News

The main news of the day came again from Twitter of US President Donald Trump. “The U.S. is very close to a major deal with China,” the American leader said. However, we do not know if it is true. The U.S. dollar just shot into the sky on this news, having started to rise sharply against all currencies.

EUR/USD day chart

On the positive side, stock markets around the world are growing, as are commodity prices. The main thing is that the next portion of the positive does not result in another and growing negative, if after the weekend we hear that there are new problems in the negotiations again.

EUR/USD

Very interesting technical picture in a pair of euros/dollar. Pay attention to the daily chart above. For the first time since June, the price is close to the 200-day simple moving average line and bounced back like a pinpong ball.
And this is against the background of the statement of the new ECB Chairman Christina Lagarde that the slowdown of the Eurozone economy has stopped. In any case, from the low of October, the pair has already grown by 300 points, and the correction is absolutely normal. Today it started with fundamental and technical factors.

GOLD

Gold traditionally reacted with a fall in trade tension, although in the first half of the day it grew steadily against the U.S. dollar and other currencies. A number of stops were removed, but the break-up turned out to be false, the gold metal returned to the corridor, which had formed since the beginning of November 2019.

INDICES

The American stock market has shown new historical highs. Investors have already forgotten about the sharp fall of the first 2 trading days in December. The shell does not fall into the same funnel twice, so almost nobody foresees a repetition of last December, when stock indices closed the month of cutting by the fall. On the contrary, there is still enough time left until the end of the year and the Christmas rally is in full swing.

What awaits us today?

EU Leaders Summit
09.00 Address by ECB Vice-President De Gindos
14.30 Retail sales in the USA in November

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.

12.12.2019 – Special Report. Next week it will be exciting: The Repocalypse of September could be repeated. And also the December bear market on the stock exchange from last year. Only far worse than before. Because if a financial market legend is right, many banks will use cash to buy bonds. Which will dry up the interbank market again. And in the end it will force the players to sell out. Only the Fed could stop the disaster with a fourth quantitative easing.

Countdown to QE4?

Zoltan Pozsar is not just anybody. The Hungarian is considered one of the most important architects of the modern repurchasing market and has worked for the New York Federal Reserve and the US Treasury. He has just published a highly complicated brand letter for his current employer Credit Suisse. He titled his newsletter Global Money Notes #26 “Countdown to QE4?” Put simply, he warned of a worst case on the financial market – and a meltdown in the repo market, the interbank market for overnight credit. This could work its way up to Wall Street via the forex swap market and treasuries. And ultimately only the Fed will be able to stop the disaster.

Already this Monday it will be exciting

The starting signal for the apocalypse could already be fired on Monday. Then the quarterly tax date for the transfer to the tax office is due again – and the banks need cash, which they will then no longer be able to lend. We remember that the repo market last froze after 16 September. The interest rate exploded within minutes from around 2 to 10 percent. Three months ago, JP Morgan in particular had stopped lending. The problem: JPMorgan is one of the largest lenders in the market for short-term overnight loans. The Financial Times also noted a major strategic reorientation at the bank.

G-SIB and the Silvester-Crash

According to press reports, JP Morgan diverted 350 billion dollars into treasuries, triggering the cash drain. Such a step is being pushed forward by the regulators, of all people, who are calculating the so-called G-SIB surcharge on the last day of the quarter. This time on New Year’s Eve. G-SIBs are Globally Systematically Important Banks. The Basel Committee for Bank Supervision requires G-SIBs to hold a higher proportion (> surcharge) of safe reserves if they are heavily invested in risky assets. Since treasuries are considered safe investments, JP Morgan has just bought bonds on a large scale. Goldman Sachs is also seen as a big address that needs to reduce its GSIB surcharge.

And this could trigger a devastating dynamic at the end of the year: In order to lower the G-SIB scores, the few players with reserves could withdraw cash again and buy safe assets. According to Pozsar, the market is not yet pricing in such a scenario.

This time it’s much worse.

