31.10.2019 – Daily Report. The Fed has delivered as expected – the markets are applauding first. The S&P 500 once again reaches a record high. The DAX climbs moderately at the beginning of Thursday. Then, however, hopes for the China-USA customs treaty will be dampened.
The DAX slips
That’s how fast it can go: At first, the DAX climbed slightly. Shortly after 10:00 a.m., however, Germany’s leading index fell sharply, with the DAX losing 0.6 percent to 12,827 points most recently. Yuan and US futures also fell.
Bloomberg reported that leading Chinese officials see a chance for a customs deal close to zero. The US demands for structural changes are simply unacceptable. Beijing also demanded a commitment from the US to withdraw all existing tariffs in Phase 2 for the signing of Phase 1 and also to cancel the next tariff round planned for December.
China calms its nerves first
The day before, according to CNBC, the Chinese Ministry of Commerce had announced that both sides wanted to call on Friday. The communication of both trade delegations continued and there was good progress – both sides continued to work on the agreed timetable. And this despite the fact that Chile just cancelled the APEC summit in November, at which phase 1 was to be signed.
In addition, Washington was accommodating Beijing: Finance Minister Steven Mnuchin told Reuters news agency in Saudi Arabia that it would take some time for China to boost its agro-purchases in the US to the promised $40-50 billion a year. Our assumption: If China ever makes a clear commitment to buy, the futures on lean hog and soya should pick up strongly. The stock market has not yet responded to the news, and the Chinese CSI-300 set a moderate 0.1 percent back to 3,887 points in the morning.
As expected, the Fed delivers
The evening before, the Federal Reserve had met the expectations of brokers. Due to the economic slowdown in the USA, the Federal Reserve lowered the key interest rate for the third time in a row. The gentlemen of the money cut the key monetary policy rate by a further quarter point to the new range of 1.5 to 1.75 percent. Now the Fed signaled a pause. According to Fed Chairman Jerome Powell, things are now moving in the right direction. It remains to be seen how the tariff dispute between China and the USA will develop.
Japan remains true to itself
Meanwhile, as expected, the Bank of Japan has left its interest rate policy unchanged. The target for the short-term interest rate remained at minus 0.1 per cent. The currency watchdogs reaffirmed their promise to keep the yield on ten-year government bonds around zero percent. However, the BoJ signaled its willingness to cut interest rates further if necessary. In the event of global economic risks, the fragile recovery in Japan is to be supported. The Nikkei gained 0.4 percent to 22,927 points in the morning.
US stock markets on the upswing
After the rate cut, US equities gained on Wednesday. The Dow Jones Industrial rose by 0.4 percent to 27,187, its highest level since mid-September. The Nasdaq 100 gained 0.4 percent to 8,083 points. Both stock market barometers lurk just below their all-time highs. And in terms of chart analysis, another note: both Nasdaq 100 and Nasdaq Composite have now closed their recently cracked small price gap again. The S&P 500 closed yesterday by 0.3 percent to 3,047 points at a new closing record.
The end of the dollar is approaching
There’s still a sideways view of the Greenback. The so far unknown expert Anne Korin from the also unknown Thinktank Institute fort he Analysis of Global Security has warned in an interview with CNBC against the end of the dollar as a global reserve currency. A club of very powerful countries is working at the end of this status – China, Russia and also the European Union. An important reason for this is US jurisdiction: anyone paying in US dollars or doing business with American banks may fall under American jurisdiction. And as the Iran case has shown, this could have consequences. A warning signal would be oil contracts in Chinese currency – Petro-Yuan. Those who believe the lady will position themselves short in the Greenback in the long run. And he might consider long positions in the renminbi.
This is what the day brings
Thursday brings some interesting economic data, see here:Market Mover
At 1:30pm the first weekly applications for unemployment benefits will be received in the USA.
At the same time, the data on personal income and consumption in September will be available on the tickers.
The Chicago purchasing managers’ index for October is then reported at 2:45pm.
The Bernstein Bank wishes successful trades!
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