18.09.2019 – Daily report. Rien ne va plus: The shareholders on the Frankfurt Stock Exchange go on a temporary strike. Commitments are in short supply. It is hardly to be expected that the situation will change over the course of the day. Because in the evening the Federal Reserve announces its interest decision. Otherwise, the situation on the oil market will continue to ease.
Break in Frankfurt
Hardly any movement on the Frankfurt Stock Exchange: The DAX has barely changed recently at around 12,380 points. The crisis in the Persian Gulf receded into the background. Hardly any attention was paid to a report on the faltering European automobile market: from January to August, 3.2 percent fewer cars were registered than in the same period last year. For investors, only the Federal Reserve was important: for most brokers, another rate cut is a foregone conclusion.
Second rate cut priced in
This much conviction has never been so strong: most analysts expect central bankers to lower their key interest rate band by a further 0.25 percentage points; the current range is between 1.75 and 2.0 percent. At the end of July, the currency authorities had lowered interest rates for the first time in more than ten years.
The unshakeable faith of the market naturally harbours a high potential for disappointment – which often comes unexpectedly. Perhaps Fed head Jerome Powell wants to demonstrate his independence. If you trade CFDs or are active in online stock trading, you might want to consider a protective put. Or because of the recent rise in oil prices and the unresolved trade dispute with China, the Fed is pushing the gas pedal through and lowering interest rates even more than hoped for – then you can look forward to a bull market on the stock exchange.
Relaxation on the oil market
By the way, the magazine “Forbes” highlighted how closely the topics of oil/ Iran and China are connected. Beijing has promised Tehran investments of 400 billion dollars over the next 25 years. The aim is to expand oil and gas production and infrastructure. China wants to quench its thirst for oil and de facto circumvent the sanctions of the West. Interesting side effect: If the USA and Saudi Arabia were to strike at Abquaiq and Kurais against Iran in retaliation for the weekend air strike, they would also hit China. If refineries and ports are destroyed, the Chinese would probably have to put even more money on the table for reconstruction.
Otherwise, the oil price settled back south after the wild ride of the past few days. A barrel of WTI was last traded at around 59 dollars, a barrel of Brent at around 65 dollars. Saudi Aramco had reported that full production was to be restored by the end of September.
No clear trend in Asia
The CSI-300 in China gained 0.5 percent in the morning to 3,911 points. The Nikkei closed 0.2 percent lower at 21,961 points. Japan reported falling exports again in August – for the ninth time in a row. The minus of 8.2 percent was quite strong, with many analysts expecting an even worse decline. All data can be found here: Market Mover
A slight plus in New York
On the evening before, the New York Stock Exchange had also been rather reserved. The Dow Jones Industrial gained a little only shortly before the closing bell and dropped 0.1 percent more firmly out of trading at 27,111 points. The S&P 500 rose 0.3 percent to 3,006 points and the Nasdaq 100 climbed 0.5 percent to 7,889 points.
This is what the day brings
The Fed’s interest rate decision marks the most important date of the day at 8 pm German time. It will be even more exciting from 8:30pm when Fed Chairman Powell will give his outlook on the topics of inflation, economic growth and unemployment. Each half-sentence could whirl Wall Street, Dollar and US-Bonds around, therefore you should absolutely keep your regular market updates in the view.
Before that, US building permits and construction starts for August are due at 2:30pm.
The weekly crude oil inventory data from the Energy Information Administration will also be available from 4:30pm.
The Bernstein Bank wishes you successful trades!
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