22.10.2019 – Daily Report. Mixed targets for the Frankfurt stock market: On the one hand, a surprisingly strong balance sheet season has pulled Wall Street up. There are also new, positive signals in the customs dispute between China and the USA. On the other hand, the Brexit situation remains confused. Tonight it will be exciting again for currency traders in Sterling.
Handbrake in Frankfurt
The DAX has started strongly into Tuesday and then crumbled a little. Germany’s leading index recently held up 0.1 percent to 12,757 points. The news situation remained confusing – both bulls and bears found arguments for their positioning.
New customs dispute hopes again and again
The most important stock market topic appears to be making further progress. US President Donald Trump expressed his confidence yesterday. Finally, Trump’s economic advisor Larry Kudlow followed suit: He told Fox Business Network that the tariff increases planned for mid-December could be reversed if talks continued well. And then Chinese Deputy Foreign Minister Le Yucheng added that both sides had made some progress in the talks. As long as they respect each other, there is no problem too big to be solved.
Upward potential for the yuan
However, both Americans remain cautious and are still sticking to the tariffs imposed. And on the other hand, the Chinese are pushing the yuan to counter the negative effects of punitive tariffs with cheaper prices for Chinese exports. However, it may soon be interesting for forex traders. According to Japan’s major bank Nomura, the yuan will probably only remain in a narrow range around 7.0750 for a while. This could change as soon as Phase 1 of the trade deal is signed, believes Stuart Oakley, head of Forex trading. He explained to CNBC via email that if a deal comes out at the APEC summit in Chile in mid-November, the yuan will approach the 7.00 mark again. But for this to happen, the elimination of existing tariffs would also have to be seriously discussed.
Rising prices overseas
In view of the new signs of hope, the Chinese blue chips in the CSI-300 rose by 0.4 percent to 3,986 points. The Tokyo stock exchange remained closed, Nippon celebrates the enthronement of Emperor Naruhito. Wall Street had rallied yesterday: The Dow Jones index closed 0.2 percent higher at 26,827 points. The S&P 500 gained 0.7 percent to 3,006 points and the Nasdaq Composite climbed 0.9 percent to 8,162 points. It remains to be noted that JPMorgan and Apple excelled with record highs.
The Brexit thriller continues
Meanwhile, “Hell’s Week” continues in the Brexit mess. Hoping for a regulated Brexit, GBPEUR has risen from 1.0725 to 1.1630 since mid-August. This trend is however in danger. According to “Guardian” Prime Minister Boris Johnson now wants to start a second attempt for his Brexit law.
Today, Tuesday, for the first time, MEPs are allowed to debate the draft of the withdrawal law in principle – the debate starts at 12.30 p.m. German time. The vote on the timetable of the “Withdrawal Agreement Bill” is scheduled for 20:00. Then the Commons will have a meeting all night long to discuss possible amendments. They could change the substance of the agreement and thus sabotage it, since it has already been negotiated with the EU. The law must not only be ratified by the House of Commons and the House of Lords at second and third readings by Thursday. The EU Parliament must also start the ratification process. Only then would a timely, regulated withdrawal be within reach. If not, a chaos Brexit threatens.
This is what the day brings
Apart from the Brexit thriller, there are only a few really relevant dates on Tuesday.
At 16.00 o’clock first the sales of used real estates in the USA are announced in September.
At 22.30 o’clock the weekly crude oil stock data of the American Petroleum Institute arrive.
Figures reported include Procter & Gamble, United Technologies, United Parcel Service, McDonald’s and Texas Instruments.
As always, you will find the overview here: Market Mover
The Bernstein Bank wishes you successful trades!
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