News

24.03.2020 – Daily Report. Mega financial aid from the Fed. Price gains in Japan. The DAX hisses over 9,000 points. Wall Street had posted losses the night before. There is still no agreement in Congress on the gigantic US aid program in sight.

Rising share prices in Frankfurt

Investors in Frankfurt are taking action again: the DAX recently rose by 5.7 percent to 9,318 points. The German aid package of 156 billion dollars provided hope. The same applies to the fact that in Italy the number of new infections and deaths has slowed down.
As expected, the incoming economic data was weak: German service providers’ business has slumped more than ever before. The purchasing managers’ index for the sector slipped to 34.5 points in March, its lowest value since data collection began in June 1997, according to IHS Markit.
US futures rose by a good 5 percent in the hope of an agreement in Congress on the gigantic aid program. Gold rose by 1.7 percent to $1,594.

Investors in Asia buy

Asia was also expected to recover on Tuesday. The CSI-300 rose by 2.7 percent to 3,625 points. In Hubei province, the first restrictions such as travel bans are to be lifted shortly. The exception is the metropolis of Wuhan, where the corona epidemic began. The Nikkei rose by 7.1 percent to 18,092 points. Investors hoped for share purchases by the Bank of Japan (BOJ), public pension funds and share buybacks by corporations.
Meanwhile, India took drastic measures: In the states of Maharashtra and Karnataka, anyone suspected of being infected with Corona is given a stamp on the back of their hand at the airport to enforce quarantine. The central government also uses airline reservations to track people’s movements.

Minus in New York

The evening before, prices on the US stock exchanges had slipped. The Dow Jones Industrial fell by 3 per cent to 18,591 points – its lowest level since November 2016, while the market-wide S&P 500 lost 2.9 per cent to 2,237 jobs. And the Nasdaq Composite closed narrowly unchanged with a minus of 0.3 percent to 6,860 points.

Rescue package deadlocked in Congress

Investors were disappointed by the party bickering in Congress: the aid package again failed to pass the Senate. The Democrats made demands that had nothing to do with Corona aid: For example, an emissions cap on airlines, the promotion of wind and solar power, money for planned parenthood – the organization performs abortions, among other things -, the automatic renewal of immigrant visas, or more rights for unions. The “Wall Street Journal” commented that the Democratic leadership, under pressure from the left within the party, has taken workers, hospitals and small businesses hostage. Meanwhile, the Dems presented their own plan, which at $2.5 trillion is even more gigantic than that of the Reps at $1.8 trillion.

Dollar Cannonade of the Fed

As a result, the stock market initially ignored the Federal Reserve’s heavy artillery: the Fed wants to buy up unlimited government bonds and mortgage-backed securities. In addition, it is launching several credit programs to support companies and households. US President Donald Trump expressed his satisfaction and indicated an end to the economic slowdown – with a partial restart of some sectors. “The solution must not be worse than the problem,” Trump emphasized again at a press conference at the White House.

Hedge fund Pershing Square goes “all in

Meanwhile, Bill Ackman was causing a stir: The head of Pershing Square Capital Management told Bloomberg that he had bet 2.5 billion dollars on the recovery of the economy and invested entirely in equities. He was now 100 percent long. An amazing turnaround: Just a week or so ago, the investor on CNBC called for drastic measures to contain Corona. He had warned “Hell is Coming” – and since then he has been known to a wider audience in the USA. However, many investors also remember him for his rather bizarre statements, for example that he had had visions about the effects of Covid-19.

What the day brings

Dates are rather thin on Tuesday. As always, you can find the overview here:Market Mover

For example, data for the manufacturing industry in the USA are due at 2:45pm.
At 3:00pm new home sales in February will follow.
And at 9:30pm the American Petroleum Institute reports the US crude oil inventory data.

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.

All major countries are trying to save their markets. In the United States, Republicans and Democrats are fighting again. Democrats have blocked the package of market stimulation for 2 trillion dollars, which is about 10% of GDP. Markets reacted sharply to this situation and lost about 3% during the trading session.

Chart of the Day – Brent

Germany is taking a package of measures to combat the coronavirus and wants to allocate about 10% of GDP. In Germany, the solutions are easier to find and this aid will soon arrive.
Japan has behaved interestingly. The government said that the Olympic Games are likely to be postponed, but not cancelled completely, which had a very positive impact on the Nikkei index. Overall, Asia is doing better with the virus now, so markets are feeling more stable. It is difficult to give any forecasts in this situation, but for now everyone is waiting at least for stabilization. The world economy has never seen such stimulus measures, and one can only guess what they will lead to.

