Fear of Recession Slows the DAX Down

By 22/03/2019News
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22.03.2019 – Daily report.A hard blow for the DAX: An extremely negative purchasing managers’ index for the manufacturing sector (EMI) in Germany has pulled the leading index out of its slight profit zone and into the red. The DAX has just crossed the 11,600 mark. The fear of a recession suddenly began to circulate. Investors fled to the safe haven of German government bonds: On Friday, the yield on ten-year securities was below zero percent again for the first time since October 2016.

EMI Sinks the DAX

A little deep rush in Frankfurt: Immediately after the publication of the EMI, the DAX plunged and touched the 11,460-point mark. This meant a minus of 0.8 percent. The online real-time prices you posted on your trading platform probably suddenly turned deep red. No wonder: The preliminary EMI fell to 44.7 places in March. The index thus reached its lowest level for six and a half years, according to IHS-Markit. And in February the indicator had still been at 47.6. Most forecasts for the subindex had been 48 for March, which would have meant a slight recovery.

Pessimism in Industry

So business is bad. As the reason for the pessimism, the market researchers cited precisely those topics that traders on the stock market are also repeatedly preoccupied with: Brexit chaos, the US-China Trade War, the weakness of the German automotive industry and the general decline in global demand. The most recent Fed decision and the Brexit shift in particular have at least partially clarified and defused two important issues.

Profits in New York

The liquidity aspect came to the foreground on the American floor after the Fed’s decision on Wednesday. As a result, investors were more optimistic on Thursday. The Dow Jones recorded a plus of 0.8 percent to 25,963 points at the closing bell. In the course of trading, the leading index had briefly crossed the 26,000 mark several times. The market-wide S&P 500 finally rose by 1.1 percent to 2,855 points and the Nasdaq 100 even rose by 1.5 percent to 7,493 points.
On Wednesday, the US Federal Reserve had announced the end of its balance sheet reduction. From the end of May, it will buy further US government bonds for 15 billion US dollars – per month. A lot of money will thus flow into the financial market. This year, the Fed probably does not want to raise the key interest rate any more.

Wait and See in Asia

There was little movement on the Asian stock markets. Japan’s leading index, the Nikkei, closed 0.1 percent at 21,627 points. The Tokyo indicator thus rose by 0.8 percent over the course of a week. The Chinese blue-chip index, CSI300, took off unchanged into the weekend at 3,835 points.

Brexit on Hold

In the forex market, investors continue to look to the British pound. The Brexit drama in the Cable is now going into prolongation. The EU is now offering London a postponement of the exit from the international community until 22 May. However, under one condition: The British House of Commons should now accept the withdrawal agreement, which has already been rejected twice, in the coming week. So, the tension in this drama remains with us. In the meantime, however, many investors are asking themselves what would be so bad about a Brexit without a contract – managers and politicians have been preparing to leave since the vote in June 2016.

US Real Estate in Focus

Whether the German benchmark index and global trading will be back in the black on Friday is also due to data coming in from Wall Street in the afternoon. For example, the sales of existing houses for February arrive at 15.00 hrs. The forecast is at 5.1 million after 4.94 million in the previous month. We wish you much success with your trading!

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