30.09.2019 – Daily Report. The beginning of the week starts with new speculations regarding the China-USA customs dispute. Will Washington curb capital flows to China? Global trade is initially irritated. But a partial denial and a request to speak from the Federal Reserve provide support on the German stock exchange.
Fed Supports US Futures and DAX
Investors in Frankfurt are resisting the current: while the DAX had worked its way up on Friday, Wall Street slipped. Actually, a catch-up downward movement would be due. But the DAX remained unchanged at 12,385 points in early trading.
The US futures also pointed upwards again. One of the reasons: Charles Evans, head of the Federal Reserve Bank of Chicago, told CNBC that he was open about the right level of interest rates in the US (“definitely open minded”). Evans also sits on the Federal Open Market Committee (FOMC), which decides on interest rates.
Threatening US sanction against China shares
In addition, an important stress factor from Friday was partially eliminated over the weekend. According to a report by the news agency Bloomberg, the US government should consider limiting American capital flows to China – American money should not support Chinese companies. One possibility would be to stop listing shares of Chinese companies on American stock exchanges. The news about a possible delisting naturally put Chinese shares on the US financial market such as Alibaba or Baidu under pressure immediately.
In addition, the involvement of American pension funds in Chinese markets could be limited. One way of doing this would be for index operators like MSCI to restructure their indices. For example, the All Countries World Index (ACWI), in which Chinese companies have a share of 3.6 percent according to “Focus” and thus form the fifth largest position. Index operators would then have to sell Chinese shares massively.
One day after the announcement, the US Treasury Department partially denied the matter on Saturday: There were no plans for a delisting of Chinese shares in the USA. Which leaves the part open that the exposure of US investors to Chinese equities could be restricted through funds. Let’s wait and see.
Falling prices despite robust China data
In the light of speculation, the CSI-300 dropped 1 percent in the morning to 3,815 positions. New economic data from China was quite positive. The purchasing managers’ index of the Chinese business magazine “Caixin” – which measures the mood in small and medium-sized companies – rose to its highest level in one and a half years. The government indicator for large, state-owned industrial enterprises also climbed slightly. However, it remained just below the growth threshold. In Japan, industrial production fell in August compared with the previous month. The Nikkei 225 closed 0.6 percent lower at 21,756 points – its lowest level for almost three weeks. As always, you can find all the data here: Market Mover
Losses in New York
On Wall Street, the most recent trade dispute between China and the U.S. described above caused unrest late Friday evening. The Dow Jones turned negative, closing 0.3 percent lower at 26,820 points. The Nasdaq 100 lost 1.2 percent to 7,681 points. The S&P 500 fell 0.6 percent to 2,960 points.
This is what the day brings
The economic calendar is rather clear at the beginning of the week.
In Germany the consumer price index for September runs at 2pm over the ticker.
The ECB weekly report on the bond purchase programme will follow at 3:45pm.
At the same time, the Chicago purchasing managers’ index for September is reported.
Bernstein-Bank wishes successful trades!
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