19.06.2019 – Daily report. Investors on the Frankfurt Stock Exchange are initially taking it easy after the previous day’s profits. On Wednesday midday, the DAX is moving sideways, but the mood is far more confident than in the days before. Before the Federal Reserve’s interest rate decision in the evening, however, only a few stock market participants dare to leave the cover. And the overseas targets are positive – because now there is to be a meeting between the presidents of the USA and China.
Monetary policy provides confidence
The bulls fueled their strength and digested their profits from Tuesday. The DAX recently held up 0.1 percent. On the German stock exchange, as in global trading, there was renewed confidence that the Federal Reserve would verbally prepare the market for interest rate cuts in the evening. Most analysts expect the currency guardians to leave the key interest rate in the range of 2.25 to 2.50 percent this time.
In addition, the announcement by ECB President Mario Draghi on Tuesday that the European Central Bank could loosen monetary policy further if the economic outlook does not improve also had an impact. This looks like a devaluation race between the dollar and the euro. So forex traders should keep an eye on the situation and fill their financial arsenals with Germany’s best CFD brokers.
New hope in the customs dispute
US President Donald Trump also announced on Tuesday via Twitter that he had had a “very good” telephone conversation with China’s President Xi Jinping. He and Xi would have a longer meeting next week on the fringes of the G-20 summit in Japan. The teams on both sides would start talking earlier.
Obviously, the pragmatists have prevailed against the concrete heads in the Chinese leadership. For even Hu Xijin, the editor-in-chief of the English-language Global Times, who is regarded as the mouthpiece of the Communist Party’s dogmatic wing, had to eat chalk now. He twittered that the phone call would bring the narrow hope of resolving the blockade between the two countries.
The Asian stock markets had risen accordingly on Wednesday. The Nikkei 225 closed 1.7 percent higher at 21,334 points. In China, the CSI-300 rose by 1.3 percent to 3,716 points.
Tube-breaker instead of financial nuclear weapon
The question remains as to whether China has noticed that the alleged nuclear option to sell US government bonds is only a pipe-breaker. According to the US Treasury, Beijing sold $7.5 billion worth of Treasuries in April alone. And lo and behold: Now the Chinese stock amounts to “only” 1.1 trillion dollars – that is a two-year low. In the high, the Chinese had held securities with a volume of a good 1.3 trillion dollars. Now it turns out that there are enough other buyers for the US bonds. Moreover, China would reduce the value of its bonds if it were to sell them on a large scale. So Beijing would cut itself into its own flesh.
Wall Street targets all-time high
The mix of new interest rate fantasies and the signals in the trade dispute had also boosted prices in New York. The leading Dow Jones Industrial index climbed by 1.4 percent to 26,466 points, marking a six-week high. The previous record of 26,951 points from October appears within reach. The broad-based S&P 500 gained almost 1 percent to 2,918 points yesterday. And the Nasdaq 100 gained 1.5 percent to 7635 points.
This is what the day brings
The view remains on the appointment calendar. The Ouverture is a speech by ECB President Mario Draghi at 4:00pm. Perhaps he will once again fire up the interest rate fantasy when he concludes the ECB Forum in Portugal “20 Years of European Economic and Monetary Union”.
At 4:30pm, the American Energy Information Administration (EIA) presents its weekly oil report.
And at 8 pm the Federal Reserve’s interest rate decision follows, followed at 8:30pm the press conference with Fed Chairman Jerome Powell.
The Bernstein Bank wishes you successful trades!
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