China acts as the main impetus

Wall street

 

04.03.2019 – Daily report. New week, new support from China: The DAX continued its share price run on Rosemonday. According to a report in the Wall Street Journal, an agreement between Beijing and Washington is imminent. Driven by the unusually detailed article on the US-Chinese customs dispute, Germany’s leading index rose to 11,700 points in early trading, but then crumbled slightly.
Customs dispute allegedly before breakthrough

The dominant topic on the stock market was once again China: The “Wall Street Journal” (WSJ) fired the buying mood on the world’s stock exchanges with a report containing so many details that it could only have been pierced by an official body. The financial blog “ZeroHedge” revealed details: According to WSJ, the negotiations in the customs dispute have reached a final stage. The talks had progressed so far that an agreement could be signed at a summit between US President Donald Trump and Chinese President Xi Jinping around 27 March, after Xi had visited Italy and France.
In concrete terms: Beijing should be prepared to lower its tariffs and other trade barriers for American agroculture-products, chemicals, cars and other goods. In return, the US should consider dropping most, if not all, of the sanctions against Chinese goods.
Furthermore, the People’s Republic is said to have promised to accommodate the USA in terms of foreign ownership rights to car ventures in China and to lower car duties for US cars below the current level of 15 percent. Furthermore, the Middle Kingdom is said to have agreed to buy American goods on a large scale. According to the WSJ, the purchase of 18 billion dollars worth of liquid gas from Cheniere Energy by the Chinese petroleum giant Sinopec could be a cherry on the cake, according to insiders.

State corporations and shadow banks

But be careful: even the WSJ admits that there has been little progress on other issues. Westerners have always complained about the theft of intellectual property or the preference given to Chinese state-owned companies – for example through subsidies or the awarding of major contracts. No wonder: the red giants play a decisive role in the long-term plans of the communists for the country’s development.
This is another reason why analysts are eagerly looking forward to the National People’s Congress: the Mammoth-Parliament meeting with around 3,000 members will begin tomorrow in Beijing. One of the most important decisions there could be that Beijing instructs its shadow banks – i.e. all donors outside the official financial sector – to pump more credit into the economy. Which, of course, would generate new applause on the stock markets.

Asian stock markets are picking up

Meanwhile, investors in Asia have already taken a bold step: the Japanese Nikkei climbed by around 1 percent to 21,822 points. In China, the blue chip index CSI 300 rose by 1.2 percent to 3794 points.

Up, up and away in New York

In the USA, too, there have been signs of new profits recently: The future on the Dow Jones Industrial was 0.4 percent higher on Monday morning. Wall Street had already closed with a plus on Friday, even though prices had returned from their highs: At the closing bell on Friday, the Dow Jones Industrial only defended a gain of 0.4 percent to 26,026 points; in early trading it had advanced by almost 1 percent. The S&P 500 was down 0.7 percent to 2804 points on Friday. The Nasdaq 100 rose by 0.8 percent to 7152 points at the end of trading.
Since the Christmas low, Wall Street has thus completed a splendid rally: Since then, the Dow Jones Industrial has risen by 20 percent. The S&P 500 even climbed by around 21 percent, the Nasdaq Composite even jumped by 25 percent.
So the question remains whether the latest rally was based solely on hopes in the customs dispute. If disappointments arise here or if the stock market players decide to take profits on a large scale, then the bears will once again have the say on the floor. We will keep you up to date.

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.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.