09.07.2019 – Daily report. That’s how fast the wind turns on the stock market. Last week, the DAX had reached an annual high. And now the leading index is crumbling strongly. On the one hand, BASF’s profit warning is depressing sentiment. On the other hand, the Federal Reserve in particular is paralysing the stock market – as of today, a series of important dates is imminent. Will the Fed lower interest rates despite the strong US job data from Friday or not?
The Fed speaks – the market stops
The handbrake in the global market is expected to remain on until Thursday. Until then, the stock market will be listening to monetary policy makers. At first, all broker eyes will be on Fed Chairman Jerome Powell at 2.45 p.m. today. He will give a speech at 14.45 German time in Boston on the topic “Stress Testing: A Discussion and Review”. Perhaps he will drop one or the other hint in the opening speech of the Fed symposium on the subject of interest rate cuts.
Finally, at 4 pm, James Bullard, head of the St. Louis-Fed, who is entitled to vote in the Federal Open Market Committee, will speak at the OMFIF Foundation in St. Louis (Official Monetary and Financial Institutions Forum). Two weeks ago he had spoken out in favour of an insurance rate cut as security against falling inflation.
Tomorrow, Wednesday, Fed Chairman Powell will finally face the Senate’s Banking Committee in Washington. He will continue to answer questions on monetary policy from members of parliament until Thursday at the traditional six-monthly hearing.
The DAX dives into the abyss
Against this backdrop, no major equity exposures were expected on Tuesday. The DAX slipped by around 1.3 percent by noon.
In the previous week, the leading index had reached 12,656 points, its highest level since August last year. The DAX was also depressed by the negative target from New York and a profit warning from BASF. Earnings before interest and taxes (EBIT) and before special items are expected to slide by up to 30 percent below the previous year’s level. Previously, the Group had expected an increase of between one and ten percent.
Minus in Asia
The Asia Dow closed 0.4 percent lower at around 3,300 points. The Asian stock markets were overshadowed by the conflict between Japan and South Korea. In the dispute over compensation payments for South Korean forced laborers, Tokyo has introduced export controls for materials needed by Korean chip manufacturers. Japan’s leading index, the Nikkei 225, nevertheless closed with a moderate plus of 0.1 percent to 21,565 points.
China buys gold
What remains is an interesting footnote from Beijing: the Chinese central bank has increased its gold holdings for the seventh consecutive month. As read in the financial blog “ZeroHedge” citing the People’s Bank of China website, it increased its reserves by 10.3 tons. In the six months to May, China had already bought almost 74 tonnes. Obviously another step by the Chinese away from the dollar and US Treasuries.
Losses in New York
The falling hope of a rate cut had weighed on Wall Street the previous evening. The Dow Jones Industrial fell by 0.4 percent to 26,806 points the previous evening. The S&P 500 fell by 0.5 percent to 2,976 points. The Nasdaq 100 slipped 0.7 percent to 7,786 points. All three indices set new records last Wednesday.
This is what the day brings
Apart from the Fed’s requests to speak mentioned at the beginning, only a few dates are scheduled for Tuesday.
Thus at 10:30pm of German time the weekly inventory data of crude oil, which are announced by the private American Petroleum Institute, line up.
The Bernstein Bank wishes successful trades!
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