08.10.2019 – Daily Report. No buying mood in Frankfurt. Scepticism about a solution to the Chinese-American customs dispute is spreading on the floor. The requirements from global trade are mixed – profits in Asia, losses on Wall Street.
Slight minus in Frankfurt
Once again, investors on the Frankfurt Stock Exchange initially showed caution. In early Tuesday trading, the DAX fell by 0.4 percent to 12,050 points. Perhaps the mood will change again – yesterday the trading day for the bulls had ended with profits after a hesitant start. As is so often the case, however, the apparently deadlocked customs dispute between China and the USA is spoiling investor sentiment. Hopes for a solution before the planned resumption of talks in two days’ time are falling.
Scepticism about customs dispute
Traders pointed out that Beijing is apparently increasingly reluctant to enter into a comprehensive trade agreement with the USA. China probably does not want to give up state subsidies or its industrial policy – ergo: the preference of domestic companies remains. Meanwhile Washington fired a shot at the bow: Because of “brutal oppression” of the Muslim minority of the Uighurs, the US has blacklisted 28 Chinese government and trade organisations. This restricts exports to these companies, the US Department of Commerce reported.
Asia defies pessimism
Investors were also suspicious of the situation in Hong Kong, with US President Donald Trump linking the matter to the customs negotiations. Now, for the first time, Hong Kong’s Prime Minister Carrie Lam spoke openly of the possibility of military intervention by the People’s Republic of China, as dw.com reported. At a press conference, she said she could not rule out the possibility that the Chinese military would intervene in the conflict in the Special Administrative Region if the situation continued to escalate in the face of continuing protests. Nevertheless, the Chinese CSI-300 rose by 0.6 percent to 3,838 points after the holiday break. In Tokyo, the Nikkei gained 1.2 percent to 21,621 points. The weaker yen, which improves the chances of Japanese companies on the world market, provided a boost.
Losses in New York
On Wall Street, investors had held back the night before due to the upcoming tariff negotiations. The Dow Jones closed 0.4 percent lower at 26,478 points. The S&P 500 also lost 0.4 percent to 2,939 points. The Nasdaq Composite slipped 0.3 percent to 7,956 points.
New pressure on the Turkish lira
A view of the Turkish lira remains. Here new trouble is looming, because Ankara apparently wants to invade Syria and eliminate the Kurdish resistance. Trump has cleared the way by referring to his voters’ mandate to avoid wars. The USA had done far more than was to be expected, including taking 100 percent of the ISIS caliphate. Now is the time for others to become active in the region.
A war costs money, it will further damage the Turkish economy. And at least Trump threatened in a true Twitter storm of Turkey – he would extinguish the Turkish economy if necessary. Here is a particularly readable quote in full length: “I will totally destroy and obliterate the Economy of Turkey (I’ve done before!)”. So keep an eye on the regular market updates on your trading platform – no chart analysis helps with a war, because then emotions rule.
This is what the day brings
Last but not least, a look at the rather sparsely filled appointment calendar. As always, you will find the overview here: Market Mover
At 2:30pm US producer prices will be reported for September.
And at 7:50pm German time Fed boss Jerome Powell gives a speech in Denver.
The Bernstein Bank wishes you 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.