21.06.2019 – Daily report. One step forward, one step back: Investors will sound out the direction on Friday. And behind the scenes, big investors are pulling and pushing prices. Because it’s a big expiration day on the stock market. Thus, the DAX will not get beyond its just marked high for the year. Especially as tensions in the Persian Gulf are rising.
Slight plus in Frankfurt
Until Friday midday, the leading German index remained just under 12,400 points up by 0.3 percent. In today’s trading, volatility is guaranteed, which pleases everyone who trades CFDs – because they can use even the smallest back and forth for profits and thus have higher return opportunities than investors in online stock trading. On the Witches’ Sabbath, futures contracts on stocks and indices on the futures exchanges expire. Brokers always speak of “big decay” when the last trading day of all four types of derivatives, i.e. options and futures on indices and individual stocks, falls on the same day. Since large addresses often try to steer the indices in their direction via the heavyweights, chart analysis is pointless.
Double high in the DAX
And so the just marked double high in the DAX initially has little significance. On yesterday’s holiday Corpus Christi, Germany’s leading index reached a new high for the year at 12,438 points. But this was not really convincing – on the one hand the volume was low, on the other hand the new peak was only two points above the previous record level at the beginning of May. A double high often marks the beginning of a bear market.
Danger of war in the Persian Gulf
Otherwise, the decisive topic on the floor was the USA’s attack against Iran, which apparently came to an end at the last minute. According to the “New York Times”, US President Donald Trump had initially approved the air and sea attack against the Mullah regime as retaliation for the shooting down of a US drone military strike, but then cancelled it. We wonder whether the suspension has also been lifted.
Oil, gold and treasuries in demand
In view of the worsening crisis, the price of oil rose sharply before falling back somewhat. In addition, investors fled to American government bonds. For the first time since the end of 2016, the yield on ten-year US bonds slipped below 2 percent and reached 1.99 percent. And what else do risk-averse investors buy when interest rates are likely to fall further and the risk of war increases? Exactly: gold. The August contract rose to 1,415.40 US dollars for the first time since 2013 before sales began.
Although the Federal Reserve had left interest rates unchanged on Wednesday evening, it had signalled its willingness to act and interest rate cuts in the further course of the year. Following the interest rate decision, the greenback came under considerable pressure, making the yellow metal more attractive.
Caution in Asia
In Asia, investors played it safe in the morning. In addition, they fled into the yen, which reduces the export opportunities of many corporations. The Nikkei closed in Tokyo with a minus of around 1 percent at 21,259 points. In Hong Kong, the Hang Seng index fell by 0.5 percent to 28,409 points.
Record hunting in New York
American equities benefited from hopes of lower interest rates. The S&P 500 reached a new all-time high of around 2958 points on Thursday. In the end, it was around one percent higher at 2,954 points. At the closing bell, the Dow Jones Industrial recorded a gain of 0.9 percent to 26,753 points, just under 1 percent from its all-time high. The Nasdaq 100 also closed 0.9 percent higher at 7,738 points.
This is what the day brings
The focus today is on Deutsche Bank. The Federal Reserve publishes the first part of the latest stress test of the big banks after the close of the US stock market. If Deutsche Bank does not pass the test, as it did in 2015, 2016 and 2018, it will be threatened with restrictions on US business operations.
In addition, reports from the EU summit of heads of state and government are likely to run through the tickers, which could interest traders in the euro and European government bonds.
At 15:45 the Markit PMI for manufacturing and services will be launched in June.
And at 16.00 the figures for sales of used real estate in the USA are announced.
The Bernstein Bank wishes you successful trades and a sunny weekend!
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