04.03.2020 – Daily Report. No coordinated action by central banks and treasury secretaries. Instead, the G7 Finance Ministers and the Monetary Guardians only report the usual official talk. After all, the Federal Reserve has acted and cut interest rates. But that is not enough for Wall Street. It is enough for the DAX.

Frankfurt Stock Exchange picks up again

Perhaps the concerted action will come after all. The DAX rose by 1.1 percent to 12,117 points on Wednesday noon. Perhaps some smart US brokers already know more: The contract on the Dow Jones recently rose by 2.2 percent, the futures on the S&P 500 climbed by 2 percent. Hope was also circulating because apparently an arthritis drug from the Swiss pharmaceutical company Roche promises hope for seriously ill corona virus patients.

Disappointed hope after G7-Call

Yesterday afternoon, the US market was disappointed by the G7 conference call. Apparently, the group of states is trying to keep their already meagre powder dry as long as possible. Or the leading economic powers are powerless against Corona, the floor said. Yes, Australia had previously lowered interest rates – but not as much as had been hoped for. And Japan had bought ETFs on the market worth almost 5 billion dollars. But what about Europe? Where are the coordinated stimulus packages? What about the International Monetary Fund?

Interest rate cut not convincing

The Federal Reserve’s interest rate move was also sometimes interpreted as a sign of panic. Because of Corona, the US Federal Reserve had lowered the key interest rate by 0.5 percentage points. Fed Chairman Jerome Powell explained that it was clear that the virus was already having an impact on the growth of many countries and the global financial markets.

In fact, according to “ZeroHedge”, this was the first 50-point cut between two regular interest rate meetings since October 8, 2008 – at that time a certain Jerome Kerviel had put the Societe Generale in a precarious position with a few imploded billion-dollar deals. Some – such as US President Donald Trump – did not go far enough with the 50 basis points.

Goldman Sachs immediately took the floor again. Chief economist Jan Hatzius expects another 50 basis points; or 25 points to the regular meetings on March 18 and April 29. Others, such as analyst Michael Every of Rabobank, generally questioned the sense of interest rate cuts. Every asked: “what level of interest rates is required to incentivize you to risk the death of yourself and your family? Lower interest rates would not help at all if people were to retreat for weeks at home like in a bunker and the supply chain would be broken.

Disappointment in New York

So the Fed couldn’t please anybody. The Dow Jones jumped about 700 points after the announcement, but soon gave up the gains. The Dow recorded a minus of 2.9 percent to 25,917 points at the closing bell. What a vola – golden times when you trade CFDs… The S&P 500 lost 2.8 percent to 3,003 digits. And the Nasdaq 100 dropped 3.2 percent to 8,594 points. Investors returned to safe havens: The yield on 10-year Treasuries dropped below 1 percent for the first time.

Mixed trend in Asia

In Asia things were quieter on Wednesday. The CSI-300 in China rose by 0.6 percent to 4,115. Unsurprisingly, Hong Kong followed the Fed and lowered its key rate from 2.0 to 1.5 percent. The Hang Seng nevertheless lost 0.2 percent to 26,222 points. The Nikkei index squeezed out a small plus of 0.1 percent to 21,100 points.

The Democrats’ death wish

But why did the US futures rise recently? Perhaps US politics is a factor. After everything had looked like a communist presidential candidate Bernie Sanders, the Democrats now had their hearts set on the presumably highly corrupt Joe Biden. He won on “Super Tuesday” after the last count in eight states. A formidable comeback. Sanders was successful in only three states, including the voter-rich California. Wall Street is pleased, because with such candidates the chances of Donald Trump are increasing. Or do the brokers applaud because there is an alternative to Bernie, any alternative at all?

By the way, Kiev should soon start official investigations against Joe Biden, reported. This is because Biden had forced Ukraine to fire Attorney General Viktor Shokin, or otherwise to forgo loans of $1 billion. Shokin made an affidavit stating that he was investigating the Burma gas company where son Hunter Biden, without special skills, was earning up to $50,000 a month. But let’s wait and see if that happens. In any case, crisis management in the Covid-19 affair, the corona crash and a possible US recession could completely reshuffle the cards in the presidential election.

What the day brings

The diary on Wednesday brings some interesting events, the overview can be found as always here: Market Mover

For example, the ADP index for employment in February is first presented at 14.15 in the USA.

At 16.00 the ISM-Index Services for February follows.

At the same time, the Canadian central bank announces its interest rate decision.

And the weekly oil report comes in.

At 8:00 pm the Fed’s Beige Book is published.

And after 10 p.m. Deutsche Börse reports the composition of the indices.

The Bernstein Bank wishes successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.