Sunday, August 9, 2020

Dow Jones, Nasdaq, S & P500: Fed Aid Drives US Stock Exchanges

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Dusseldorf For the fourth day in a row, the US stock markets start with profits. The US leading index Dow Jones rises 1.3 percent to 23,737 points, the broader S&P 500 gains almost two percent to 2804 points and the technology-heavy Nasdaq Composite gains 1.5 percent to 8210 points.

The price gains followed the announcement of further injections by the US Federal Reserve against the corona crisis. There is a $ 2.3 trillion aid package for small and medium-sized businesses and regional governments. Among other things, the banks are to provide four-year loans for companies with up to 10,000 employees.

This also outshone the ongoing wave of unemployment claims. Last week, 6.6 million Americans made an initial application, more than expected by analysts.

The markets are continuing their positive weekly trend, which started with a strong rally on Monday. The Dow Jones closed at 21,053 points on Friday last week, and is up almost 13 percent on a weekly basis.

Compared to the high of 29,551 on February 12, the Dow Jones is still more than 20 percent down – and thus in a bear market. This is achieved when prices have fallen by more than 20 percent compared to the high.

On Wednesday, too, the indices had risen by around three percent after a breather on Tuesday. The markets had been given positive signals about the state of the coronavirus pandemic, and the exit of the left-wing Senator Bernie Sanders from the pre-election campaign by the US Democrats also caused prices to rise.

Gold prices are also rising

How sustainable the price increases are, however, remains to be seen. Due to the upcoming extended Easter weekend, some investors could still get cold feet and cash in, warned market analyst Milan Cutkovic from brokerage firm AxiTrader. “In the current situation, four days are an eternity, and it doesn’t take a lot of bad news to trigger another sell-out in the markets.”

No stabilization of the US stock exchanges: “Down risks greater than up opportunities”

For this reason, some investors turned to the “anti-crisis currency” gold before the holiday, said analyst Jeffrey Halley of the brokerage firm Oanda. The precious metal rose 1.7 percent to $ 1,673 per troy ounce (31.1 grams).

Look at other asset classes

Investors are also eagerly awaiting advice from Opec plus, which, in addition to the members of the export cartel, includes other crude oil-producing countries such as Russia. An agreement to cut production is considered certain, said portfolio manager Thomas Altmann from the investment advisor QC Partners. “So everything revolves around the question of whether the cut in production will be large enough to stabilize the oil price sustainably.”

If the US pulls together with Opec plus, even a relatively low throttling of ten million barrels a day could give the oil price a strong boost, predicts Naeem Aslam, chief market analyst at brokerage firm AvaTrade. “Without the US on board, even a 15 million barrel reduction would probably not raise the price above $ 40.”

Against this backdrop, Brent oil from the North Sea rose 3.5 percent to just over $ 34 a barrel (159 liters). WTI grade oil rose over four percent to $ 26.43 a barrel.

Focus on individual values

US oil companies: In the hope of cuts in production by major oil producers, investors are grabbing papers from US oil companies. Exxon and Chevron stocks climb up to 1 percent off-exchange. The oil producers Apache, Whiting Petroleum, Devon Energy, Diamondback Energy, Occidental Petroleum, Hess Corp and Marathon Oil are up between 6.5 and 16 percent.

Diageo: The world’s largest spirits company has cashed in on its annual targets due to the corona crisis and has suspended its billion-dollar share buyback program. The manufacturer of the whiskey brand Johnnie Walker does not currently see itself in a position to precisely quantify the consequences for the company. The share gains over two percent.
With agency material

More: Bank of England now has to finance British government debt


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