09.05.2019 – Daily report. All seat belts fastened for crash landing: Today and tomorrow the decisive negotiations in the customs dispute between China and the USA are going on in Washington. An agreement seems increasingly unlikely. Beijing has meanwhile announced retaliation if America raises punitive tariffs as announced. The world’s stock markets remain in shock paralysis, the DAX slips. The fear indicator VDAX rises sharply.
First panic in Frankfurt
In view of the general situation, the German balance sheet season receded into the background. HeidelbergCement bucked the downward trend in the DAX. The building materials group beat the forecasts for profit and turnover. At Deutsche Telekom, the US business remained the profit driver. Continental reported a sharp drop in profits in the first quarter.
But what is all this compared to the threat of a trade war between the world’s two largest economies: The VDAX reached its highest value since mid-January. Its European counterpart, the VStoxx, also reached a four-month high.
Sales in Asia
Needless to say, Asian investors also pressed the sell button. The Japanese Nikkei slipped another 0.9 percent to 21,402 points. The Hang Seng lost 2.4 percent to 28,311 points.
Whirlwind on Wall Street
The day before, the customs dispute had stirred up the prices. US President Donald Trump ran at full speed yesterday at an event in Panama Beach, Florida. China had broken the deal – “they will pay for it”. He confirmed his intention to raise the special tariffs from 10 to 25 percent tomorrow. At least he still said, “don’t worry – everything will work out”, reports the financial blog “Zerohedge”. Previously, Trump had given investors hope via Twitter: the People’s Republic was showing renewed willingness to reach an agreement, the Chinese vice-government leader Liu He wanted to conclude an agreement.
In view of the turbulence, the Dow Jones Index closed yesterday at around 25,967 points, barely changed. The S&P 500 lost a moderate 0.2 percent to 2,879 points. The Nasdaq Composite fell by 0.3 percent to 7,943 points. However, the indices had reached their daily high shortly before the end of trading and then fell like stones.
Perfidious breach of promise by the Communists
Skepticism in the customs dispute is absolutely justified. Reuters yesterday reported disturbing details. The English news agency reported on the edited Chinese version of the draft treaty sent to the White House late Friday, citing half a dozen sources. Overall, Beijing had made an unexpected U-turn on a dozen issues. The edits from the Middle Kingdom systematically ran through the entire 150-page treaty and ignored months of negotiations.
In all seven chapters of the draft, Beijing had deleted earlier commitments. All in all, the communist regime had backed down a dozen questions. These include the core issues of intellectual property theft, industrial espionage, competitive advantages, access to financial services and currency manipulation. According to sources, however, China underestimated the Trump administration because for twenty years it had been getting what it wanted from former US presidents.
After the all-clear, before the trade war.
If the information is correct, the Red People’s Republic is not a trustworthy partner. Even if both sides still sign a deal, the question remains whether China will stick to it. Attentive brokers should consider the possibility of new turbulences or even a trade war for the future. As always, keep an eye on regular market updates on your trading platform.
In addition to the mega topic of the customs dispute, Jerome H. Powell, head of the Federal Reserve, will be speaking at 2.30 p.m. German time. The important question is this: Will the Fed perhaps lower interest rates after all in the event of a possible trade war and a stock market crash?
At the same time, US producer prices, the US trade balance in March and the initial applications for unemployment assistance are to be sent through the tickers. You can see all important dates here: Market Mover
Fear seems to increase further – and panic is always the signal for buying. But where exactly is the low? Anyone who professionally analyses the situation now will be richly rewarded in the near future – through deals with a good broker with a Bafin licence! The Bernstein Bank wishes you strong nerves and much success!
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