US Dollar

On Monday, the US Federal Reserve announced another measures to stimulate the economy and support companies. They open new credit lines and buy bonds. It is planned to inject about $1 trillion more in the near future. It’s a huge amount of money, but looking at the markets, we see that these actions are not yet significantly affect currency rates and the dollar continues to dominate. Still, the decisive actions of the Fed give hope to investors and increase demand for the dollar. Therefore, now it is worth considering buying the U.S. dollar against all currencies at points of local decline.

Gold

After last week’s sharp decline, gold is recovering well and is trading above its key level of $1500 per ounce. We can assume that gold will continue to grow to the next key levels. Investors will be able to close the lack of liquidity from the very cheap help of the states, rather than from selling the precious metal. Therefore, all conditions are created for growth.

Oil

There are big problems with oil in the market. We can say that if production volumes do not decrease, we will get a real crisis of excessive consumption. According to some estimates, in April we should expect an imbalance between production and demand of 10 million barrels per day. If nothing changes, we will see an average excess of supply before demand of 6 million barrels per day. The world’s vaults are 76% full. Such excess production is likely to bring the price of oil even lower, down to $10 per barrel.

What’s waiting for us today?

09.30 Index of business activity in the German manufacturing sector
14.00 New home sales in the US
21.30 Weekly crude oil reserves in the USA

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.

23.03.2020 – Daily Report. The gigantic US aid package has been delayed. And the Federal Reserve is spreading panic – unemployment in America could rise to 30 percent. In China, a real estate collapse is looming. The investors in Frankfurt are taking cover.

Big minus in Frankfurt

At the beginning of the week, the German leading index once again rushed down: The DAX recently lost 3 percent to 8,665 points, the low was 8,531 points. What volatility: on Friday it had still climbed to 9,201 points.
The Boerse.ARD.de team in Frankfurt gave long investors some hope: last Monday’s crash low of 8,256 points had at least withstood the first onslaught of bears. Another tip for fans of chart analysis: investors should now keep an eye on the 8,256 point mark, as long as the DAX stays above it, it still has chances for stabilization and a turnaround to the upside. Above all, however, the support should remain at around 8,100 points – resulting from the high of the dotcom bubble in 2000 and the pre-financial crisis high in 2007.

Russian Roulette in the Senate

US futures had exerted pressure on German prices, which recently were still down by around 2 percent. During the night, the contract had been traded on the Dow Jones Limit-Down. The reason: In the USA, negotiations on an economic stimulus package worth more than 1 trillion dollars have stalled. The Democrats in the US Senate blocked a Corona package created by Republicans in the lead.
The vote in the Senate was 47 to 47, a Go would have required 60 votes. Meanwhile, Republican Mitt Romney from Utah tested positive for Corona, several others withdrew into quarantine. For the Democrats, the package was too much tailored to the needs of Wall Street, but not to Main Street – although the draft provides for helicopter money for all Americans. Majority leader Mitch McConnell accused the Dems of playing Russian Roulette with the market. Today at 12 o’clock local time, there will be another vote in Congress.
President Donald Trump was unimpressed by the delay: “Our stimulus package will go through. And it will be an enormous package,” he said in the White House. After a passage in the Senate, the Democrat-controlled House of Representatives will also have to approve the package. Expect the Dems to bitch again to make their mark.

Impending job apocalypse in the USA

Yesterday, a leading member of the Federal Reserve, of all people, had poured petrol into the fire. James Bullard, head of the St. Louis Federal Reserve, told Bloomberg News on Sunday that the US unemployment rate could rise to 30 percent in the coming months. He expects an unprecedented 50 percent drop in the US gross domestic product. Bullard said, “This is a planned, organized partial shutdown of the U.S. economy in the second quarter.”

Mixed trend in Asia

The major stock exchanges in Asia are developing unevenly. For example, the CSI-300 slipped 3.4 percent to 3,530 points in the morning. In Japan, the Nikkei-225 rose by 2 percent to 16,888 points. However, this means that it only made up part of the gains of the other indices on Friday. Because there the stock exchange in Japan was closed.

