11.11.2019 – Daily Report. Wait and see: Investors in Frankfurt are taking it easy at the beginning of the week. US President Donald Trump does not want a customs deal at any price. And the unrest in Hong Kong is causing additional nervousness.
Frankfurt resets
Slight decline at the beginning of the week: On a day with little news, the German benchmark index initially crumbled moderately. The DAX fell by 0.3 percent to 13,187 points. The indicator thus closed last Thursday’s price gap of 13,227 points. However, there remains another open gap of 12,200 points. That could be a possible celebration for the bears…
Spain bonds under pressure
After the election in Spain, investors initially parted with Spanish bonds – after the election this weekend, another hanging game in parliament threatens. The yield on ten-year bonds climbed to a three-and-a-half month high of 0.418 percent, according to “Börse Online”. The risk premium over comparable federal government securities thus climbed to its highest level for around five weeks.
Worry lines in the global economy
A message from the Ifo institute also caused a frown. The Munich-based institute stated that the mood in the global economy was worse than it had been since the crisis year of 2009. The corresponding indicator slipped to minus 18.8 points in the fourth quarter. In the previous quarter, it had been 10.1 points. The Institute surveyed 1,230 experts from 117 countries.
Trump slows down hope for China
A little tailwind from China and the USA would be welcome. But here Trump cooled down hopes. He complained about the speed of trade talks with China. The talks went ahead, “way too slow for me”. He went on to say that China in particular was interested in an agreement. However, he limited: “If it’s not a great deal, I won’t make it”.
Power struggle for the customs deal
One important background for your trades: In the White House there is apparently a power struggle raging between a faction that absolutely wants a deal with China and another faction that makes no concessions at all. Screen your regular market updates for Peter Navarro (Falke) and Larry Kudlow (Taube; Director of the National Economic Council). Whenever you hear a request to speak from one side, the free real-time prices could react accordingly.
Peter Navarro, a White House consultant and director of the National Trade Council, told National Public Radio on Friday that if punitive tariffs were eliminated, the pressure on Beijing would be reduced. Contrary to what China recently announced, there is no agreement to eliminate the tariffs – that is the decision of the US President alone. And lo and behold, shortly thereafter Trump put the brakes on hopes. No wonder that the yuan fell from around 6.97 to 7.01 against the dollar again.
Nervousness in Asia
Investors in Asia were disappointed with the recent developments. The Nikkei 225 dropped by around 0.3 percent to 23,331 points after its recent twelve-month high. In China, the CSI-300 slipped by a whopping 1.8 percent to 3,903 points. Investors were also concerned about the unrest in Hong Kong. On Monday morning, another person was shot by a policeman who escalated violence on the streets. Demonstrators blocked the subway and some streets, the police used tear gas. There is speculation about an impending general strike. Trump warned Beijing weeks ago of military intervention in the former British crown colony and linked the matter to the customs dispute. The Hang Seng in Hong Kong closed with a sizable minus of 2.6 percent at 26,927 points.
New record high in S&P 500
Previously, Wall Street had presented itself calmly on Friday. The Dow Jones made up for its losses in recent trading hours and closed virtually unchanged at 27,681 points. The Nasdaq Composite advanced 0.5 percent to 8,475 positions. And the S&P 500 even gained 0.3 percent to 3,093 points, once again marking a record high.
This is what the day brings
There are no really important dates for Monday. The US bond market remains closed.
As always, you will find an overview of all economic data here: Market Mover
If you trade CFD or online stocks, you will otherwise have to read all the news from the Bloomberg news agency about trumps – customs disputes, impeachment, election chances, the economy – with a good portion of skepticism. The founder of the news agency, Michael Bloomberg, entered the election campaign on the Democratic side and was once a Republican. After all, the stock market is now potentially getting a business-friendly alternative.
The Bernstein Bank wishes you 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.