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Massive Day for the Euro & DAX

Chart of the Day: DAX30 (4hr candlesticks)
Source: GKFX / MT4 (July 16, 2020)


The DAX index is testing the important 13k level for the second time, after it acted as support 3 times before the March sell-off. A breakout could pave the way to new record highs.

•    SMIC takes off 200% on Shanghai listing
•    China shares dump -4%
•    PREVIEW: EU Summit 
•    CHART: DAX 30 – 13k Breakout?



 

MARKETS


It has been choppy in currency markets in the lead up to a potentially massive day for the euro today. The single European currency led an early charge higher, with the Aussie dollar again testing 0.70 but most G10 currencies dropped later in the session as the dollar recouped daily losses.

Chinese shares took a battering on Thursday, losing 4% with local investors seemingly switching their attention to chip-maker SMIC, which rocketed 200% on its debut listing in Shanghai. Stocks in Europe closed mostly lower after the ECB left policy unchanged. On Wall Street another daily drop in big tech shares before earnings next week pulled the major benchmarks lower.

Gold and silver were both soft throughout the day, with the latter still just holding $19 per oz at the end of trading Thursday. Brent crude oil has been stuck rigid at $41-43 per barrel over the past week.
 

GURU WISDOM


“Most investors want to do today what they should have done yesterday.” – Larry Summers
 

SMIC’s Big Debut


China’s largest chipmaker SMIC jumped out of the gates on its Shanghai debut. The shares already trade on Hong Kong but the extra placement in Shanghai was well-timed given the recent optimism in China markets. It was China’s biggest mainland listing since Agricultural Bank of China in 2010. SMIC is bidding to become China’s rival to South Korea’s Samsung Electronics. At the moment it mostly builds other companies chips but will likely used the newly raised funds to invest in its own R&D.
 

EU Summit

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A senior EU official was quoted Thursday saying “we are not there yet on agreement on next EU budget and recovery fund.” Still, with Germany’s Angela Merkel and France’s Emmanuel strongly pushing to work out a deal, it seems like the EU Recovery Fund could actually be agreed at this summit. 

The European Commission has suggested a €750 billion fund with €500 billion in grants and €250 billion in loans. To please the ‘Frugal four’ countries it might end up being a smaller fund with a lower proportion of grants- or just a lot of strings get attached to the grants- but either way any agreement should be good news for the euro and stock indices like the DAX.
 

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