China’s real estate market collapses

Unfortunately we have another piece of bad news from China for you, which has not yet made its way into the mainstream media: Corona is now plunging the real estate market in China into the abyss. China Evergrande – the second largest Chinese real estate developer – loosely cut its full-year forecast in half. The stock traded in Hong Kong rushed down by 17 percent.
You will recall that we had repeatedly pointed out the gigantic vacancy rate in the People’s Republic. Beijing wants people from the province to settle in the cities in order to gain farmland; many municipalities have granted cheap loans, developers have entered the market to build gigantic prefabricated housing estates. Most of them are empty. If anyone has bought, it is mainly the middle class, to hedge against inflation. According to Xinhua, three-quarters of the assets of Chinese households are invested in real estate, compared with only 28 percent in the USA. This bubble is currently bursting. With devastating consequences for the Chinese stock market and labor market – as well as for the demand for steel, copper and cement.

Severe losses in New York

On Friday, the US indices had closed at their daily low. The Dow Jones lost 4.6 percent and closed at 19,174 points – its lowest level since November 2016. The weekly minus: more than 17 percent and at the same time the highest weekly loss since 2008. The market-wide S&P 500 closed 4.3 percent lower at 2,305 points. Here the weekly yield was minus 15 percent, the worst loss since 2008, and the Nasdaq 100 lost 4 percent to 6,994 points. By the way, according to CNBC, Ronin Capital, a large hedge fund, collapsed on Friday.

What the day brings

The diary on Monday only contains a few interesting events, as always you will find the overview here: Market Mover

Only the second vote in the Senate and perhaps even in the House of Representatives on the gigantic economic stimulus package will be important.

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.

The week ends sadly for the markets. No one knows what to do next. In general, there were attempts to close the market in the green zone, but statements of the U.S. Federal Reserve that its actions are coordinated with banks in England, Canada, Japan, ECB and the National Bank of Switzerland did not leave a chance. A lot of dollar liquidity is needed now, and the US is ready to provide it.

Chart of the Day S&P500

The week closes again in the negative and it is absolutely unclear whether the bottom is close or not. Trillions of dollars have been thrown to save the world economy. Countries have a lot of money, but it is not clear whether they will need it and for what? Everywhere there is isolation, production stops. Maximum protection for the entire population. And it will have a very strong impact on the GDP of countries. China is beginning to come alive after the epidemic and we very much hope that the infection situation will change soon.

Japanese Yen

It’s very interesting how this currency behaves now. In general, the Bank of Japan has shown nothing new in the fight against the crisis and the coronavirus. Japan is going to hold the Olympic Games and it is very, very expensive. There is no information yet whether these competitions will be cancelled, but the Japanese Yen is weakening amid the problems with the markets. The whole cryptomarket completely collapsed on Thursday in just one hour. Bitcoin lost 20% of its value and pulled the rest of the crypto currencies. The total capitalization fell to $172 billion, about 88 billion less than a week earlier. It’s all like panic and fleeing to other assets. Bitcoin is now traded at $6,000, back to late 2018 levels.

Euro

The Euro can’t get enough of itself after serious statements by the US Federal Reserve and problems in Europe. Italy is suffering from coronavirus, the countries are in quarantine, the economy starts to stop completely. The countries must move on and make common decisions. In general, the world currencies will fluctuate very strongly now, and it is not yet clear who will win in this situation.

What’s waiting for us today?

14.30 USA National Activity Index
16.00 Consumer confidence index in Europe for March
23.00 Manufacturing PMI in Australia

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.

20.03.2020 – Daily Report. Green prices on the trading platform at last: The DAX rises sharply on Friday afternoon. This means that it is building on the stabilization of the previous day. US futures are rising because of the prospect of decisive action in the USA – it is likely to rain helicopter money here shortly. In addition, Germany will apparently put up a new protective shield for companies.

DAX presents itself strong

The German leading index rose by 5.3 percent to 9,066 points. We are curious to see how the Witches’ Sabbath will affect share prices today. The day before, the indicator had presented price movements as in normal times for a change. The DAX closed with a plus of 2 percent at 8,610 points. However, it was not the bazooka of the European Central Bank that triggered this recovery – but the turn to the north on Wall Street. US futures recently rose by over 5 percent.