According to the Credit Suisse expert, there are three major differences at the end of 2018:

1) A year ago, major US banks still had cash reserves that they no longer had. Last year, banks’ cash reserves were 100 billion dollars higher, according to the financial blog ZeroHedge. All in all, the banks’ fire power had fallen drastically.

2) At the end of 2018, according to Pozsar, a fall of 20 percent in the Equities had reduced the G-SIB score – but not this time. We would like to remind you that the stock market has been marking new all-time highs lately. Higher share prices also mean a higher G-SIB score.
3) Last year the banks had still invested their reserves in complex trades such as FX swaps, whereby last year the repo rate on 31 December shot up to 6.5 percent of this. If there are no reserves left, there will be no fresh liquidity through currency swaps. And the repo rate could once again run off from the underlying by around 2 percent to undreamt-of highs.

Here comes the crash

And that threatens the repo market. According to ZeroHedge, one of the strategies of large hedge funds is to buy US Treasuries and sell derivative contracts such as interest rate futures in order to take the arbitrage. The problem is that large hedge funds like Millenium, Citadel and Point 72 get their margin from the repo market. But if liquidity were to dry up, these players would have to sell their holdings urgently. The Bank for International Settlements has also just warned that the US repo market is mainly dependent on four major banks. And when the banks froze their money in September, the Fed suddenly stood in front of several LTCMs. Let us remember: the hedge fund Long Term Capital Management threatened the international financial system with its imbalance in 1998.

Double strike against the market

The bottom line is that the market could soon be hit twice. In Pozsar’s worst-case scenario, market players buy too many collaterals such as treasuries and do not make cash reserves available to the interbank market. On the other hand, addresses that urgently need cash must get rid of their stocks. According to Treasurys, stock reserves are the big sales candidates. We think: Or some funds or banks may tip over.

Does a big bank want the crash?

According to Pozsar, should the Fed lose control of the overnight repo rates shooting off again in a cash drain and the crash begin, it can only do two things: First, it can encourage foreign banks to engage in FX swaps in order to pump fresh money into the market. Or secondly, buy up US government bonds now. According to Pozsar, only this second option will work and ultimately be nothing but a QE4. The devilish thing is that Pozsar reports that at least one major US bank is plotting a collapse of the cash market by mispricing in the forex swap market to force the Fed to QE4. Thus, according to Pozsar, buying US Treasuries is nothing other than a legal frontrunning strategy.

The Fed is alarmed

And if that all seems to be unworldly to you, then here are two little clues: Wall Street takes the matter very seriously. In response to a journalist’s question yesterday, Fed Chairman Jerome Powell replied calmly but surprisingly: “The Fed is also open to coupon purchases. That would be a novelty. And another look at history: on 5 September 2008, the repo market in the USA froze completely to a halt. Ten days later Lehman Brothers was history and the world slid into a gigantic financial crisis. This September, the Fed reassured the situation through repo auctions – the question is whether this will continue if really everything is worse than before.

Our conclusion: Whoever follows the warnings of repo pope Pozsar will subito invest at least part of his reserves in short positions on US indices as well as the DAX or Treasuries. And the money will be shifted into long positions as soon as the Federal Reserve really starts a QE4. Anyone who believes that the Fed will prevent a liquidity crunch in advance, for example by intensifying repo auctions, or that Poszar is wrong, will lean back and relax.

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.

12.12.2019 – Daily Report. The Fed has spoken, now it’s the ECB’s turn. And the British are going to the polls. Before the big customs decision on Sunday, investors are taking a moderate turn. Will there be a Phase 1 deal by then, or will the US impose new penalties? Recently it looked a little more like an easing of the conflict.

Frankfurt slightly positive

The German stock market was cautiously optimistic on Thursday morning. The DAX gained 0.4 percent to 13,202 positions. The futures on Dow Jones and S&P 500 each gained 0.2 percent. If it is true what the news agency Reuters reports with reference to insiders, then new tariffs on December 15 appear rather unlikely.

