11.06.2019 – Daily report. The trading floor is firmly in the hands of the optimists. After the Whitsun break, the DAX rises, Asia rises, Wall Street tightens its grip. The bulls refer to the agreement in the border agreement between the USA and Mexico. And they overlook new warning signals in the customs dispute between China and America.
Mexico and China support the DAX
The German benchmark index rose by more than 1 percent to 12,200 points on Tuesday afternoon. Brokers blamed the positive Wall Street figures for this development. Mexico now wants to curb the influx of people into the USA. On Friday evening President Donald Trump had suspended the punitive tariffs he had threatened on all Mexican imports indefinitely. Otherwise they would have entered into force yesterday.
German steel stocks posted partly significant price gains, with prices supported by hopes of increased Chinese demand. Beijing has increased the scope for regional governments to invest, and they can call up special bonds to finance infrastructure projects.
Asia ignores Trump’s threat
In China, this announcement mainly boosted the prices of construction stocks. The CSI 300 in China rose by a whopping 3 percent to 3,719 points. The Nikkei index gained 0.3 percent to 21,204 points.
Meanwhile, US President Donald Trump has threatened China’s President Xi Jinping with further tariffs on Chinese imports worth 300 billion dollars. These would take effect if Xi was not ready for a meeting at the G-20 summit in Osaka, Japan, on 28 and 29 June, Trump told US television station CNBC. Beijing has not yet confirmed a meeting. This means that all Chinese imports worth around 600 billion dollars into the USA would be subject to punitive tariffs.
China’s red line
Interesting footnote for Forex traders: Goldman Sachs expects China to depreciate the yuan sharply. The investment bank has just raised its three-month target for the USD/CNY from 6.95 to 7.05. The USD/CNY is expected to strengthen from 6.95 to 7.05. This would be the lowest level since March 2008, when Bear Stearns collapsed. With the break of the mark of 7, a massive capital flight from China could set in.
Wall Street wants to go up
Still without any reaction from Wall Street, Trump’s covert threat against a possible social media cartel remained. In an interview with CNBC just mentioned, Trump hinted at tougher action in the direction of Google and Facebook. Referring to the European Union, Trump said: “We should do what they do”. And continues: “Something is going on about monopoly.” The EU Commission has imposed competition fines of 9.5 billion dollars on Google. So keep an eye on your trading platform – something could soon move here.
Yesterday, at any rate, the Nasdaq 100 gained 1.1 percent to 7502 points. The Dow Jones rose by 0.3 percent to 26,063 points, but returned from its daily high of around 26,211 points. The S&P 500 recorded a plus of 0.5 percent to 2887 positions at the end of trading.
Focus on Italian bonds
There remains another political issue that CFD traders should keep in mind. Italian government bonds could soon be exciting. Because the government in Rome is standing up to the EU. The threatened deficit procedure because of the escalating national debt could frighten off some investors. And then perhaps, perhaps again, focus on the issue of the break-up of the euro zone. With corresponding consequences for the euro.
This is what the day brings
There are a few important dates for today, Tuesday. At 2.30pm the American producer prices will arrive. And at 10.30pm the private American Petroleum Institute reports the weekly crude oil inventory data.
The Bernstein Bank wishes you successful trades!
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