Funds over 500 billion euros for German companies

One of the reasons for the good mood: As “Der Spiegel” reported, the federal government wants to set up a new rescue umbrella for companies that have got into trouble because of Corona. The fund is to contain a volume of around 500 billion euros. This is intended to save companies from insolvency by issuing guarantees for liabilities or actually injecting capital. This would probably amount to a partial nationalization. The model for this is the Special Fund for Financial Market Stabilization (Soffin), with which the state saved banks from bankruptcy during the financial crisis twelve years ago – it was endowed with 480 billion euros at the time, most of which was in the form of guarantees. Should banks be shaken in the current crisis, the Federal Government also wants to revive the Soffin.

Soon it will rain money

The USA is going even further with a real novelty: people there are likely to receive a cheque from the government shortly. Treasury Secretary Steven Mnuchin gave the Fox Business Network details of the helicopter money: a total of 500 billion dollars is to be transferred directly to the Americans in two tranches. In the first tranche it is to be 1,000 dollars per adult and 500 dollars per child. A whopping 3,000 dollars for a family of four. And yesterday, Republican Majority Leader Mitch McConnell submitted a similar stimulus proposal, which will now be negotiated with the Democrats.
So a brilliant Marshall Plan bypassing the banks, which often use government support to stabilize themselves. Similarly, US President Donald Trump emphasized at his press conference yesterday: companies in which the state steps in to bail out and takes over shares should not be allowed to buy back shares with tax money or even increase bonuses for management. Now that’s an announcement.

Slight gain on the Chinese stock market

In China, investors remained skeptical on Friday. Beijing reported again that there were no new domestic infections. However, the regime critical “Epoch Times”, which is well connected in the People’s Republic, reported that the reality in the country was different. The newspaper’s sources reported long queues in front of hospitals, the construction of emergency hospitals and tightly controlled quarantine. On the stock market, in addition to Corona, the fact that the People’s Bank of China (PBoC) has refrained from cutting interest rates also caused reticence. After all, the CSI-300 gained 1.8 percent to 3,653 jobs. In Tokyo, the stock exchange remained closed due to the holiday at the beginning of spring.

New York fights its way up

Yesterday, Wall Street had already sent out signals of stabilisation. The index closed about 1 percent higher at 20,087 points. The index had slipped by more than 3.5 percent in early trading, but in the meantime it had also climbed by almost 3 percent. The Nasdaq 100 gained 1.6 percent to 7,289 positions. And the S&P 500 finally gained 0.5 percent to 2,409 points. The sharp drop in the Philly Fed index and the decline in the US current account balance had been expected. As was the sharp rise in the number of first-time applications for unemployment benefits. We are therefore curious to see whether Wall Street will now initiate a strong recovery in view of all the steps it has taken as described above.

Record day for oil

The oil market experienced this recovery yesterday: crude oil made the largest daily gain ever. As a result, WTI increased by 26 percent in the meantime. Most recently, WTI rose by 9.3 percent to 28.31 dollars and Brent rose by 7.8 percent to 32.65 dollars. In order to stem the oil flood, Texas now apparently wants to cut production, as the Wall Street Journal reports, citing insiders. This would be the first time since the oil shock in the seventies. In addition, top managers in the industry had asked the Texas Railroad Commission, the regulator responsible for the industry, for state aid. This shows: the US oil industry is up against the wall. Assume that a large part of the small producers will topple over – which will reduce supply.

This is what the day brings

For the weekend, relaxation is the order of the day. As always, you will find the overview here: Market Mover

At best, the sales of used real estate in the USA in February at 15.00 hrs. might meet with some interest on Wall Street.
The Bernstein-Bank wishes successful trades – and lots of sunshine to enjoy in the domestic quarantine!

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.

The President of the USA addressed his country. He asked the FDA to accelerate the agreement on vaccine development and said that there are a couple of therapies that have shown excellent results. Furthermore there is a cure that has shown no less good results against coronavirus. And this is another war, now on the medical front… but we’ll win it too!

Chart of the Day EUR/USD

Indices

On this positive + huge overselling, the stock markets bounced back on Thursday. But after spring comes summer, and after Friday is the weekend. Even Donald Trump will not predict how much the situation will get worse during Saturday and Sunday. Therefore, traders need to be as careful as possible when carrying volatile instruments, such as oil, over the weekend.