Only one Trump consultant for new tariffs

According to Reuters, US President Donald Trump will probably meet with his closest advisors today, Thursday, to discuss the new tariffs due on Sunday – tariffs on goods worth 160 billion dollars, including smartphones and toys, are up for debate. Trump will meet US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and economic advisors Larry Kudlow and Peter Navarro. However, according to the report, Navarro is the only one who explicitly advocates a tougher stance. Kudlow and Mnuchin are strictly against it. Lighthizer hopes he has enough arguments to prevent customs tariffs. But Trump will make the final decision.

Meanwhile, the New York Times reported a detail that fits the picture. Navarro, under the alias Ron Vara, has emailed a memo around Washington advocating higher tariffs to force China to make structural changes. It goes on to say that there is a lot of discussion about the customs deal.

We think: If Trump should impose new tariffs against China, then it will rumble strongly on Wall Street and in Frankfurt. If the US collapses and softens or postpones tariffs in light of the great progress that has been made, the stock market is likely to pick up moderately. If China should either kneel before or shortly after the deadline and publicly promise mega purchases from US farmers, as demanded, which makes the new tariffs unnecessary, then prices will surge sharply.

Waiting and Seeing in Asia

The stock markets in Asia showed no clear trend in the morning. In China, the CSI-300 fell by 0.3 percent to 3,891 points. In Japan, the Nikkei gained 0.1 percent to 23,425 points. In Hong Kong, the Hang Seng rose by 1.3 percent to 26,994 points.

New York cautiously optimistic

Wall Street had closed the night before, well claimed. The Dow Jones gained 0.1 percent to 27,911 points. The market-wide S&P 500 advanced 0.3 percent to 3,141 positions. And the Nasdaq Composite even rose 0.4 percent to 8,654 positions.

The Fed holds still as expected

The brokers were satisfied with the Federal Reserve’s interest rate decision. Because of the good economic data and low unemployment, the Federal Reserve left its key interest rate unchanged in the corridor of 1.5 to 1.75 percent. At its previous three meetings since July, the Fed had lowered the key rate by 0.25 percentage points each.

Brokers waiting for the ECB

Now it’s the turn of the European Central Bank – today the first interest rate meeting is taking place in Frankfurt under the chairmanship of its new President Christine Lagarde. Hardly anyone expects a change in the key interest rate, which is at a record low of 0.0 percent.

Tension at Sterling

The British pound is going to be exciting tonight: The first exit polls for the election in the House of Commons should arrive at 22.00 hrs. The Tories were not so rosy recently, because according to the statistical error dispersion of the important opinion poll by YouGov, Prime Minister Boris Johnson could still miss the absolute majority of 320 seats. Johnson wants to free Britain from the European Union on 31 January. Labour has announced a second Brexit referendum in the event of an election victory. If the majority is unclear, EURGBP would be guaranteed to be highly volatile.

That’s what the day brings

The diary brings some interesting events today, you can find the overview as always here: Market Mover
The aforementioned ECB interest rate decision will be received at 13.45. The press conference at 2.30 p.m. could provide new impetus for EURUSD.

The US producer prices are reported at 2.30 pm.

At the same time, the first weekly applications for unemployment benefits are received in the USA.

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.

That’s what comes to mind after the results of the Fed meeting were announced. Of course, everyone understood that the interest rate would remain unchanged. Investors were more interested in whether the tone of the Fed’s policy would change, as well as future forecasts.

DAX30 chart of the day

Everything’s completely unchanged. Future inflation, future U.S. GDP and future interest rates have not changed at all.

EUR/USD

The Euro has been growing for the third day in a row and is close to the highs of last week. Whether the euro/dollar pair will go up sharply will be clear tomorrow at the end of the European Central Bank meeting.

GOLD

Gold added almost $10, the bulls did not see any signals of tightening monetary policy and considered it a positive factor.

