18.03.2020 – Daily Report. Corona seems unstoppable. Cheap money from the central banks won’t change that. And concrete economic stimuli are still to come. The DAX plunges.
Frankfurt and US Futures in reverse gear
After the strong recovery from the previous day, the bears in Frankfurt have already taken the reins again. At noon, the DAX slumped by 5.1 percent to 8,487 points. In terms of chart analysis, brokers are now looking at the 8,150 mark, as Börse.ARD.de noted. This is because the highs of the stock market years 2000 as well as 2007 and 2008 were at this level, which is an important support for the German leading index.
The futures on Dow Jones and S&P 500 recently slipped by a good 3 percent. According to CNBC, the contracts were traded “Limit Down” during the night, which means that losses were limited to 5 percent. However, exchange-traded funds that follow the indices and are not affected by such regulation slipped even further: The SPDR S&P 500 ETF premarket, for example, lost 5.3 percent in the meantime and the SPDR Dow Jones Industrial Average ETF fell 5.9 percent. So this looks like a new sell-off on Wall Street.
Two-year epidemic possible
Pessimism also spread in Germany. In the opinion of Ifo boss Clemens Fuest, the expected economic slump in this country could be even more severe this year than during the financial crisis of 2009.
Previously, the Robert Koch Institute (RKI) also caused enormous scepticism: it has recorded a rapidly rising number of virus patients and is receiving increasing alarm signals from the authorities. According to RKI head Lothar Wieler, the pandemic could last about two years. And in extreme cases, the restrictions for people could remain in force for that long. We ask ourselves: How many airlines, hotels, restaurants, retail shops, advertising agencies, car manufacturers and banks will topple over in such a permanent crisis?
Losses on the Asian stock market
While the number of new corona cases in China is stabilizing at a low level, the number of
daily recorded corona infections in South Korea continued to increase. The country is far more rigorous than Europe. Incidentally, Hong Kong is acting particularly radically: from tomorrow, every person entering the country will have to spend two weeks in quarantine under medical supervision. To control the self-quarantine, bracelets with an app will be distributed. Too little too late?
The CSI-300 in China lost 2 percent to 3,636 jobs in the morning. And in Tokyo, the Nikkei dropped about 1.7 percent to 16,727. In Hong Kong the Hang Seng closed 4.2 percent weaker at 22,292 points.
Huge tax relief and helicopter money
Even the quite unusual measures planned by the US government could not stop the fear on Wednesday. The White House, for example, wants to introduce a gigantic tax relief – depending on the medium, it will be 850 billion dollars or even more than 1 trillion dollars. CNBC reported with reference to insiders that US Treasury Secretary Steven Mnuchin had warned Republican senators that unemployment could rise to 20 percent if the package is not passed. Specifically, companies should be able to defer tax payments up to 10 million, and individuals should be able to withhold payments to the Internal Revenue Service of 1 million dollars. Also under discussion is a check to US citizens – Helicopter Money.
Rebound on Wall Street
The stocks in New York, at any rate, had risen sharply yesterday. The announcement by the US Federal Reserve to buy up short-term corporate bonds in order to provide companies with cash in the current pandemic was also a cause for celebration. The Dow Jones closed the year at 21,237 points, up 5.2 percent. The S&P 500 rose by 6 percent to 2,529 on Tuesday. And the Nasdaq 100 gained 6.5 percent to 7,474 jobs.
What the day brings
On Wednesday, the diary contains some interesting events, the overview can be found as always here: Market Mover
In the USA, for example, construction starts and permits are due at 1:30pm for February.
At 3:30pm the crude oil inventory data from the state Energy Information Administration will follow.
And at 7:00pm the result of the FOMC meeting is to arrive according to n.tv.de of the Fed. After the interest rate cut over the weekend, however, the statements on growth, inflation and unemployment are of more interest.
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.