Oil

Speaking of oil! After the terrible fall on Wednesday, the black gold market on Thursday showed no less strong backward movement. Speculators have played out and are driving oil 20-25% a day in any direction.
Nothing has fundamentally changed. Really strong support oil can only get on the new OPEC+ deal. The problem of an ordinary trader is that he cannot know anything about behind-the-scenes agreements, which certainly go on between representatives of Russia and the oil cartel.

Euro

After a totally illogical carry to 1.15, the EUR fell very quickly to a new low of 3.5 years. The only question is why it did not happen much earlier. The economic situation in Eurozone even before the crisis was extremely difficult. It is much worse now. The main difference from Great Britain, USA or Japan is that the EU countries are working in their own direction, not acting as a united front against a common enemy.

Bitcoin

It was not for nothing that we paid attention of our traders to the first cryptocurrency for 3 days in a row. The main message in previous mailings was that BTC was actually the only asset that did not fall against the dollar this week. On Thursday, this situation led to an explosive growth. Bitcoin grew by 15% at once, shaming the skeptics who were waiting for the first crypto at levels of 2-3 thousand dollars.

What’s waiting for us today?

02.30 Decision of the People’s Bank of China on interest rate
13.30 Canadian retail sales in January
15.00 U.S. secondary housing market sales for February

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.

19.03.2020 – Daily Report. The European monetary watchdogs announce the mega-support and fire the bazooka – they want to buy bonds worth 750 billion dollars. But instead of a boom, the stock exchange is just a whorehouse. Because who benefits from that? Ailing banks and overindebted states. It is questionable whether much of the money will reach the real economy. The DAX is only rising slightly.

Frankfurt Stock Exchange in the wake of deflation

Investors in Frankfurt entered the market only hesitantly towards Thursday afternoon: The DAX climbed 0.6 percent to 8,495 points. A meagre plus in comparison to the heavy losses of the previous days. The US futures fell about 0.2 percent.
On the trading floor, the insight spread that the world is facing mega-deflation. With a
Death spiral of falling prices and declining investment. In addition, there is currently massive de-leveraging in the financial industry. In other words, everything has to go – it’s all about survival. A sign of this is the strength of the dollar – it has risen against most currencies and most recently stood at 1.0856 against the euro.

750 billion euros from the ECB

In Europe, all those investors who had bought government bonds can be happy – the European Central Bank will buy them from them. The ECB, for example, intends to fight Corona with an emergency programme worth 750 billion euros by the end of 2020. Overall, the volume of all purchases, together with other current and planned purchases of government bonds, corporate bonds and other assets, will thus rise to 1.1 trillion euros this year. The question is how much of this money will end up in consumers’ pockets. Even if commercial and state banks were to grant more loans – who will take them up when demand slumps?

Fin de regime – they have not understood anything

This was also the line of argument of the always biting analyst Michael Every from Rabobank. With a view to the various, hardly manageable fiscal and economic stimulus programs, he stated yesterday: “Too much – and still not enough”. And stated that we are dealing with a fin-de-regime, as the end of the regime. Literally: “Things have already irrevocably changed and whipsaw market action reflects that this is the case”. In the USA, the Virus Fiscal Package has swollen from 500 billion dollars to 1.2 trillion dollars – thus to 5.6 percent of the US gross domestic product.

But he was critical of loans – loans would hardly help in a longer crisis: “However, when you have a collapse in demand and a supply shock, is your first response to want to borrow more to tide you over? Perhaps for a month or two. Yet if this is going to last 12-18 months, as some health experts are suggesting, then surely the temptation is just to shut down and restart a new business when we are virus-free? Or, take the loan, pocket it, and then close down?” So: Take the money, let the company fall over and run. By the way, the Rabobank expert was positive on topics such as basic income and helicopter money.

Economic indicator copper

On the subject of deflation, CNBC just referred to the economic indicator copper. The red metal is used, for example, in construction, household appliances or cars for cables. The price has just fallen to its lowest level since January 2016. Thus, the three-month futures on the London Metal Exchange (LME) plummeted to a low of $4,371 per tonne. In mid-January, the price was still at 6,340 dollars. This does not bode well for the global economy in the next three months.

