07.10.2019 – Daily Report. Investors on the German stock exchange are once again not taking action: Friday’s US job data was halfway passable – Wall Street pulled in. But the German economy is sending out new warning signals. And China is apparently playing a temporary game in the trade deal with the USA.
The DAX is stagnating
The DAX is simply not making any headway: at the start of the week, the leading index remained unchanged at 12,012 points. The fear of recession persisted on the trading floor: German industrial orders fell unexpectedly sharply in August. Orders fell by 0.6 percent compared to the previous month, as the Federal Statistical Office announced on Monday in Wiesbaden. This was the second consecutive decline and already the fifth setback in the current year. Before the imminent trade dispute with the USA over subsidies for the aircraft industry, this is certainly not a good omen. As always, you will find an overview here: Market Mover
China cools expectations
The mood also deteriorated in the China-USA customs dispute. The news agency Bloomberg reported that the chances of a comprehensive deal, as requested by Washington, had declined. The spectrum of issues China wanted to negotiate had narrowed. In concrete terms, negotiator Liu He wants to bring an offer with him from Thursday, but this does not include a commitment to reforms in Chinese industrial policy or state subsidies, he said, citing unnamed sources. But these are precisely the sticking points for America.
Obviously China has thundered blood: because of the fear of a US recession and the impeachment against Trump the leadership in Beijing could believe that the Americans would make every deal just to report a success. On the other hand, the Chinese leadership is also under pressure from swine fever and exploding meat prices. In addition, the conflict in Hong Kong continues to smoulder. Only on Friday US President Donald Trump told journalists that both sides were at a very important stage. But: “If the deal doesn’t work 100 percent for us, we won’t make it.”
So that gives us three options: either No Deal or Trump breaks. Or Beijing will give in after all. The former should send Wall Street south, the latter a moderate plus. And the third case is likely to send the New York Stock Exchange up a lot.
In view of the latest developments, the Japanese Nikkei-225 fell by 0.2 percent to 21,375 points at the start of the week. In the People’s Republic of China, the stock markets remained closed due to the “Golden Week”.
New York wins again
Wall Street had risen on Friday after halfway positive job data in the USA. Unemployment fell to its lowest level in 50 years. Wage growth, however, was not as strong as expected. The Dow Jones Industrial rose by 1.4 percent to 26,574 points and closed just below its daily high. The market-wide S&P 500 also rose by 1.4 percent to 2,952 points. And the Nasdaq 100 climbed 1.5 percent to 7,754 points.
A Second Impeachment Witness
Meanwhile, the team of lawyers representing the first whistleblower conjured up a second witness in the matter of impeachment. His law firm represented several tipsters, said attorney Andrew Bakaj, who once worked for both Hillary Clinton and the Democratic faction leader in the U.S. Senate, Chuck Schumer; Bakaj is also said to have donated for Joe Biden. While number one is said not to have heard Trump’s allegedly scandalous statements about Ukraine and lied about whether he had contact with the Democrats in the House of Representatives before the charges were brought, the second witness is said not to have done so, according to ABC News. Looks like the Democrats will have to underpin their rather weak position. Let’s wait and see.
This is what the day brings
Monday will bring hardly any interesting data that could move stocks, bonds and currencies.
At 1:30pm the ECB’s banking supervisors will speak on banks’ liquidity risks.
This will be followed at 3:45pm by the ECB’s weekly report on the bond purchase programme.
At 7pm German time, Fed Chairman Jerome Powell steps up to the microphone in Salt Lake City.
Finally at 9pm the US consumer loans are due in August.
The Bernstein Bank wishes successful trades!
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