28.03.2019 – Daily report. It is clear that nothing is clear: The Brexit drama goes into the next act. But the DAX won’t be deterred by this – the index posted slight gains on Thursday morning. While the international stock market was predominantly calm and many brokers are waiting for news on the Chinese-American Trade War, a big spectacle is looming in the currency market. The next few days could be exciting for the Turkish lira.
Moderate Plus for the DAX
Slight movement in German equities: The DAX has risen to 11,500 points, which at times meant an increase of a good half a percentage point. Real market-moving news was scarce at first, but US economic data is only due in the afternoon. The situation was hardly any different in global trading either.
Waiting for the Customs Agreement
Asia had suffered losses on Thursday. Economic worries pulled the Nikkei down in Tokyo by 1.6 percent to 21,034 points. In China, the CSI 300 lost 0.4 percent to 3728 jobs. The principle of hope remains: today, talks between US Trade Representative Robert Lighthizer and Finance Minister Steven Mnuchin with Chinese officials were scheduled for today. News in theTrade War should move the markets.
Wall Street Resigns
The evening before, waiting had also been the dominant theme in New York. At the closing bell, the Dow Jones fell by 0.1 percent to 25,626 points. The market-wide S&P 500 even lost 0.5 percent to 2805 positions yesterday (Wednesday). The Nasdaq 100 fell by 0.6 percent to 7308 points. The inverse yield curve already mentioned here caused skepticism: three-month US bonds continue to offer a higher yield than ten-year bonds. This is seen as a warning signal for a recession.
Brexit Chaos without End
The foreign exchange market is currently far more exciting than online stock trading. Initially, the British pound is facing new performances in the political theater. Because the parliament in London proved itself incapable for a direction decision. Yesterday evening the House of Commons rejected all eight alternatives for Prime Minister Theresa May’s deal with the EU. May had even offered her resignation for approval of the treaty. This looks very much like a political twilight of the gods. In other words, let us prepare ourselves for a change of government.
Showdown in Turkey
The most exciting piece is currently performed in the Turkish lira. First Ankara had initiated an investigation against JPMorgan, which last Friday had attracted the anger of the autocracy. The major US bank warned that the lira would crash after the March 31 local elections because the country’s banks would then stop burning forex reserves to support the lira. The analysts set the price target at 5.90 lira for the dollar, while on Friday the lira was quoted at 5.76 lira.
Now it was currency traders’ turn: the cost of the lira’s overnight swap rate exploded from 25th to 27th March to the fabulous rate of 1338 percent. The overnight loan of the lira thus virtually froze over. In the short term, the politically desired short squeeze was successful, the Turkish lira recovered strongly against the euro (6.26 lira) and the dollar (5.56).
But the performance is likely to be expensive in the long run. If long investors can’t protect themselves or only at a high price and have to fear to be burned with such a smut show, then there is the possibility that these investors might withdraw from their investments sooner or later. If in a capitulation of the long side the curtain should fall, this could become the really interesting challenge for Ankara. Especially since nothing has changed in the homemade reasons for the decline of the Turkish economy: Inflation, economic crisis, lack of confidence. So keep an eye on this exciting market!
This is What Thursday Brings
Otherwise, a lot of economic data is coming up today. For traders in dollars, bonds and stocks it will be particularly exciting at 1.30 pm. Then the data for the American gross domestic product will be shown on the screens. The forecast is plus 2.6 percent. At the same time, initial applications for unemployment benefits are received. If the figure is far above the forecast 220,000, the markets are likely to react with horror. Finally, the pending house sales for February are reported at 3 p.m. – forecast: plus 0.4 percent. We wish you a very successful day trading!
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