Correction in Asia continues

Asian investors held back on Thursday. The Nikkei lost around 1 per cent to 16,553 points. Support came from the Bank of Japan, which offered banks an additional 4 trillion yen, or 34 billion euros in liquidity, and expanded its bond purchase program by 1.3 trillion yen. In China, the CSI-300 lost 1.3 percent to 3,589 jobs.

Heavy losses again in New York

Meanwhile, the cops yesterday experienced another bloodbath on the US stock markets. Due to the rapid sales, stock exchange trading was temporarily suspended. At times, the Dow Jones Industrial rushed almost 11 percent below 19,000 points – its lowest level since November 2016 – and at the closing bell, the Dow was still 6.3 percent lower at 19,898 points. The S&P 500 fell by 5.2 percent to 2,398 points. And the Nasdaq Composite plunged by 4.7 percent to 6,989 points. Meanwhile, US President Donald Trump wants to resort to a law from wartime, the Defense Production Act, in case of emergency in the Corona crisis.

Dates of the day

The diary has some interesting events on Thursday, you can find the overview as always here: Market Mover

At 1:30pm the following data is published:
Weekly US initial applications for unemployment benefit
US current account
Philadelphia Fed Index
And at 3:00pm the US leading indicator for February will follow.
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.

Optimists think there’s nowhere else for oil to fall. And the pessimists (shorts and oil producers) continue to sell it in huge volumes. On Wednesday, WTI oil fell by another 20%, reaching a low of $20 per 1 barrel.

Chart of the Day GBP/USD

OIL

In theory, black gold has somewhere else to fall. There are huge surpluses of physical oil in the markets, which nobody buys. Owners are forced to store it in tankers, the cost of freight which has increased by 5-10 times in just one month.

Pound

Yesterday we were looking at a significant event on a monthly timeframe in the Australian dollar/US dollar pair. Today, on the same timeframe (chart above), no less significant event. The pound/dollar broke the lows, which were shown in 2016 after the referendum on Brexit. And then there is not just an abyss, but abyss without a bottom, the pound has never been so cheap..

Canadian Dollar

But there is another very interesting chart in the Australian dollar/Canadian dollar pair. What do we see on a monthly timeframe? The price has approached the highs of the panic in 2016, and behind them there is a new huge gap. On Thursday, at this level, there will be a huge battle of bulls and bears and another blood will spill.

Bitcoin

For the third day in a row, we draw our subscribers’ attention to the first cryptocurrency. It persistently refuses to fall further against the U.S. dollar, while all assets fall against the dollar. The absurdity is that this very crisis can give cryptocurrencies a powerful boost in terms of human acceptance, which has been so lacking for the last 2 years.

What’s waiting for us today?

00.50 Monetary Policy Committee Meeting of the Bank of Japan
01.30 Employment rate in Australia for February
09.30 Swiss National Bank interest rate decision
13.30 Initial claims for unemployment benefits in the USA

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.

18.03.2020 – Special Report. Most brokers currently compare the corona crash with 1987 or 2008: massive slump, rapid recovery. But maybe everything is really different this time – because it’s not “just” the financial sector that is going down. But the entire real economy on the globe. The warnings of a new, major depression are mounting. Some experts believe that despite the sharp bear market we have just experienced, we are only just beginning – and that the bottom of despair is far from being reached.

The light must not go out

This crash is far more threatening than “just” a financial crisis. Richard Baldwin, Professor of International Economics at the Graduate Institute in Geneva, recently warned in his publication VoxEU.org that the crisis triggered by Covid-19 was different. For it hit the economic giants all at once – the G7 and China. And in these countries, many sectors of the economy at once. Literally: “It is not a credit crisis, or a banking crisis, or a sudden-stop crisis, or an exchange crisis. Today’s crisis is a bit of all these. His advice: Governments should take expensive but quick measures to maintain the money cycle. That’s what he said: “keeping the lights on”.

Warning from Crescat Capital

We take a similar view and repeat our assessment from the Special Report of 12 March – the stock market is threatened with the biggest crash ever. It’s probably not over yet… The hedge fund Crescat Capital also sees it that way, we have already noticed it positively several times with clever analyses. Crescat supports our warning of a new 1929 – and drastically.

