29.11.2019 – Daily Report. Investors in the German stock market are holding out sideways. On the one hand there is no Wall Street target because of Thanksgiving. On the other hand, the stock market is worried about China’s anger over US support for the demonstrators in Hong Kong.
Prices in Frankfurt are crumbling
The DAX did not make any headway on Friday morning either: The indicator plunged to 13,168 points, but then picked up again. Most recently, the leading index was 0.2 percent weaker at 13,226 points. EURUSD also remained lethargic at 1.1009.
Investors expect only a few new impulses, as the US stock market only trades in short positions today. Only in the coming days should there be new momentum on the trading floor, because the stock market is analysing the figures for the mega shopping event Black Friday in the USA. Meanwhile, German retail sales in October were significantly lower than expected. All data can be found here:Market Mover
If you trade stocks online, we congratulate you on your good nerves. Since the beginning of November, the leading index has been moving sideways in a corridor between 13,000 and 13,400 points. After all, the annual high of 13,374 points was also reached during this period. However, the all-time high of 13,596 points from January 2018 is still a good way off. If you trade CFD, then of course it doesn’t care, because thanks to the leverage you still have good chances even with smaller movements.
Fear of China’s anger
Brokers referred as current stress factor to the feared backlash of the Chinese because of the signing of the laws supporting the pro-democracy movement in Hong Kong by US President Donald Trump. Possibly the trade talks between China and the USA could now derail. Perhaps such caution in global trade is wise; perhaps it is only hysterical. After all, nothing happened at all – as the brilliant Wall Street Journal (WSJ) has just analysed.
According to the WSJ, the focus of the Chinese authorities is now on the question of whether America is actually introducing sanctions. But that would probably take a good six months. Beijing had also listened with interest to the passage in Trump’s statement according to which he referred to his ancestral leadership role in foreign policy. Notwithstanding all the outrage expressed, China wants to continue a customs deal to alleviate the pressure on the weakening domestic economy. This coincided with Trump’s interest in increasing the chances of his re-election. WSJ author Lingling Wei also noted that it was not by chance that the U.S. president chose the evening before Thanksgiving to sign, because then the Americans would prepare for the big celebration and the deal would go down. Moreover, according to WSJ, the Chinese leadership has positively noted the passage in Trump’s statement in which he expressed his respect for China’s President Xi Jinping.
Theatrical thunder or backlash?
Interestingly, Geng Shuang, the angry spokesman for the Chinese foreign ministry, recently did NOT say that when a journalist asked whether the signing would have a negative impact on the trade talks – but evasively demanded that the USA not enact the laws because this could undermine bilateral relations and cooperation in important areas.
The journal also quoted Wang Yong, Professor of International Affairs at Beijing University, as saying that while the laws have worsened sentiment, they should not negatively affect trade talks. We suspect that a professor at a state university knows a few backgrounds from the Politburo. The WSJ also noted that much now depended on Washington encouraging Hong Kong demonstrators to escalate their protests. So let us wait and see.
Asia backs down
Whatever the case, investors first played it safe. The red chips in the CSI-300 fell by 0.9 percent to 3,829 points. The Hang Seng lost 2 percent to 26,346 points. Traders also suspected that investors were withdrawing money from China and especially Hong Kong at the end of the month. The Nikkei index lost 0.5 percent to 23,294 points. Investors reacted disappointed to the data on Japanese industrial production in October – it fell as rapidly as it did at the beginning of 2018. In concrete terms, output slipped by 4.2 percent compared to September, as the Ministry of Trade announced in Tokyo.
This is what the day brings
As mentioned before, the impulses from America at the end of the week are small. On Wall Street there will only be a shortened trading until 7pm. The bond market closes at 8pm.
The Chicago purchasing managers’ index for November will be published at 3:45pm.
Bernstein-Bank wishes you successful trades and a relaxing weekend!
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