11.07.2019 – Daily report. It‘s back: the hope for cheaper money. It was rekindled by Fed chief Jerome Powell. But today he is speaking again before the Senate in Washington. Ergo the stock exchange members wait for the moment. Especially as the upcoming US economic data in the afternoon have to confirm the expectations.
Frankfurt continues to wait
The skepticism doesn’t want to go away. By Thursday midday, the DAX had risen by 0.2 percent to 12,397 points.
In his statement to the House of Representatives on Wednesday, Powell left the door open for an interest rate cut. The Master of the Money said, “Uncertainty over trade conflicts and concerns about the global economy have recently weighed on the outlook for the US economy”. However, he also added: “Inflationary pressure remains subdued. This is likely to result in only a moderate cut in interest rates. But at least: a strong labour market report had just left the air out of the interest rate fantasy. Now it probably depends on the US inflation data scheduled for the afternoon whether an interest rate hike of a quarter or half a percentage point will be necessary. Today Powell also addresses the Senate’s Banking Committee.
Cheap money in China too?
The increased hope of a US interest rate cut in the near future has also given the Asian stock markets some wings. The Japanese Nikkei index lost 0.5 percent of its trading value at 21,634 points. In view of developments in the USA, stock market participants in China also hoped for a loosening of monetary policy and government economic stimulus programs. Nevertheless, the CSI 300 with the 300 largest listed companies in mainland China closed almost unchanged at 3,785 points.
New records in New York
The prospect of cheap money had pushed the indices in New York the night before. As a result of the Powell speech, Dow Jones Industrial, S&P 500 and Nasdaq 100 temporarily reached new highs. However, profits melted away again. The Dow recorded a plus of 0.3 percent to 26,860 points at the closing bell. The S&P 500 rose by 0.5 per cent to 2,993 points, in the meantime it had even made it over the 3000 mark. The Nasdaq 100 finally increased by one percent to 7,903 points.
Powder keg Persia
CFD traders had to pass a small stress test in the oil market. Apparently the Iranian Navy tried to capture a British tanker. This was reported by the US television channels CNN and Fox News on the evening before, in agreement with sources from the US government. According to them, five armed boats of the Iranian Revolutionary Guards had approached a British tanker near the Strait of Hormuz. London confirmed the incident on Thursday morning: three Iranian naval boats tried to stop the British oil tanker “British Heritage”. Accordingly, the British warship “HMS Montrose” pushed the Iranian boats away. Shots were not fired. Iran denied the incident. The action underlines how quickly the situation in the Persian Gulf can escalate.
This is what the day brings
CFD traders should keep an eye on their trading platform today and scan the regular market updates. For one thing, from 4:00pm on, Fed Chairman Powell can swirl around in front of the Senate with every half-set of Wall Street, DAX, Dollar and Treasuries. But volatility can be good for quick deals.
First, US consumer prices for June are due at 2:30pm.
At the same time, the weekly initial applications for unemployment benefits and real incomes in June are running on the screens.
The OPEC Monthly Bulletin will also be released today.
As an encore, Fed Vice President Randal Quarles – who has voting rights in the FOMC – will give a speech to the Bipartisan Policy Center in Washington D.C. at 7:30pm.
The Bernstein Bank wishes you successful trades!
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