INDICES

Full compliance with forecasts (results of the Federal Reserve Board meeting) was also positively received by stock markets. What do investors need? That’s right! Stability and certainty. On Wednesday evening, they got exactly what they wanted.
And of course, the main event of this week is the IPO of Aramco. After a long preparation, Saudi Arabia brought to the exchange the world’s largest company in terms of capitalization, engaged in the production and sale of oil. During the first day of trading, the share price rose by 10%, and the company’s value approached 1.9 trillion U.S. dollars.
It should be noted that only 1.5% of the company’s shares were sold to investors during the IPO. The rest is in the hands of the Saudi Arabian authorities. All the proceeds from the placement will be used for projects related to the diversification of the oil business.

What awaits us today?

08.00 Harmonised consumer price index Germany
09.30 Swiss National Bank decision on interest rate
13.45 ECB interest rate decision
14.30 Press Conference of ECB Chairman

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.

11.12.2019 – Daily Report. After a dramatic Tuesday, the stock market tries unsuccessfully to recover on Wednesday. The German benchmark index is oscillating sideways. Once again, contradictory reports about a rapprochement in the customs dispute between China and the USA are causing restraint. And global trade remains cautious because of the Fed as well.

The DAX is losing its courage

At first it looked like a recovery. But most recently, the German benchmark index lost its early gains. The indicator was 0.1 percent higher at 13,087 points. Yesterday, after a meagre start, prices slipped and fell to 12,887 points. This is how weak the DAX had last been on October 31. Then the index rose again and the losses were reduced to 0.3 percent. Interestingly, the German stock market indicator yesterday turned pretty much on the 50-day line, which runs at 12,891 points. Once again we can rely on the basics of chart analysis.

Back and forth in the customs dispute

The reason for yesterday’s U-turn was a report in the Wall Street Journal. According to the report, the start of further US punitive tariffs on Chinese goods scheduled for Sunday could possibly be postponed. The paper referred to members of the Chinese and American negotiating delegations. Furthermore, there should be no hard time limit for the negotiations – so no time pressure.
On the other hand, economic advisor Peter Navarro on Fox News dampened expectations. The hardliner Navarro said there was no indication that December tariffs would not come into force. He added that it is up to the Chinese whether there is a deal or not. White House Chief of Staff Mick Mulvaney also confirmed that tariffs depended on how the negotiations developed, and at least interjected that they were “pretty good”. Probably the struggle for a customs deal will continue until the deadline on Sunday. So volatility is guaranteed – good for you when you trade CFDs.

Wait and see in Asia

Against this backdrop, investors in Tokyo held out sideways. The Nikkei lost 0.1 percent to 23,392 points. The Chinese CSI-300 closed almost unchanged at 3,903 points.

Restraint in New York

Trading in New York was largely undramatic. The Dow Jones closed Tuesday 0.1 percent lower at 27,882 points. And the market-wide S&P 500 also fell by 0.1 percent to 3,132 points. The Nasdaq 100 also lost 0.1 percent to 8,354 points.

Dampers for the Tories

A look remains at the British pound, which recently fell slightly to 1.1855 euros. The reason is a cold shower for Prime Minister Boris Johnson. According to an eagerly awaited last survey before tomorrow’s election, the Tories’ lead in seats in the House of Commons has more than halved. According to YouGov, Conservatives still win 339 of the 650 seats in the House of Commons, 20 less than in the previous YouGov survey at the end of November. Labour comes in at 231, 20 more than before. In addition, smaller parties gained. All in all, the previous survey had revealed a majority of 68 Conservative deputies; now election researchers only expect 28 seats ahead of all other parties. Since YouGov is regarded as extremely reliable, this again looks more like unclear power relations and a persistent Brexit stranglehold.

This is what the day brings

The event of the day is the result of the Federal Reserve meeting at 20:00. Hardly any broker, however, expects another interest rate hike after three key rate cuts.
US consumer prices will arrive at 3:30pm.
At the same time the American real incomes are reported.
At 4:30pm the US Department of Energy publishes its oil report.
All dates can be found here: Market Mover

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.

