13.12.2019 – Daily Report. What a great day for bullish traders: The customs deal between China and the USA has apparently been concluded. Wall Street celebrates new records, the DAX marks an annual high. In addition, British Prime Minister Boris Johnson has achieved a historic victory – the pound hisses away. And largely unnoticed by the local mainstream media, the Federal Reserve is pumping its financial stores full. The USA is facing the biggest liquidity injection in the repo market of all time: 500 billion dollars are to prevent the crash at the end of the year.
Annual high in Frankfurt
Glory Days! This looks very much like a tightened year-end rally now: At the start of trading on Friday, the DAX reached a new annual high of 13,408 points. Germany’s leading index recently held its own at 13,387 points with a gain of 1.3 percent. This brings the all-time high of 13,596 points closer again. No wonder, the most important brake blocks for the stock market have now been removed. Particularly in the customs dispute between China and the USA, it now looks very much like an easing.
Phase 1 to come
After Wall Street closed, Bloomberg reported that a deal would be closed. Then CNBC and the Washington Post followed suit. According to this, the US punitive tariffs planned for 15 December will be postponed and existing tariffs will be halved. China had promised to buy US agricultural goods on a large scale. In addition, there is to be a penalty mechanism. The matter has not yet been officially announced and has probably not yet been included in a contractual framework. The market has also ignored the fact that the details are unknown and that Beijing may be squeezing its way out. Never mind – as you know, you shouldn’t go against Mr. Market when trading CFD or online stocks. Nevertheless, you should keep an eye on regular market updates and a possible disappointment in mind – as so often in this matter.
Asian stock markets are attracting
Initially, however, investors in Asia took action. The Nikkei in Tokyo climbed by 2.6 percent to 24,023 points. In Hong Kong, the Hang Seng also rose by 2.6 percent to 27,688 points. The Chinese CSI-300 rose by around 2 per cent to 3,968 points.
Record hunting in New York
After the China News, Wall Street was also a joyful place to be. US President Donald Trump delivered fat booty for the bulls via Twitter: “They come very close to a big deal with China. They want him and so do we! The result: a high in the Dow and the S&P 500, a final record in the S&P 500 – ditto both for Nasdaq Composite and Nasdaq 100. Specifically, the Dow Jones Industrial gained 0.8 percent to 28,132 points at the closing bell after setting a new record in trading at 28,225 points. The S&P 500 climbed 0.9 percent to 3,169 points. And the Nasdaq 100 gained 0.8 percent to 8,467 points.
Sterling and Midcaps explode
Told you so: As predicted in our Special Report, the British pound is hissing away after the overwhelming election victory of the Tories in Great Britain. The pound jumped to 1.3516 dollars in the largest jump since March 2009. GBPEUR rose to 1.2082. Of course, profit taking began. But not only the currency market, the stock market also celebrated. The British mid-cap index FTSE 250 recently shot up by 4 percent to 21,617 positions.
As it recently looked, the Tories will conquer 364 (+48) of the 650 seats in the House of Commons and thus a comfortable absolute majority. Labour (203 seats / -59) received the receipt at the urn for the permanent sabotage in Brexit. The biggest victory for the Conservatives since Margaret Thatcher – merry Brexmas!
The Fed pumps 500 billion into the market
Last but not least, another financial highlight: The New York Federal Reserve is stocking up its repo arsenals – and is raising its auctions of overnight loans sharply in an intensified series of auctions between today’s 13 December and 14 January 2020. As the NY Fed has just announced, a large overnight auction of 120 billion dollars is under way today, and two other particularly fat tenders are on and around New Year’s Eve with 150 billion and 120 billion dollars respectively. Financial market expert Scott Skyrm of Curvature Securities commented: “Massive”. (…) The largest series of RP operations ever! (…) All total, I count the Fed committed to pump $500 billion in the Repo market over year-end.”
It almost seems as if the Federal Reserve has read our report on the Repocalypse Reloaded yesterday. Of course it didn’t, that would be too much of an honour. But the guardians of the currency certainly reacted to the sinking warnings of repo pope Zoltan Pozsar of Credit Suisse. He had warned of a drying up of liquidity and a flight into treasuries at the end of the year due to the tax deadline on Monday and the Basel rules for systemically important banks – which could lead to a collapse of hedge funds and a crash on the stock exchange. So the downfall seems to have been averted…
That’s what the day brings
Friday brings two more big dates, you can find the overview as always here: Market Mover
In the USA, retail sales for November will be reported at 14:30 hrs.
Stocks for October follow at 16:00.
Bernstein-Bank wishes you successful trades and a relaxing weekend!
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