Stock Markets: reactions and developments

Normally, the stock markets would hardly be able to make a move today on US Thanksgiving Day. But the signing of the “Hong Kong Human Rights and Democracy Act” by Donald Trump is a negative factor for the talks between the USA and China on Phase 1 deals. Beijing has appointed the US ambassador, and the Chinese State Department has just threatened the US with serious consequences if the Hong Kong Bill becomes a binding law. Beijing emphasizes its determination to take countermeasures, but does not say what these measures might look like. One of the first steps could be to impose sanctions on US representatives in Hong Kong. Hu Xijin, editor-in-chief of the Global Times this morning, hinted at this.

But Hong Kong is only one of the many points of conflict between the two great powers. Tonight China completed a missile test. It sees this as a signal to the USA. Especially in the South China Sea, which is so central to China’s supply, power demonstrations by the USA are constantly taking place. This is a provocation for Beijing. Is it just a coincidence that North Korea again held a missile test this morning? That, too, should be a sign from China to the USA.

The importance of the conflict in economic terms is demonstrated by the fact that China’s GDP has now overtaken that of the EU. This makes China the second largest currency area in the world. In 1992, the current EU economy was 15 times larger than China’s, ten times larger in 1995, five times larger in 2005 and three times larger in 2008. But while the Euro currently accounts for 20% of global foreign exchange reserves, the Yuan does not even have 2%. This gap will close in the next few years.

As FMN showed today in the article “Handelskrieg: Wie dringend braucht China den Deal?“, China’s stock markets, unlike the stock markets of the Western world, are not in year-end rally mode. China’s investors thus seem to be much more immune to the always optmistic reports that the trade war deal is now imminent. The US equity markets were quite different. When Donald Trump announced the Phase 1 deal on October 11th, the S&P 500 stood at 2950 points. Now we are in the range of 3150 points.

But what is the Dax doing about the situation today? Yesterday something relevant could have happened to the German benchmark index, as Jochen Stanzl shows in the following video (german):

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