28.01.2020 – Daily Report. Deep intoxication in global trading: US indices rupture striking downward gaps, the DAX yesterday broke through the 50-day line from above. But on Tuesday morning, the first thing on the agenda is an attempt at a recovery. Everything depends on the corona virus.
Frankfurt dares resistance
A brief stopover in the downward trend: The DAX was recently unchanged at 13,203 points. However, the slight gains before the stock exchange melted away. The German leading index broke through the 50-day line yesterday. First of all, an attempt at a rebound and thus a re-conquest of the moving average must be assumed. Since the German stock market has been far less enthusiastic than Wall Street in recent weeks, not as many optimists as in the US have entered the market. US futures were pointing 0.3 percent north. If, however, the 50-day line in Frankfurt breaks sustainably, the next stop will be the moving 200-day average at currently around 12,500 points.
Make or break through the corona virus
Everything now depends on the further course of the epidemic. Presumably the apparently determined steps of the Chinese against the lung disease will take effect sometime. But in the coming days you can expect a sharp increase in the number of cases diagnosed. If only because many people are now sensitized and are more likely to see a doctor; and because the authorities at the airports are taking a closer look. Overnight, the number of cases reported in China doubled. More than 4,000 infections have now been confirmed worldwide, and the number of deaths has climbed to over 100. So it fits into the picture that the first case was identified in Germany.
However, if the virus becomes really dangerous due to mutations and cannot be contained convincingly in a timely manner, then we can expect a mega slump. Since the market does not yet see the possibility of a global epidemic, the depth of the fall in the event of a case cannot be estimated at all.
Initially, many investors in Japan parted with their shares as a precaution. The Nikkei slipped by 0.5 percent to 23,215 points. Stock exchanges in Shanghai, Hong Kong and Taiwan remained closed due to the Chinese New Year.
US indices fall like stones
The Dow Jones Industrial closed yesterday with a minus of 1.6 percent at 28,536 points. The S&P 500 suffered its biggest daily loss since the beginning of October and also closed down 1.6 percent at 3,244 points. The Nasdaq 100 even lost 2.1 percent to 8,952 points.
All major American stock market barometers have now torn nice downward gaps. At the same time, the fear indicator VIX shot up with an upward gap. According to the lessons of chart analysis, these price gaps will close again at some point. Just when? Certainly not in times of fear like these. Especially since the 50-day line on the indices is now pulling prices from below like a magnet.
Oil market slump
The sell-off in oil also continued. WTI fell by 0.6 percent to 52.81 dollars, while Brent fell by 0.9 percent to 58.07 dollars. A trader from Global Risk Management told the Wall Street Journal that the recent crash was 100 percent due to Corona. Saxo Bank commented that a glut of gasoline supply in China would have a global impact.
Heading for safe havens
Conversely, safe havens were once again in demand. Meanwhile the price of gold in euro terms reached a new all-time high at 1,443, see our Special Report yesterday.
Ten-year US government bonds rose to their highest level since early October.
This went in the Impeachment
And what’s new in Impeachment? Well, there’s currently no threat to Wall Street here. Yesterday there was a real highlight when Pam Bondi, former Attorney General of Florida and now a member of Donald Trump’s Communications Team, reminded the Senate and the US voters of interesting facts. She said there were good reasons for Trump to talk to Ukraine about investigations into corruption against the Biden clan; after all, Hunter Biden, Joe Biden’s son, had collected up to 83,000 dollars a month from the Burmese gas company, even though he has no experience in the energy business. A total of $3 million is said to have been paid out. With the focus on his allegedly corrupt clan, Joe Biden is finished as the Democrats’ main middle-class eligible candidate.
Very nice also the feigned indignation of the Democrats about the fact that allied Ukraine was withheld from Trump for a short while its military aid of almost 400 million dollars. What you rarely or never read in this country: Barack Obama’s administration provided Kiev with blankets and medicine when the Russians attacked. Four of the eight current Democratic house managers in the Senate Inspectorate also refused to allow Ukraine to use lethal weapons. Only Trump sent Ukraine urgently needed Javelin-type armor-piercing missiles. So where has Trump abandoned an ally and how has he compromised national security?
Either way, you should keep your eye on the impeachment. If some Republicans want to switch sides and subpoena new witnesses together with the Democrats – which is quite possible – Wall Street will get a new short argument.
What the day brings
The schedule on Tuesday is quite clear, see here:Market Mover
In the USA, at 2:30pm, the order intake for durable goods in December is reported.
Consumer prices for January arrive at 4:00pm.
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.