10.12.2019 – Daily Report. Just don’t position it wrong. Investors on the German stock market are holding back in view of the forthcoming, sometimes epic, decisions. The Federal Reserve’s interest rate meeting is scheduled for Wednesday. The European Central Bank’s interest rate decision will follow on Thursday. The parliamentary elections in Great Britain will also take place on Thursday. And on Sunday the Grande Finale lurks: Then new US punitive tariffs on Chinese goods threaten.
The 13,000 falls
The most important week of the year is running and the brokers on the Frankfurt stock market are taking cover. The German benchmark index was 1.1 percent weaker at 12,961 points on Tuesday morning. Caution had already been felt on the Frankfurt floor on Monday. The DAX said goodbye close to its daily low of 13,105 points, a loss of 0.5 percent. So much waiting is quite understandable.
Focus on Fed and ECB
The euro/dollar and treasuries as well as European bonds are likely to change little this week. In view of the recent robust economic data, most experts assume that the Fed will not touch the key interest rate. In addition, most brokers believed that the new ECB head Christine Lagarde would not touch the key rate at Thursday’s meeting.
Brexit switch in Great Britain
The election in the United Kingdom is scheduled for Thursday. The British pound was quoted at 1.1878 against the euro. According to a survey by the Survation Institute, the Conservatives around Prime Minister Boris Johnson extended their lead over the opposition Labour Party to 14 percentage points – previously the Institute had measured 9 percentage points. For the pound, this probably means new strength, as a clear Brexit deal from Johnson is to be expected – and thus the end of the uncertainty surrounding the EU exit.
High Noon in the customs dispute
On Sunday it’s time to get down to business: On 15 December, the USA could impose new punitive tariffs on Chinese imports. Chinese imports worth 160 billion dollars are up for debate. China should respond with countermeasures. Brokers fear that the trade conflict between the USA and China, which has been smouldering for 17 months, will escalate and further slow down global growth. If you trade stocks or CFDs online, then it will be really exciting: If there is no deal, Wall Street, DAX and Asia indices are likely to dive. So keep an eye on the regular market updates and keep the trading platform open. US Secretary of Agriculture Sonny Perdue just unsettled investors. He said President Donald Trump did not want to introduce tariffs, but he wanted to see “movement” from China.
Weak data from China
Meanwhile, Beijing once again reported weak economic data. According to the statistics office, producer prices in the Middle Kingdom fell by 1.4 percent year-on-year. The Chinese CSI-300 recorded an increase of 0.1 percent to 3,900 points in the morning. In Tokyo, the Nikkei index fell by 0.1 per cent to 23,410 points.
Minus in New York
Investors in New York had been cautious the night before. The Dow lost 0.4 percent to 27,910 points. The S&P 500 left with a minus of 0.3 percent at 3,136 points. And the Nasdaq 100 lost 0.4 percent to 8,363 points.
Hedge Funds and the Repocalypse
As if this week wasn’t exciting enough for traders, here’s an interesting background. The Bank of International Settlements just announced that hedge funds also dried up the US interbank market in September. As large funds have been increasingly involved in US treasuries, the need for a cash loan of short-term credit has risen rapidly. We wonder whether this is not a harbinger of future problems.
This is what the day brings
The appointment calendar on Tuesday is not really full to bursting.
The ZEW forecast for the German economy is expected to be released at 11:00am.
At 2:30pm US productivity data for the third quarter is due.
And at 10.30pm the American Petroleum Institute reports the weekly crude oil inventory data.
As always, you will find the calendar of events here:Market Mover
The Bernstein Bank wishes you 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.