10.05.2019 – Daily report. The Frankfurt stock market has calmed down for the time being – prices are rising. US President Donald Trump had cooled investors’ heated feelings about the customs dispute a little the evening before. And China and America are continuing to negotiate despite the recently increased punitive tariffs – and there is also a small loophole.
Recovery in Frankfurt
On Friday morning, the DAX made up some of the heavy losses of the previous day with a gain of around 1 percent. German exports were balm for the scarred broker souls: In March, exports had surprisingly increased by 1.5 percent compared to the previous month, according to the Federal Statistical Office. As always, all important economic data can be found here: Market Mover. However, the decisive issue was of course the threat of a trade war between China and the USA.
Deadline in the customs dispute
The American treasury rings the bell: Since this morning, 6:00 a.m. German time, the increased US special customs duties for Chinese exports to the USA have been taking effect. The special levies on imports of goods worth 200 billion dollars are increasing from 10 to 25 percent. Immediately after the increase, the Ministry of Commerce in Beijing announced “necessary countermeasures”. China’s chief negotiator Liu He criticized the move, but was conciliatory. “We want to resolve some of the differences honestly, confidently and rationally,” said the Deputy Prime Minister. “I think there is hope.” The two economies, the USA and China, are part of a complete industrial chain.
In addition, there is a loophole: the now increased criminal tariffs only apply to goods that are not yet in transit to North America. So all goods that left the Chinese ports before midnight on the US East Coast will remain lower valued. De facto, both delegations still have about two weeks until Chinese freighters leave for the Pacific coast of the USA. While the Nikkei fell 0.3 percent to 21,345 points, the Chinese CSI 300 rose by 3.6 percent to 3,730 points.
Calming in New York
The evening before, US President Trump had also distributed verbal beta-blockers to investors. He had received a “nice letter” from China’s President Xi Jinping and wanted to call the Chinese head of state. Accordingly, the brokers in New York first lowered their pulse. The Dow Jones recovered from its daily low of 25,517 points and closed at 25,828 points. A little hint for friends of chart technique: The Dow turned around just above the 200-day line. The S&P 500 closed 0.3 percent down at 2,871 points. The market-wide index crossed the 50-day line downwards over the course of the month, but closed almost exactly on top of it. The high-tech index Nasdaq 100 lost 0.5 percent to 7,583 positions. Investors also followed the 50-day moving average on this stock exchange: the indicator was exactly based on the indicator over the course of the day before turning north again.
How weak is the United States?
Let’s come back to the statement of Vice Prime Minister Liu He that China wants to solve the dispute “honestly”. What has meanwhile been reported in the “Wall Street Journal” about the monstrous Chinese about-turn of last Friday with the withdrawal of all previous concessions, raises doubts about the sincerity of the Chinese. Chinese President Xi Jinping and other senior officials have interpreted Trump’s repeated calls to Fed chief Jerome Powell to lower interest rates as a sign of weakness. The Chinese also felt encouraged to take a hard line as Trump stressed his “friendship” with Xi and praised Liu as well as Chinese economic policy. Beijing’s stance raises doubts that China will stick to agreements in the future and that a trade war will be avoided. CFD traders should keep this in mind.
This is what the day brings
The calendar still remains to be seen. Today, Friday at 14:30, real incomes in the USA for April and consumer prices in April are due. The Bernstein Bank wishes you successful trades!
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