The time to buy is when there’s blood in the streets

The investment house reported yesterday for March to date a yield plus of 31 percent and wrote a warning to its customers, this was published via the blog “ValueWalk”. Crescat reminded of the legendary banker Baron Nathan Mayer Rothschild. He once said, “The time to buy is when there’s blood in the streets, even if it is your own.” Rothschild had organised gold smuggling for London during the Napoleonic wars in order to supply the troops on the continent with pay. Legend has it that he made a fortune in British government bonds through his own messengers, as he was the first to learn of the victory at the Battle of Waterloo. Translated to today, Crescat said: “Even after an almost 30% fall in the S&P 500, we are still a long way from the “blood in the street” valuations that mark the bottom for stocks.

Crash from a historic top

Letztlich stecke der Markt erst am Anfang der globalen Rezession. Konkret heißt es: “Was die US-Aktien betrifft, so ist es nur der erste Monat nach einem, wie wir glauben, historischen Markthoch. Das Problem ist, dass die Pandemie zufällig zur Zeit des am meisten überbewerteten US-Aktienmarktes aller Zeiten zuschlug, der auf einer Zusammenstellung von acht Bewertungsindikatoren basiert, die von Crescat verfolgt wurden und sogar höher als 1929 und 2000 waren. Sie traf auch nach einer rekordverdächtigen Hausse und wirtschaftlichen Expansion. Der Aktienmarkt war bereits reif für einen großen Abschwung, der auf einem Ansturm von sich verschlechternden Makro- und Fundamentaldaten basierte, noch vor dem globalen Gesundheitsnotstand”. Kurz: Der Absturz in einem überbewerteten Markt war überfällig, selbst vor der globalen Gesundheitskrise.

Only the beginning of the crash

And then it gets really drastic: the recent corona shock was probably just the beginning for the US stock market. For a global recession is looming, corporate earnings are likely to collapse and unemployment to rise. As always, the economy and the market would have to be cleansed of their sins to make room for new growth.

56 percent below average

Crescat went on to say that from the February top it would take a 56 per cent drop to even get to the long term average. And a 74 percent loss to further subtract one standard deviation. But in the worst bear markets, Crescat said, prices even slid two standard deviations south. This is what happened in the Great Depression, the bear market of 1973/74 and the double dip recession of 1982.

1929 revisited – minus 89 Percent

And that’s how we ended up in the Great Depression. The current bear market is comparable in speed and severity to 1929, Crescat continued. In 1932, there was an 89 percent drop from the top. Of course there will always be bounces to the top in between.

12 Trillion Dollar Margin Call

By the way, Crescat is not alone. JPMorgan has just warned that the world is facing an unprecedented dollar margin call – and that shorts worth $12 trillion, or 60 percent of US gross domestic product, will have to be closed. The dollar is sliding towards deleveraging, as three-quarters of cross-currency funding is greenback. Not to mention all the assets that have to be sold.

Save everything and everyone

And Zoltan Pozsar, the Credit Suisse repo king already quoted at this point, advised the Federal Reserve to save everything and everyone. As set forth in “Global Money Notes #28: Lombard Street and Pandemics.” Incidentally, the Fed has followed the expert’s earlier recommendations exactly with its latest steps – interest rate cut, billion-euro injection for the repo market.

Two years of epidemic possible

Drastic requests to speak therefore everywhere. But there is still a lot of hope on the stock market, as the rebounds show. And even in real life there is still little sign of “Blood on the Street”. Indeed, in the meantime hamster purchases have begun. But carefree pensioners sit around in groups in cafés, arrogant little students celebrate corona parties. The Robert Koch Institute (RKI) has just issued a harsh warning: The pandemic could last for about two years. And in extreme cases, the restrictions for people could remain in force for that long. This sounds as if there is no short-term cure and no resistance.

Imminent mass insolvencies and state of emergency

We ask ourselves: How many airlines, hotels, restaurants, retail shops, advertising agencies, car manufacturers and banks will topple over in such a permanent crisis? And further: Only when supermarkets and petrol stations close down in the end, when the supply of electricity, gas and water runs out because nobody shows up for work anymore – then the real emergency will prevail. Then we will see the army in the streets – plus soup kitchens, riots, looting. And only then will we have Blood on the Street.