For the last three and a half years, since the Brexit referendum, the pound has been flying both ways on a swing. Now he’s moving fast up again, setting multi-month highs. Why? The main trade idea is the next elections to the British Parliament. So, what’s the big deal? They are not the first and not the second ones, are they?

GBP/USD Day Chart

The difference between these elections is that according to the polls, Boris Johnson and his Conservative Party will win them with a good separation from the Labour Party. This means that they will be able to take and finally withdraw from the EU.
But this is bad for the UK economy, isn’t it? Yes! It’s bad compared to staying in the European Union. However, it is much better than the uncertainty that persists for several years, which has already bothered everyone.
Investors should see either one or the other option, but not the intermediate solutions that now dominate the market. Manufacturers want to clearly understand the rules of the game. Will they have to pay for the import of components from the EU and whether their products will be subject to export duties when exported there. And there are a lot of such questions, to which everybody is waiting for a clear and final answer.

EUR/USD

The Euro continues to grow on the second day and is again close to the level of 1.11. No strong movements are expected before the results of the European Central Bank meeting on Thursday are announced.

INDICES

Global stock indices have fallen since morning. Then they turned sharply and went upwards. Due to what? Everybody is sick and tired of the topic of negotiations between the USA and China. The next trade duties were to be introduced on December 15. This is a day off and a big gap could have happened on Monday. However, it was reported that Trump’s administration is postponing this increase, as the U.S. and China are close to signing a new trade agreement.

What awaits us today?

14.30 U.S. consumer price index for November
16.30 Changes in petroleum product inventories in the US over the past week
20.00 Summary of economic forecasts from the US Federal Open Market Committee
20.00 FRS decision on interest rate
20.00 FRS comments on monetary policy

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.

10.12.2019 – Daily Report. Just don’t position it wrong. Investors on the German stock market are holding back in view of the forthcoming, sometimes epic, decisions. The Federal Reserve’s interest rate meeting is scheduled for Wednesday. The European Central Bank’s interest rate decision will follow on Thursday. The parliamentary elections in Great Britain will also take place on Thursday. And on Sunday the Grande Finale lurks: Then new US punitive tariffs on Chinese goods threaten.

The 13,000 falls

The most important week of the year is running and the brokers on the Frankfurt stock market are taking cover. The German benchmark index was 1.1 percent weaker at 12,961 points on Tuesday morning. Caution had already been felt on the Frankfurt floor on Monday. The DAX said goodbye close to its daily low of 13,105 points, a loss of 0.5 percent. So much waiting is quite understandable.

Focus on Fed and ECB

The euro/dollar and treasuries as well as European bonds are likely to change little this week. In view of the recent robust economic data, most experts assume that the Fed will not touch the key interest rate. In addition, most brokers believed that the new ECB head Christine Lagarde would not touch the key rate at Thursday’s meeting.

Brexit switch in Great Britain

The election in the United Kingdom is scheduled for Thursday. The British pound was quoted at 1.1878 against the euro. According to a survey by the Survation Institute, the Conservatives around Prime Minister Boris Johnson extended their lead over the opposition Labour Party to 14 percentage points – previously the Institute had measured 9 percentage points. For the pound, this probably means new strength, as a clear Brexit deal from Johnson is to be expected – and thus the end of the uncertainty surrounding the EU exit.

High Noon in the customs dispute

On Sunday it’s time to get down to business: On 15 December, the USA could impose new punitive tariffs on Chinese imports. Chinese imports worth 160 billion dollars are up for debate. China should respond with countermeasures. Brokers fear that the trade conflict between the USA and China, which has been smouldering for 17 months, will escalate and further slow down global growth. If you trade stocks or CFDs online, then it will be really exciting: If there is no deal, Wall Street, DAX and Asia indices are likely to dive. So keep an eye on the regular market updates and keep the trading platform open. US Secretary of Agriculture Sonny Perdue just unsettled investors. He said President Donald Trump did not want to introduce tariffs, but he wanted to see “movement” from China.

