16.01.2020 – Daily Report. The New York Stock Exchange is on a quiet and steady upward trend. While investors in the USA are applauding the customs deal with China, investors in Frankfurt are playing coy. Many Asian stock exchange traders are also analyzing the small print for the first time.
Frankfurt slightly in the red
Shareholders’ capital is increasingly flowing to New York, while Frankfurt is still lagging behind: the DAX was down 0.1 percent at noon on 13,420 points. There is still a bit of air left until the all-time high at 13,596 points. Apparently, many investors who believe in chart analysis expect that the DAX will first have to close the upward gap it tore last week in order to pick up.
Caution in Asiae
Investors in Asia also tended to stay on the sidelines. The Nikkei closed with a minimal plus of 0.1 percent at 23,933 points. The major Chinese stocks in the CSI-300 lost 0.4 percent to 4,149 points.
Many brokers welcomed the completion of Phase 1 – delivered as ordered and announced by US President Donald Trump. The stock market loves reliability. In addition, the fact that China intends to buy US goods worth around 200 billion dollars over the next two years exceeded expectations. However, it remains to be seen whether and how Beijing will fill this promise with life. And as described in our Annual Outlook, the really important problems are only in Phase 2 – industrial espionage and favouring domestic companies in China. We are skeptical that Beijing will change its business model. In fact, China has bought itself time now. And Washington is keeping existing punitive tariffs as a disciplining whip. Presumably nothing will happen until the presidential election.
Records on the US stock markets
Gregory Gilligan, Chairman of the American Chamber of Commerce in China, commented on CNBC that there is moderate optimism among companies after the customs deal, despite the continuing uncertainty. The target of 200 billion dollars will be difficult to achieve, but this is better than no way to sell goods at all.
So Wall Street celebrated the deal. The Dow Jones rose 0.3 percent to 29,030 points at the closing bell – a new closing record. In the course of trading, the leading index had marked an all-time high at 29,128 points. The S&P 500 rose by 0.2 percent to 3,289 digits at the end of trading – this was also a new closing high. The Nasdaq Composite had also reached a record high in intraday trading, and the high-tech index closed with a moderate gain of 0.1 percent at 9,259 points.
Serenity in New York
What the bulls should keep a close eye on is the fact that there is still no sign of exuberant euphoria on Wall Street. This would be a signal to get out. But instead, the major indices have groped their way forward a bit, only to fall back again before the daily high. Sensible cash management, then. Or is it Sell the News? Let’s wait and see. Another look into the Washington swamp: The articles in the impeachment indictment finally delivered to the Senate by the Democrats in the House of Representatives are currently not an issue for the bulls. Because the Republican defensive front in the Senate is in place.
The Eternal Tsar
Traders in EURRUB and investors who trade online shares on the Russian stock exchange should also keep an eye on the policy. We are not alone in suspecting that the current government reshuffle in Moscow is the harbinger of major events. Most likely, the Russian constitution will soon be amended – to allow the president to remain in power indefinitely and not just two terms in office at a time. Of course, this would be an autocratic move that will secure Vladimir Putin’s place in the Kremlin for the rest of his life. The financial market and the people should welcome the move, as it should ensure stability and prosperity for Russia for a number of years until the succession is settled.
What the day brings
The diary brings some interesting events, you can find the overview as always here: Market Mover
Traders in Euro and European government bonds will be watching the news on the trading platform closely at 1:30pm, as the ECB minutes of the meeting on 12th of December will be running on the tickers.
At 2:30pm it will get interesting for dollar, treasuries and US equities, as US retail sales for December will be reported.
At the same time, the Philly Fed Index will be publishe das well as the weekly American initial claims for unemployment benefits.
Finally at 4:00pm the NAHB-Index for January follows.
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.