Junior Miners already now buying opportunity

But let’s end this bleak outlook on a potentially impending Armageddon with a light of hope, presented by Crescat Capital. There is one corner of the stock market that already offers historically low valuations and an incredible buying opportunity: “small cap gold and silver mining companies”. Last Friday, the sector had fallen 84 percent since the Bull Market Peak in December 2010. And with that a double bottom has formed, as the market last recorded a minus of 87 percent in January 2016. And on Friday the “precious metals juniors” also reached a record low in valuation compared to gold. This against the background that a run on gold always starts in the crisis. It remains to be noted that Crescat itself has invested in these stocks.

The Bernstein-Bank wishes you successful trades! And to all of us soon an antidote to Corona – or the realization that humans do develop resistances and that everything will not be as bad as feared in the worst case.

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.

18.03.2020 – Daily Report. Corona seems unstoppable. Cheap money from the central banks won’t change that. And concrete economic stimuli are still to come. The DAX plunges.

Frankfurt and US Futures in reverse gear

After the strong recovery from the previous day, the bears in Frankfurt have already taken the reins again. At noon, the DAX slumped by 5.1 percent to 8,487 points. In terms of chart analysis, brokers are now looking at the 8,150 mark, as Börse.ARD.de noted. This is because the highs of the stock market years 2000 as well as 2007 and 2008 were at this level, which is an important support for the German leading index.

The futures on Dow Jones and S&P 500 recently slipped by a good 3 percent. According to CNBC, the contracts were traded “Limit Down” during the night, which means that losses were limited to 5 percent. However, exchange-traded funds that follow the indices and are not affected by such regulation slipped even further: The SPDR S&P 500 ETF premarket, for example, lost 5.3 percent in the meantime and the SPDR Dow Jones Industrial Average ETF fell 5.9 percent. So this looks like a new sell-off on Wall Street.

Two-year epidemic possible

Pessimism also spread in Germany. In the opinion of Ifo boss Clemens Fuest, the expected economic slump in this country could be even more severe this year than during the financial crisis of 2009.

Previously, the Robert Koch Institute (RKI) also caused enormous scepticism: it has recorded a rapidly rising number of virus patients and is receiving increasing alarm signals from the authorities. According to RKI head Lothar Wieler, the pandemic could last about two years. And in extreme cases, the restrictions for people could remain in force for that long. We ask ourselves: How many airlines, hotels, restaurants, retail shops, advertising agencies, car manufacturers and banks will topple over in such a permanent crisis?

Losses on the Asian stock market

While the number of new corona cases in China is stabilizing at a low level, the number of

daily recorded corona infections in South Korea continued to increase. The country is far more rigorous than Europe. Incidentally, Hong Kong is acting particularly radically: from tomorrow, every person entering the country will have to spend two weeks in quarantine under medical supervision. To control the self-quarantine, bracelets with an app will be distributed. Too little too late?
The CSI-300 in China lost 2 percent to 3,636 jobs in the morning. And in Tokyo, the Nikkei dropped about 1.7 percent to 16,727. In Hong Kong the Hang Seng closed 4.2 percent weaker at 22,292 points.

Huge tax relief and helicopter money

Even the quite unusual measures planned by the US government could not stop the fear on Wednesday. The White House, for example, wants to introduce a gigantic tax relief – depending on the medium, it will be 850 billion dollars or even more than 1 trillion dollars. CNBC reported with reference to insiders that US Treasury Secretary Steven Mnuchin had warned Republican senators that unemployment could rise to 20 percent if the package is not passed. Specifically, companies should be able to defer tax payments up to 10 million, and individuals should be able to withhold payments to the Internal Revenue Service of 1 million dollars. Also under discussion is a check to US citizens – Helicopter Money.

Rebound on Wall Street

The stocks in New York, at any rate, had risen sharply yesterday. The announcement by the US Federal Reserve to buy up short-term corporate bonds in order to provide companies with cash in the current pandemic was also a cause for celebration. The Dow Jones closed the year at 21,237 points, up 5.2 percent. The S&P 500 rose by 6 percent to 2,529 on Tuesday. And the Nasdaq 100 gained 6.5 percent to 7,474 jobs.

What the day brings

On Wednesday, the diary contains some interesting events, the overview can be found as always here: Market Mover

In the USA, for example, construction starts and permits are due at 1:30pm for February.

At 3:30pm the crude oil inventory data from the state Energy Information Administration will follow.

And at 7:00pm the result of the FOMC meeting is to arrive according to n.tv.de of the Fed. After the interest rate cut over the weekend, however, the statements on growth, inflation and unemployment are of more interest.

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.