04.06.2019 – Daily report. Like a magnet, the 200-day line initially attracts the DAX. But then the leading index turns strongly upwards. Nevertheless, after yesterday’s recovery, China continues to weigh on the nerves of investors in Frankfurt. On the anniversary of the Tiananmen massacre, Washington is pillorying Beijing.
The German stock market is on the rise again: the leading index first approached the 200-day moving average once again, which most recently stood at around 11,617 points. In early trading, the DAX dropped to 11,714 points. Most recently, however, it held up 0.8 percent. Yesterday, too, things went well once again: As if the investors in Frankfurt had read our market report, the DAX was exactly on the 200-day line – and then turned up in the schoolbook and closed in the plus.
Brokers blamed new hopes for an interest rate cut in the USA for the DAX shoot in the morning – possibly the US Federal Reserve would have to support the domestic economy. Which brings us to the crucial issue in Frankfurt and global trade – the looming trade war between China and the USA.
Customs dispute continues topic number one
The Chinese CSI 300 fell by 0.9 percent to 3,598 points. In Tokyo, the Nikkei 225 closed the morning unchanged at 20,409 points on the scoreboard.
Goldman Sachs has just publicly changed its mind on the matter: The investment bank now expects an open trade war between the People’s Republic and the USA. In concrete terms: China and the USA are not expected to reach an agreement until the end of 2019, but this will not eliminate all punitive tariffs, but instead reduce the tariffs in return for concessions from China. The analysts see the situation with Mexico in a similar light. Just like most other banks, the Goldmen recently assumed that the US and China would close a deal. And the change of opinion of the masses nicely explains the disappearance of Wall Street.
China’s open wound
What remains is a look at the deterioration in relations between China and the USA. Beijing is suppressing every memory of the 30th anniversary of the Tiananmen massacre – Internet sites are blocked, regime critics disappear. US Secretary of State Mike Pompeo criticised the human rights situation in the People’s Republic: China tolerates “no contradiction” and violates human rights “if this is in its interest”. The Chinese embassy in Washington accused Pompeo of “prejudice and arrogance” and “serious interference in internal affairs”.
The nervous reaction of the Chinese communists points by the way to the sticking point in the customs dispute: After the murder of hundreds, if not thousands, of defenceless demonstrators by the People’s Liberation Army on June 4, 1989, the Middle Kingdom made a silent pact with the people. The state no longer forces people to activism in party and youth organizations and withdraws from private life. The most important thing: except in the strategically important sectors, the market economy prevails – and the state ensures the prosperity of its citizens. In return, the people in the country are completely apolitical and do not criticize the leadership. But what if prosperity wobbles in a trade war with the USA?
High-tech giants suspected of cartels
On Wall Street yesterday, another issue overshadowed the customs dispute: According to insiders, US authorities are investigating the market power of Google and Facebook, as the news agency Bloomberg reported. Which, according to the Bank of America, could lead to a split in the worst case scenario. Investors on the Nasdaq reacted nervously: the composite fell by 1.6 percent to 7,333 points. The Dow Jones index closed almost unchanged at 24,819 points and the S&P 500 fell 0.3 percent to 2,744 points.
This is what the day brings
Both CFD traders and investors in online stock trading should keep an eye on their free real-time prices from 3:55pm today. Then Fed Chairman Jerome Powell will speak. The US Federal Reserve is currently holding its research conference on topics such as monetary policy instruments and communication. So will there be a covert indication of falling interest rates, or not?
Shortly thereafter, at 4 pm, the US industry’s incoming orders will run through the tickers.
The Bernstein Bank wishes you successful trades!
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