03.09.2019 – Daily report. Skepticism on the Frankfurt floor. Investors are reluctant to trade early on Tuesdays. The new negative factors are the old ones: China, USA, Great Britain. In other words, the threat of a trade war and Brexit. Gold continues its flight of fancy.
DAX sideways – Euro weak – Gold firm
That was probably nothing: The DAX tried to push up to 12.00 points in early trading, but bounced back at 11,980 points. Germany’s leading index recently dropped by 0.2 percent to 11,933 points. US futures also fell slightly. There were enough reasons for the reluctance to buy on the stock market: new fears in the China-USA customs dispute and the Brexit also stood out. The euro was again under pressure on the currency market, slipping to USD 1.0931, its lowest level since May 2017. Investors were looking for the safe haven of gold: the gold price in euros continued to swing below its recent record high of EUR 1,401.
Does Trump command the China exit?
Speculation about a government decree has intensified in the Anglo-Saxon media. Does Donald Trump want to get American companies out of China by presidential order? In fact, on 23 August Trump had for the first time called on American companies via Twitter to immediately look for alternatives for China and instead have products manufactured in the USA.
The POTUS (President of the United States) quoted the International Emergency Economic Powers Act (IEEPA). The Act was passed in 1977 and gives the President the authority to act on any unusual and extraordinary threat to the national security, foreign policy or economy of the United States (“any unusual and extraordinary threat … to the national security, foreign policy, or economy of the United States”). Needless to say, such an exit decree would mean a new stage of escalation in the dispute with China – and Wall Street would be swirling around.
No impetus from overseas
Meanwhile, the Beijing government took the floor, complaining that the recent US import tariffs violated the agreement China and the US had reached at the G20 summit in Osaka. The Chinese CSI-300 gained 0.1 percent to 3,854 points this morning. In Tokyo, the leading Nikkei 225 index closed almost unchanged at 20,625 points. There were no impulses from the USA. On Monday Wall Street was closed due to “Labor Day”.
Showdown in London
It was really exciting last time in Great Britain. The British pound slid below 1.20 against the dollar, its lowest level since October 2016. No wonder the dispute over the Brexit escalated: The opposition and around 20 rebels from the conservative government faction want to force Prime Minister Boris Johnson by law to give in to his tough Brexit course. The retainers want a delay of three months – and apparently in a salami tactic they want to sabotage the Brexit. The farewell has already been approved by a referendum and the victory of the Pro-Brexit-Tories in the parliamentary elections. The Prime Minister “under no circumstances” wants a further extension of the EU withdrawal deadline beyond 31 October. Johnson threatened to call new elections if he was defeated in the House of Commons.
US oil industry threatens collapse
And the US oil market is also going to be in trouble. According to the Wall Street Journal (WSJ), the Shale Revolution could come to an unpleasant end. Because a wave of bankruptcies is rolling over the American oil and gas industry. According to the WSJ, 26 companies have already filed for bankruptcy in 2019 and 28 in 2018. Small and medium-sized producers in particular are struggling with a lower oil price and the reluctance of financiers, many companies can no longer service their debts. In addition, OPEC is likely to do everything in its power to kill off its unloved competitors with high production and low prices.
This is what the day brings
As you can see, global politics continues to set the pace on the floor. In the recent reluctance to act, it was neither right nor wrong. The return was only right when you trade CFDs. But please only with a broker with a Bafin license.
If there is hope that the upcoming economic data will bring more movement, you will find the overview here as always: Market Mover
In the USA the Markit PMI manufacturing industry is scheduled for August at 3:45pm.
The ISM manufacturing index will follow at 4:00pm for August.
At the same time, US construction investments for July will be listed on the ticker.
Bernstein-Bank wishes successful trades!
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