20.02.2020 – Daily Report. Slight setback on the German stock exchange. Despite positive news in times of Corona: the flood of money is still with investors – both in the USA and China. A perfect environment for stocks. And also for precious metals. An investor with a price target of $ 10,000 an ounce has just spoken.
Brokers in Frankfurt wait and see
Hardly any movement on the trading platform: The DAX has fallen back slightly. In the morning, the price indicator was down 0.3 percent to 13,751 points. The US futures also crumbled moderately at 0.1 percent. Investors initially concentrated on contradictory information from China.
Gains on the Asian stock exchanges
Initially, a renewed change in the way the corona was counted caused eyebrows to be raised. Accordingly, there were doubts about the number of new infections in China. In addition, South Korea reported a significant increase in Covid-19, although the Nikkei in Tokyo climbed 0.3 percent to 23,479 points – the weak yen supported export values. For a completely different reason, the CSI-300 red chip index in China rose strongly – it recorded a plus of 2.3 percent to 4,147 points.
China’s central bank lowers interest rates
Beijing is supporting the domestic economy hit by the epidemic with a further cut in interest rates. For example, the central bank reduced the one-year reference interest rate Loan Prime Rate (LPR) from 4.15 to 4.05 percent. The five-year interest rate was reduced from 4.8 to 4.75 percent. The People’s Bank of China had just lowered the interest rate for medium-term loans (MLP) by ten basis points to 3.15 percent.
Federal Reserve supports the market
Cheap money also remains for investors in the USA. So the Federal Reserve will stick to its monetary policy. The members of the Monetary Policy Committee (FOMC) have specifically expressed their support for maintaining the current monetary policy stance for “a certain period of time”, according to the minutes of the interest rate meeting of 28th and 29th January published last night. At the same time, the Money Lords referred to global developments such as the corona virus – the Fed is therefore ready to intervene if necessary. In addition, the Fed expects US economic growth to continue at a moderate pace.
New records again in the USA
As a result, US equities continued to rise yesterday. Both the high-tech indices on the Nasdaq and the S&P 500 climbed to all-time highs. The market-wide S&P 500 gained 0.5 percent to 3,386 positions. And the Nasdaq Composite rose 0.9 percent to 9,817 points. The Dow Jones Industrial closed 0.4 percent higher at 29,348 points.
Super bull sees gold at $10,000
Interestingly enough, the flood of money from the central banks is currently mainly washing up stocks. However, gold is still playing hard to get. This could change, as the grandiose blog “Valuewalk” noted. According to this, investor Daniel Oliver of Myrmikan Capital believes a gold price of 10,000 dollars per troy ounce is possible. Although the investor did not name a specific date, he said that the time will come in the next or the next but one financial crisis. The Fed has already printed all the paper money that could heave the precious metal onto this mark.
Oliver referred to the seventies: Since then, gold reserves in the USA have remained relatively constant. At the same time, he said, the Fed had begun to buy enormous quantities of government bonds. During the financial crisis of 2008, the Fed issued new dollars in order to buy treasuries and bonds backed by real estate to save the market. In the next panic, it would not be enough to rescue banks, but then interest rates would also have to be cut sharply. We are curious.
What the day brings
At 2:30pm the Philly Fed Index for February is due in the USA.
And at 4:00pm the consumer confidence will follow. As always, you can find the overview here: Market Mover
The Bernstein-Bank wishes successful trades!
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