The DAX defies China

A Bank in Frankfurt

20/02/2019 – 12:00: It’s getting serious now: In the customs dispute between China and the USA, Beijing has decided to take out their torture’s weapons. After all, US President Donald Trump had previously sent out conciliatory signals – and negotiations are continuing. Thus, the DAX was in positive territory in early trading. Fresenius and FMC also put the bulls in a good mood. Wall Street had not sent out any impulses before.

Stagnation on Wall Street
The New York Stock Exchange had remained skeptical on Tuesday. In the course of trading, the Dow Jones had reached its highest level since the beginning of December. But then the prices crumbled, and the Dow recorded a gain of only 0.03 percent to 25,891 points at the closing bell. On Monday there was no trading in the USA because of Presidents’ Day. S&P 500 closed Tuesday with a gain of 0.2 to 2780 points. And the high-tech index Nasdaq 100 also advanced by 0.2 percent to 7067 positions.

Focus on Fresenius in Frankfurt
Meanwhile, the DAX was up by 0.7 percent to 11,390 points in early Wednesday trading. Fresenius and FMC outperformed: Despite difficulties in the clinic business and at its dialysis subsidiary FMC, the Fresenius health care group increased sales and net income slightly more than expected last year. FMC is also creating a buying mood with a share buyback program.

China warns the USA of the global crash
But the Chinese-American customs dispute continues to set the pace on the stock exchange. Every small cough will throw the stock markets back and forth. It’s starting to get exciting here: The Chinese leadership has just sent a clear warning to the USA through a mediator of the Communist Party. The KP newspaper “Global Times” reported, citing unnamed analysts, that any new US tariffs on Chinese goods could bring the world’s stock exchanges to their knees. In detail, the report says: “If the US were to impose higher tariffs and China were to react with tougher countermeasures, this would be a catastrophic blow to the global stock market.”

Of course, the Communists have also noticed that Trump has repeatedly cited Wall Street’s performance as an indicator of his success. No wonder, since gigantic players like Calpers – the Californian pension fund for civil servants – invest in the financial market; in a crash the pension of many voters would be cut. Goodbye, re-election. The S&P 500 has already won around 11 percent this year, the Shanghai Composite more than 10 percent in the plus.

Negotiators from both economic powers met again on Tuesday. Trump expressed confidence and indicated that the deadline set for an agreement at the beginning of March could be extended.
This was also positively received in Japan: In Tokyo, the Nikkei index gained 0.6 percent to 21,431 points. Japanese exports to China fell by more than 17 percent last month compared with the same month last year. Which is also an argument for China and the USA to come to a better agreement. Should Beijing be weakened further, purchases in Nippon are likely to decline even more.

The Fed takes the floor
And so, it continues on Wednesday: In the currency market it could be interesting for EUR/USD, because in the evening analysts will take a close look at the minutes of the Fed’s interest rate meeting at the end of January. They hope to find answers to the question of whether the Fed will tighten its interest rate screw soon or not.

Wal-Mart tops forecasts
Wednesday is also likely to see some movement in US retail equities. Retail giant Wal-Mart topped expectations for Q4, reporting earnings per share of $1.41, compared to $1.33 which was what analyst expected. The bulls will be interested in this sector on Wednesday. In addition, Wal-Mart raised the dividend to $2.12 per share, the 46th consecutive year in which the payout has risen.

Meanwhile, the financial calendar in the USA has thinned out considerably. The Home Builders’ Index is still due for February. In the meantime, almost all 500 companies of the S&P 500 have reported; according to the stock exchange site “Zacks”, about 400 companies reported an average increase in profits of 13 percent and an increase in turnover of 7.5 percent for the fourth quarter in a year-on-year comparison.

As you can see, the numbers at the stock exchange are richly laid out. The only thing that is clear is that volatility will hold. And there are three main topics: China, China and China.

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