18.03.2019 – Weekly report. This will be the trading week of the central banks: three interest rate decisions will probably bring a lot of movement in the financial market. The Federal Reserve, the Swiss National Bank and the Bank of England are appearing in front of the press. Against this backdrop, not only the US dollar, the Swiss franc or the British pound could move, but also equities and government bonds. With the British Brexit theater, another long runner is directing our attention towards the foreign exchange market.
Starting Basis Annual High
First of all the review of the events at the end of last week: On Friday’s triple witching day, the DAX presented a ride toa new years highr. At the end of the triple witching day, the German benchmark index was up 0.9 percent at 11,686 points. The weekly gain was thus around 2 percent. At its peak, the DAX had even managed to reach 11,725 points, before the decline in futures in the afternoon pulled the index down again.
Wall Street is Celebrating
In the evening, the stock market bulls extended the party. After a weak start at the closing bell, the Dow Jones Industrial marked a plus of 0.5 percent to around 25,849 points. The US leading index thus gained almost 1.6 percent over the course of a week. The market-wide S&P 500 went into the weekend on Friday with a plus of 0.5 percent at 2822 points and the Nasdaq 100 rose by 0.9 percent to 7307 points.
No Reason for Interest Rate Hikes
By the way, trading in New York on Friday was initially slowed by bad economic news: the Empire State Index from New York fell by 5.1 points to 3.7 points, according to the regional central bank. This is the lowest level since May 2017, with forecasts pointing to an increase to 10.0 points. But: This gives the Federal Reserve new arguments to keep its feet still. In other words, not to raise interest rates for as long as possible. Especially since US industrial production climbed by only 0.1 percent in February, analysts had forecast a plus of 0.4 percent.
The news that the Chinese government wants to lower the value-added tax from April 1 in order to boost private consumption created a good mood. In addition China wants to pass an investment law that is supposed to bring more fairness to foreign companies and investors. Specifically, the National People’s Congress approved a law on Friday that is to come into force on 1st January 2020. Foreign companies are to be granted securitised rights. For example, forced technology transfer is to be prohibited in the future.
Two completely different things are to be right and to get right – and of course the Chinese courts are dancing to the tune of the communists. Nevertheless, this is a concession towards the USA. Hopes have thus returned that the customs agreement between America and China will finally be adopted in the near future, which, as things stand at present, is not expected until April.
Bank Merger Ahead
Investors should keep an eye on German financial stocks this week: Deutsche Bank and Commerzbank are now starting formal merger talks. The two largest German private banks announced this move on Sunday.
Tuesday will be exciting for German bonds and equities: At 11.00 a.m. the ZEW will announce its economic expectations for Germany in March. The forecast is -14.0 after -13.4 before.
At 3.00 p.m. German time, new orders from the USA are due for January. The forecast is -0.5 percent.
Brexit Again and Again
Also on Tuesday, according to the latest press releases, the British House of Commons should vote again on the resignation treaty negotiated by Prime Minister Theresa May with the European Union. After two rejections, however, approval is hardly considered realistic, which is why May is apparently considering a rejection of the vote. Most analysts now consider a hard Brexit to be probable. If accepted, the British would have to file an application for an extension in the aftermath of the EU summit on Thursday.
Thus anglophile investors direct on Wednesday at 10.30 o’clock the views on the consumer price index for January, the prognosis lies with 1,9 per cent.
Tension on the Oil Price
Oil market traders should pay close attention to regular market updates due to the threat of NOPEC legislation: If, contrary to expectations, the US Congress adopts the “No Oil Producing and Exporting Cartels Act”, OPEC will be threatened to leave – and then all ex-members of the cartel could increase oil production to the maximum, Suhail al-Mazrouei, the oil minister of the United Arab Emirates, threatened, according to press reports in a meeting with bankers. A crash in the oil price would destroy US oil shale producers because banks would then no longer lend them any money.
In keeping with this, the US data on crude oil stocks in the USA will be displayed on Wednesday at 3.30 pm.
Finally on Wednesday evening at 7 p.m. German time things will get exciting: The US Federal Reserve Chairman Jerome Powell will comment on American monetary policy. A rate hike of the current 2.5 percent is currently regarded as extremely unlikely – in the meantime the first brokers are even discussing rate cuts.
SNB and Bank of England
Finally on Thursday at 09.30 the Swiss franc will come into view: The forecast for the SNB’s interest rate decision is -0.75 percent.
British retail sales for February are also scheduled for Thursday at 10.30 a.m.. According to forecasts, this will amount to 0.2 per cent after 1.0 per cent in January.
Of course, the Bank of England will also discuss the domestic economy in its press conference on the interest rate decision. The interest news will be available from 1 p.m. on the ticker, the forecast is 0.75 percent.
At 1.30 p.m. the Philly Fed index for March should move prices on Wall Street. The average forecast is 3.2 after -4.1 in the previous month. The indicator shows the economic development in the Philadelphia region.
On Friday at 09:30, brokers will look at the Manufacturing Purchasing Managers’ Index for Germany in March. The forecast: 50.3.
In the afternoon the music will play again in the USA at 3 p.m.: Then the sales of existing houses will be announced for February. The forecast is at 5.1 million after 4.94 million in the previous month.
We hope that this extensive range of financial market events also includes the right thing for you – and wish you every success in trading!
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