Weak data from China

Meanwhile, Beijing once again reported weak economic data. According to the statistics office, producer prices in the Middle Kingdom fell by 1.4 percent year-on-year. The Chinese CSI-300 recorded an increase of 0.1 percent to 3,900 points in the morning. In Tokyo, the Nikkei index fell by 0.1 per cent to 23,410 points.

Minus in New York

Investors in New York had been cautious the night before. The Dow lost 0.4 percent to 27,910 points. The S&P 500 left with a minus of 0.3 percent at 3,136 points. And the Nasdaq 100 lost 0.4 percent to 8,363 points.

Hedge Funds and the Repocalypse

As if this week wasn’t exciting enough for traders, here’s an interesting background. The Bank of International Settlements just announced that hedge funds also dried up the US interbank market in September. As large funds have been increasingly involved in US treasuries, the need for a cash loan of short-term credit has risen rapidly. We wonder whether this is not a harbinger of future problems.

This is what the day brings

The appointment calendar on Tuesday is not really full to bursting.
The ZEW forecast for the German economy is expected to be released at 11:00am.
At 2:30pm US productivity data for the third quarter is due.
And at 10.30pm the American Petroleum Institute reports the weekly crude oil inventory data.
As always, you will find the calendar of events here:Market Mover

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.

Traditionally, on Monday, after the release of the most important unemployment data on Friday in the U.S., the markets are quiet and smooth. Friday’s dynamics and all positive in risky assets have gone somewhere, leaving time for investors to think about whether Friday’s news is really so important?

DAX30 Day Chart

On the one hand, the U.S. economy shows again that it is on the rise. On the other hand, it is actually the only major economy in the world that is growing. In the EU, Japan, the UK, everything is much sadder.
But the main problem is another. The American stock market has been growing for 10 consecutive years. Not only that, it is dragging other stock markets and risky assets with it. What will happen if investors start to sell American companies’ shares on a massive scale? No one has an answer to this question.

EUR/USD

Decreasing by 60 pips on Friday, the euro did not want to go back to the level of 1.10 and even slightly increased in today’s low-volatile trading. The EUR/USD pair is strongly affected by the negative swap. At the same time, the pair has been refusing to go lower for several months. This is potentially a very strong bullish signal, because when an impulse arises, a huge number of shortcuts will have to close their positions massively.

GOLD

Gold continues to be in the corridor that has been forming since the beginning of November 2019. It seems that no news can push the yellow metal beyond the boundaries of this corridor. But we know very well that the longer the market has minimal volatility, the stronger the subsequent movement will be.

INDICES

The world stock indices have not shown a certain dynamics today. Investors’ attention will be focused on new data released during the working week. It should also be remembered that there are actually 2 weeks of “thoughtful trading” until the end of the year. Next, the market may begin to move abruptly in both directions, under the influence of speculators who are seizing power in the last days of the year.

What awaits us today?

02.30 Consumer Price Index in China for November
10.30 Industrial production data for the UK for October
10.30. Data on GDP of Great Britain for October
11.00 ZEW Business Environment Sentiment Index for December

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.

09.12.2019 – Daily Report. The American job engine is booming, Wall Street is providing a strong model for trading in Frankfurt. The US indices are lurking just below the all-time highs. But the DAX is starting the trading week cautiously. Investors are also waiting for the customs dispute to be settled.

Take a breather in Frankfurt

On Monday morning, the DAX fell by 0.1 percent to 13,148 points. The indicator thus followed the US futures on the Dow and S&P 500, which fell by 0.1 percent. Anyone trading stocks online is once again stagnating. And those who are invested in Germany’s best CFD brokers can still use the standstill for their trades thanks to the lever.
Investors recently ignored positive signals from the German economy: in October, exports increased by 1.9 percent compared to the same month last year. The DAX rose by 0.9 percent to 13,167 points on Friday, driven by Wall Street. The weekly balance thus stood at minus 0.5 percent.

