06.03.2020 – Daily Report. The sell-off on the stock markets continues. Wall Street is going under. The DAX follows. And US futures are deep red again. Oil remains under selling pressure. In contrast, government bonds and gold are in demand.
DAX and US futures weak – gold rises
The bears also raged on Friday. The DAX fell 4 percent to 11,468 points by noon. US futures fell by about 3 percent. Gold was in demand: The price of the precious metal rose 0.8 percent to 1,687 dollars. In contrast, the precious metals, which are also used in industry, declined: Silver lost 0.5 percent to 17.41 dollars per troy ounce. Platinum fell by 0.4 percent to 871 dollars.
Bond rush
Meanwhile, the flight to safe havens continued elsewhere: both Treasuries and German government bonds were in demand. The yield of the ten-year German Bunds slid to minus 0.714 percent – the record low of September 2019 is not far off. In the USA, bonds reached a record low for the tenth time in eleven days. The yield plummeted to 0.769.
Recently, more and more pros have come forward, saying that the Fed panicked after the rate hike. For example, “Bond King” Jeffrey Gundlach, the head of DoubleLine Capital, spoke on CNBC. The interest rate move was justified, but not the way it went. Then he admitted to gold – the price would rise even more.
Nervousness in Asia
Investors in the Asian stock market also showed nerves of steel. For example, the CSI-300 in China slipped by 1.6 percent to 4,139 points. After all, the index had approached its January high of 4,223 points the day before with the fourth consecutive day of gains. The weekly conclusion for the CSI: around 5 percent plus. In Tokyo, the Nikkei lost 2.7 percent to 20,750 jobs on Friday. The weekly yield is thus minus 1.9 percent.
New York in a frenzy of depth
The US bulls had to accept a strong sell-off on Thursday. In addition to Covid-19, the US industry also put pressure on sales, with fewer orders than expected in January.
The Dow Jones slipped by 3.6 percent to 26,121 points. The S&P 500 lost 3.4 percent to 3,024 jobs. And the Nasdaq 100 dropped 3.1 percent to 8,672 points. Is this already a final surrender? I don’t think so. Panic is characterized by losses of up to 10 percent in the final stage.
Warning about the global recession/strong>
Particularly as the world is threatened by a severe slump in the real economy, which is probably still not fully priced into share prices. Because to date, nobody can concretely imagine the consequences of such an unprecedented event. Nigel Green, head of the deVere Group, warned of a global recession. The risks of a sharp downturn increased significantly. However, he added that the economy would eventually recover strongly, and that global growth would even be possible once economies repositioned and adjusted – especially if central banks and governments intervened. deVere is one of the world’s largest investment advisors.
It remains to be noted that US President Donald Trump is expected to release $8.3 billion in corona aid today. And that England is apparently working on an emergency plan and Australia is also considering a new quantitative easing.
Oil under pressure
The shock-induced paralysis in the global economy triggered by Corona once again added to the price of oil. Brent lost around 2.5 percent to 48.76 dollars, while a barrel of WTI fell by 2.2 percent to 44.87 dollars. And this despite the fact that OPEC has now proposed even more drastic cuts in production than had already been announced. On Thursday evening after the meeting in Vienna, the ministers of the oil cartel surprisingly proposed an additional cut of 1.5 million barrels per day until the end of 2020. Unfortunately Russia has not yet agreed to this. The unusual thing is that this looks like an ultimatum to Moscow. Normally such steps are only published when everyone has agreed, commented Oilprice.com.
What the day brings
At the end of the week, the diary brings some interesting events, you will find the overview as always here: Market Mover
In the USA, the labour market report for February is due at 2:30pm.
Ditto the trade balance for January.
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.