13.05.2019 – Daily report. No roller coaster is more exciting at the Oktoberfest: On Friday, the latest hopes for a settlement in the customs dispute between China and the USA had already led to an impressive turnaround on Wall Street. On Monday, however, global trade rolled back a little towards the abyss. Washington apparently wants to strike with hard bandages. China sees no room for compromise and threatened retaliation.
Threatening trade war depresses DAX
What a hell of a ride: From Best Case to Worst Case in just one weekend. After the recent escalation in the trade dispute, the futures for the US indices were negative on Monday morning. The DAX crumbled by just under one percent and slipped below the 12,000 point mark. Investors fled into US government bonds and the yen, and both assets are regarded as safe havens in times of crisis. Outside the People’s Republic, the dollar temporarily rose to a four-month high against the yuan. On the floor there was a widespread insight that the new US punitive tariffs against China on Friday were probably not just a bluff – they were perhaps harbingers of a trade war.
The German carmakers recorded a minus on Monday. No wonder, because any Chinese counter-tariffs also affect BMW and Mercedes, which export from their factories in the USA to China. Once again ThyssenKrupp caused a sensation: The stock had shot up by almost 30 percent on Friday – most recently, there was a 7 percent drop in profits on the trading platform.
No compromise in sight
US President Donald Trump fired a Twitter tirade on the weekend: “We’re exactly where we want to be with China.” The US would collect double-digit billions in customs duties from China. The US administration naturally hopes that domestic companies will step into the breach and produce many goods in the future that are still being imported from the People’s Republic.
China’s chief negotiator, Deputy Prime Minister Liu He, also struck a new note on Friday when he said “every nation has its dignity” and stressed that China could make “absolutely no concessions” on fundamental issues. A thick red line. He also announced countermeasures. These statements were flanked on Sunday by the state-controlled Chinese media. The editor-in-chief of the Global Times, Hu Xijin, tweeted that from the perspective of Chinese politics there was hardly any room for compromise. Among experts, the journalist is regarded as an insider of the Chinese leadership and a mouthpiece of the communists.
Losses in Asia
Accordingly, most investors in Asia sold their shares. The Nikkei finally posted a minus of 0.7 percent to 21,191 points. The Shanghai Stock Exchange lost 1.2 percent to 2902 points.
Comeback on Wall Street
The Dow had only slipped about 400 points on Friday, only to make another remarkable comeback of 500 points. At the closing bell, the leading index brought a plus of 0.4 percent at 25,942 points into the weekend. Once again, we stress the importance of moving averages: The Dow traded exactly on the 200-day line. At the end, the indicator reduced its weekly minus to 2.1 percent. After a strong recovery, the S&P 500 closed exactly on the 50-day line on Friday, also posting an increase of around 0.4 percent to 2881 points at the end of the day. The technology-heavy Nasdaq 100 saved a small gain of 0.1 percent to 7587 positions.
The statements made by US Treasury Secretary Steven Mnuchin in a conversation with CNBC, which Trump later confirmed via Twitter, provided hope. According to this, the discussions with representatives from China were constructive. Trump stressed that the negotiations should be continued. Well, this situation is outdated again. There is no distraction in sight, because really important economic dates are not scheduled for Monday.
Nevertheless, Bernstein Bank wishes you successful trades!
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