That’s why Beijing needs the deal

Meanwhile, a report arrived in the customs dispute on Sunday that the White House must have enjoyed reading. Exports from the People’s Republic of China fell surprisingly in November – for the fourth month in a row. According to the customs authorities, the minus was 1.1 percent compared to the same month last year. Exports to the USA fell by almost a quarter. Overall, the economy in China is growing more slowly than at any time in almost 30 years.
Meanwhile, there was a positive comment from the second row on the customs deal: According to Reuters, the Chinese Trade Secretary Ren Hongbin said on Monday in Beijing that they were counting on “being able to reach an agreement as quickly as possible that satisfies all sides”. So the market is still waiting to see whether Phase 1 will be signed before 15 December. If not, the US wants to impose new punitive tariffs on Chinese products.

Asia with mixed tendency

The CSI-300 closed the morning down 0.2 percent at 3,895 points. In view of the large pro-democracy demonstration on Sunday in Hong Kong, Hang Seng left the day unchanged at 26,495. In Japan, the Nikkei rose by 0.3 percent to 23,431 points.

Strong data support Wall Street

On Friday, investors on Wall Street had taken a firm grip. The Dow Jones Industrial gained 1.2 percent to 28,015 points, the best trading day in a good two months. The index thus reduced its weekly minus to 0.1 percent. Thanks to its performance, the Dow is only 0.5 percent short of its all-time high of 28,164 points on 27 November.
The S&P 500 advanced by 0.9 percent to 3,146 points on Friday. And the Nasdaq 100 climbed 1.1 percent to 8,397 points. The US indices have now torn smaller upward gaps again. You can already guess: The chart analysis teaches that such gaps are normally closed again.

The US job engine is humming

The main reason for the optimism was the strong job report. In November, 266,000 new non-agricultural jobs were created in the USA. Most experts had expected only 186,000 jobs. In addition, wages have risen; at the same time the unemployment rate has fallen to 3.5 percent, the lowest level since 1969. The Conference Board also reported a strong plus in its indicator of 99.2 points from 96.8 points in November. All data can be found here: Market Mover

The Fed sees itself confirmed

The US Federal Reserve should see its course confirmed in the light of the strong data. The most recent move was to wait and see. And so the key interest rate is likely to remain unchanged on Wednesday in the last session this year. Which should support the Dollar.

OPEC+ cuts production

Investors in the oil market did not trust the latest OPEC deal, Brent lost 0.4 percent to 63.95 dollars, WTI slipped 0.3 percent to 58.88 dollars. OPEC+ has now officially decided to cut its oil production by a further 500,000 barrels per day in the first three months of 2020. Saudi Arabia also wants to cut its emissions by a further 400,000 barrels a day. All in all, according to Saudi Arabia, the cartel and its allies are cutting their daily output by 2.1 million barrels.

This is what the day brings

The appointment calendar is only sparsely filled at the beginning of the week.

The only time it should be exciting is at 4:00pm when the ISM’s half-yearly economic outlook arrives in the USA.

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 first trading week of December was positive for the US dollar and the stock market. Good reporting has encouraged investors to buy. Ahead of a difficult month, in the current of which will be decided the fate of the UK, as well as we will see the result of trade negotiations between the U.S. and China.

Chart of the Day S&P500

The oil market grew after the OPEC meeting. Not all countries comply with the OPEC agreement, the same Iraq, which promised to reduce production this year by 140,000 barrels per day, exactly as much increased it.

EUR/USD

The US dollar ended the week with very good performance. Optimistic data on the U.S. economy did not give a chance for the euro. On Friday, the euro/dollar fell to 1.1059.

GOLD

Gold continues to follow the euro, and again will test the level of $1450. The precious metal is still consolidating between the levels of $1434-1354 and cannot gain a foothold higher. Only specific information on the negotiations between the U.S. and China will point the way to investors.

INDICES

Friday for the world stock indices was very positive. Perhaps, the traditional Christmas rally is already beginning. After the economic data from the U.S., investors felt the strength and once again drove the indices to historical highs.

What’s in store for us today?

08.00 German trade balance

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.