25.03.2019 – Weekly report.That’s how fast it can go: First the DAX had reached a high of several months in the previous week. Then on Friday there was sudden concern about a recession. The reason was an extremely poor purchasing managers’ index from Germany. Plus a bad omen from the American bond market. Prices on the Frankfurt stock market slipped into a deep hole. And things did not look any better in New York either. Whether the bulls will gain the upper hand again this week also depends on the ongoing issues of Brexit and the US-China Trade War. And, of course, from the abundant economic data.
EMI Pushes the DAX over the Cliff
In Frankfurt on Friday, fear of the economy caused the DAX to shrink. Immediately after the arrival of the Purchasing Managers’ Index for Germany (EMI), prices plummeted. The EMI fell to 44.7 positions in March. This was the lowest level for six and a half years, according to IHS-Markit. In February, the indicator had still been at 47.6. The forecasts for March had been 48, which would have meant a slight recovery.
As Wall Street plunged, German equities continued to decline. In the end, the DAX went into the weekend with a minus of 1.6 percent at 11,364 points. On balance, this meant a weekly loss of 2.7 percent. On Tuesday, the index had reached a new high since October. Strong volatility – a paradise for anyone who trades professionally with CFDs and can react quickly. But please only with a bank with a Bafin license!
Fear of Recession in New York
The week before also ended on the US stock exchange with a clear victory for the bears. The Dow Jones Industrial came out Friday with a minus of 1.8 percent at 25,502 points. This was almost the lowest point of the day. On a weekly basis, the leading US index recorded a loss of around 1.3 percent. The S&P 500 lost 1.9 percent to 2801 positions on Friday and the Nasdaq 100 fell 2.2 percent to 7326 points. Brokers in New York cited the frightening data from Germany as one of the reasons for Friday’s sales, and Nike also reported weak figures.
Inverse Yield Curve
Furthermore, the bond market sent out a warning signal: For the first time since 2007, the interest rate on ten-year US government bonds fell below that on three-month money market paper on Friday. The reversal in the yield spread is normally an early indicator of a coming recession over the next year and a half.
Monday – US Currency Guard and ifo Index
So it’s no wonder that investors will be paying particular attention to what monetary policymakers are saying in the coming week. Charles Evans, head of the Chicago Fed, will speak in the US on Monday, as will Eric Rosengren (Boston Fed) and Patrick Harker, head of the Philadelphia Fed.
It will be exciting before Monday at 10.00 a.m. German time – then the ifo Business Climate Index for Germany will be published. If you read these lines, you will certainly know more. The index had previously stood at 98.5 points.
Tuesday – Consumer Climate and US Consumer Confidence
The GfK Consumer Climate for Germany arrives at 08:00 on Tuesday in April. The previous value was 10.8.
At 1.30 p.m., the US building permits for February will be issued via the ticker. The forecast here is 1.32 million.
Consumer confidence on the part of the Conference Board for March then arrives at 15.00 hrs. Forecast: 132.0.
Wednesday – Draghi Speaks
In the morning, journalists will analyze in detail the words of ECB President Mario Draghi. The Lord of the Money will be speaking at a conference entitled “The ECB and Its Watchers” in Frankfurt from 9.00 a.m. onwards.
At 15.30 commodity traders will look at the stock report of the State Energy Information Administration (EIA). Previously the stock had fallen by 9.589 million barrels.
Thursday – US GDP and Unemployment Figures
It will be particularly interesting for traders in dollars, bonds and stocks on Thursday at 13.30 hrs. Then the data for the American gross domestic product will appear on the screens. The forecast is plus 2.6 percent.
At the same time, the first applications for unemployment benefits are received. If the figure is well 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.
Friday – Retail Sales and University of Michigan
Yen traders get their money’s worth Friday night: At 00.50 German time, retail sales in Japan are reported in February. Forecast: plus 1.1 percent.
Retail sales in Germany are also expected for February. At 8 a.m. we know whether the figure of 3.3 percent has been exceeded.
Finally, at 09.55 the German authorities report the change in unemployment in March. The last figure was minus 21,000.
The British gross domestic product for the fourth quarter is due at 10.30 a.m.. Previously it had been plus 0.2 percent.
At the end of the week, three potentially price moving data arrives from the USA. First, the Chicago Purchasing Managers’ Index for March is due at 2.45 pm. Forecast: 57.0.
Shortly thereafter, consumer confidence at the University of Michigan in March runs on the screens at 3 pm. Forecast: 97.6.
Also at 15.00 o’clock the US sales of new houses are to be announced in February. Forecast: 617,000.
Brexit-Coup and New Customs Round
But that’s not all. Away from the predictable dates, the constant hits Brexit and the Trade War USA-China remain exciting.
On the one hand, there is the threat of a small coup in the cabinet in Great Britain. According to a report in the Sunday Times, eleven ministers want to overthrow Prime Minister Theresa May on Monday. Turbulences in the British pound are thus inevitable.
Meanwhile, the talks in the American-Chinese Trade War are to be continued in Beijing starting Thursday. The US delegation with Trade Representative Robert Lighthizer and Finance Minister Steven Mnuchin will meet Deputy Prime Minister Liu He. We are eager to see whether Wall Street can expect good news from China. We wish you a successful week on the stock exchange!
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