20.11.2019 – Daily Report. The German stock market is going downhill: Investors are shocked by threats in the customs dispute by US President Donald Trump. And the Chinese reaction to a US Senate resolution on Hong Kong. There were also disappointments in the US reporting season. To make matters worse, the European Central Bank (ECB) is also warning of risks.
The cocktail of negative news overturned the DAX on Wednesday morning: The leading index fell 1.1 percent to 13,081 points. The day before, it had reached a new high for the year of 13,367. Investors recently preferred to flee to safe havens. Gold rose by 0.4 percent to a two-week high of 1479 dollars per troy ounce. Bonds were also in demand, and the yield on ten-year German government bonds slipped to minus 0.384 percent. This was the lowest level for almost three weeks.
Warning from the ECB
Investors were shocked by a warning from the European monetary authorities. In view of the continuing economic weakness and ultra-low interest rates, the ECB sees dangers for the stability of the financial system in the euro zone. On the one hand, the low interest rates supported the economy, ECB Vice-President Luis de Guindos said when presenting the half-yearly stability report. A resulting increase in risk appetite could, however, create problems for financial stability in the medium term. The ECB referred to the high debt levels and budget deficits in some euro countries. EURUSD was quoted at 1.106.
Shrill tones in the customs dispute
In addition, investors were now more sceptical about the opportunities in the Chinese-U.S. customs dispute. Trump said yesterday on the sidelines of a White House cabinet meeting: “If we don’t make a deal with China, I will only raise tariffs further. Meanwhile, the Wall Street Journal reported that both sides disagreed on key issues. These include Washington’s demand for Chinese purchases from US farmers. And the Chinese demand to eliminate punitive tariffs.
Beijing also reacted angrily to a bill by the US Senate to support the Hong Kong democracy movement. The chamber wants to prohibit the export of tear gas, rubber bullets, water cannons and handcuffs to Hong Kong police. Beijing spokesman Geng Shuang criticized the decisions as “blatant interference in internal affairs”.
Asia stock exchanges with losses
Investors in Asia first sold their shares. In Tokyo, the Nikkei 225 closed 0.6 percent lower at 23,148 positions. The Chinese CSI-300 fell by 1 percent to 3,908 points.
New York is turning around
The brokers on Wall Street had broken another record run at the standard values the evening before. The Dow Jones finally closed with a minus of 0.4 percent at 27,934 points. The S&P 500 lost 0.1 percent to 3,120 points. A weak outlook from the Home Depot DIY chain and a profit warning from the Kohl’s department store chain caused the stock to fall by one-fifth. Meanwhile, the Nasdaq 100 set a new final record with a plus of 0.1 percent to 8,339 points. At the start of trading, the Dow, S&P 500 and Nasdaq 100 had again achieved highs.
Economic data was mixed: The number of housing starts in October had climbed less strongly than had been hoped. Building permits, on the other hand, had surprisingly risen to a twelve-year high.
New alluvial signal for crude oil
Meanwhile, the bear markets in the oil market were pleased with a surprisingly strong increase in US oil stocks. WTI held a moderate minus of 53.33 dollars, Brent of 60.89 dollars. Since the beginning of the week, the minus has added up to around four percent. According to data from the private provider API, weekly US inventories climbed by 6 million barrels – most analysts had only expected a plus of 1.5 million barrels.
Tension at Sterling
Meanwhile, forex traders are focusing their attention on the UK election on December 12th. EURGBP remained at 0.8569. Boris Johnson won the first TV duel by a narrow margin, scoring 51 percent according to YouGov, with more than 1,000 viewers surveyed. His adversary Jeremy Corbyn came in at 49 percent. And this despite the fact that the pale Labour functionary continued to ramble on the question of whether he was actually pro or contra Brexit. According to recent polls, the Tories are about 10 percentage points ahead of Labour.
That’s what the day brings
The most important event will be the publication of the Fed minutes of 29 and 30 October at 8:00pm. This is likely to indicate that the Federal Reserve is waiting with further monetary policy steps for the time being.
In addition, the state oil report is due at 2:30pm.
As always, you can see the complete schedule here:: Market Mover
The Bernstein Bank wishes you successful trades!
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