22.01.2020 – Daily Report. Finally: The German leading index has set a new record. The MDAX also reached previously unattained heights. The German stock market has thus decoupled itself from the US stock market, which was weaker yesterday. Brokers cited as reasons, among others, the convincing approach of the Chinese regarding the corona virus.
New records for DAX and MDAX
A toast to the bulls: The DAX broke through the 13,600 mark shortly after opening and climbed to a new high of 13,632 points. However, the last thing to do was to go for cash again – the leading index was only 0.1 percent up at 13,569 points. The MDAX also climbed to a new record of 28,884 points at the start of trading, only to fall back to 28,804 points (plus 0.2 percent).
Brokers cited the positive figures for the US reporting season to date, the continued supply of cheap money to stock exchanges by the central banks and hopes of a recovery in the global economy as factors for the new optimism. And then there was China.
China’s new openness is convincing
In contrast to previous crises – such as the SARS outbreak in 2003 – the leadership in Beijing has this time decided on an almost radical transparency. For example, Li Bin, the vice-chairman of the National Health Commission, announced that there have been 440 cases of the corona virus in China to date, and nine deaths. In the meantime, doctors have 1,394 patients under observation. The authorities installed body scanners to measure fever at the airport of Wuhan, the centre of the epidemic, and patients are immediately quarantined.
The communist leadership sent out a drastic warning: In the social media, the Central Political and Legal Affairs Commission in Beijing posted that anyone who concealed cases would be nailed to the pillory of shame for all eternity. For whoever puts the saving of politicians’ faces above the interests of the people is a sinner of the millennium towards the party and the people.
Recovery on the Asian stock markets
As a result, the financial markets were under the impression that China would quickly get the new lung disease under control. And thus avoids serious economic consequences for the domestic economy. As a consequence, the Red Chips in the CSI-300 closed 0.4 percent firmer in the morning at 4,132 jobs. Let’s wait and see if and how quickly the epidemic can be contained – in the meantime, besides Wuhan, cases have been reported from Beijing, Shanghai, Tianjin, Zhejiang, Henan, Chongqing, Hong Kong, Bangkok, Seoul, Tokyo, Brisbane, Taipei – and also from the USA.
Favourable economic data from South Korea also underpinned hopes of a global economic recovery. The Nikkei, for example, closed with a plus of 0.7 percent at 24,031 points.
Wall Street resets
After the recent record run, investors in the US took a short break yesterday. Yesterday, the Dow Jones Industrial lost 0.5 percent to 29,196 points. The S&P 500 closed 0.3 percent lower at 3,321 points. The Nasdaq 100 lost only 0.1 percent to 9,167 points. The U.S. Centers for Disease Control and Prevention (CDC) caused a moment of shock when the first corona patient was identified on the West Coast in Seattle. After that, airlines and hotel stocks in particular came under pressure on the stock exchange.
The Republican front stands
Let’s take another look into the Washington swamp: Republican majority leader Mitch McConnell allowed the Democrats in the Senate two small compromises to keep the moderates of his own faction in line. Thus, the duration of the pleadings will be increased from 24 to 48 hours and the documents from the proceedings in the House of Representatives will be admitted as evidence in the Senate. But in four separate ballots, the Reps, with 53 to 47 in favour, voted down all of the Dems’ submissions – now no additional documents from the White House, State Department, Defense Department and Office of Management and Budget will be requested. For the time being, no disturbing fire is to be expected from this side – Wall Street is counting on Donald Trump in view of the economic success.
What the day brings
In the afternoon, some important economic data is scheduled. As always, you will find the overview here: Market Mover
Thus, at 2.30 pm the CFNA index for December starts.
The FHFA house price index for November follows at 15.00.
One hour later the sales of used properties are reported.
And at 4.30 pm the weekly crude oil stocks are reported.
Otherwise, the economic forum continues in Davos.
The Bernstein-Bank wishes successful trades!
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