euro. So forex traders should keep an eye on the situation and fill their financial arsenals with Germany’s best CFD brokers.

New hope in the customs dispute

US President Donald Trump also announced on Tuesday via Twitter that he had had a “very good” telephone conversation with China’s President Xi Jinping. He and Xi would have a longer meeting next week on the fringes of the G-20 summit in Japan. The teams on both sides would start talking earlier.
Obviously, the pragmatists have prevailed against the concrete heads in the Chinese leadership. For even Hu Xijin, the editor-in-chief of the English-language Global Times, who is regarded as the mouthpiece of the Communist Party’s dogmatic wing, had to eat chalk now. He twittered that the phone call would bring the narrow hope of resolving the blockade between the two countries.
The Asian stock markets had risen accordingly on Wednesday. The Nikkei 225 closed 1.7 percent higher at 21,334 points. In China, the CSI-300 rose by 1.3 percent to 3,716 points.

Tube-breaker instead of financial nuclear weapon

The question remains as to whether China has noticed that the alleged nuclear option to sell US government bonds is only a pipe-breaker. According to the US Treasury, Beijing sold $7.5 billion worth of Treasuries in April alone. And lo and behold: Now the Chinese stock amounts to “only” 1.1 trillion dollars – that is a two-year low. In the high, the Chinese had held securities with a volume of a good 1.3 trillion dollars. Now it turns out that there are enough other buyers for the US bonds. Moreover, China would reduce the value of its bonds if it were to sell them on a large scale. So Beijing would cut itself into its own flesh.

Wall Street targets all-time high

The mix of new interest rate fantasies and the signals in the trade dispute had also boosted prices in New York. The leading Dow Jones Industrial index climbed by 1.4 percent to 26,466 points, marking a six-week high. The previous record of 26,951 points from October appears within reach. The broad-based S&P 500 gained almost 1 percent to 2,918 points yesterday. And the Nasdaq 100 gained 1.5 percent to 7635 points.

This is what the day brings

The view remains on the appointment calendar. The Ouverture is a speech by ECB President Mario Draghi at 4:00pm. Perhaps he will once again fire up the interest rate fantasy when he concludes the ECB Forum in Portugal “20 Years of European Economic and Monetary Union”.
At 4:30pm, the American Energy Information Administration (EIA) presents its weekly oil report.
And at 8 pm the Federal Reserve’s interest rate decision follows, followed at 8:30pm the press conference with Fed Chairman Jerome Powell.
The Bernstein Bank wishes you successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.