- Weaker open expected in Europe, Asian shares mixed
- Hang Seng drops after China plans to open security office in Hong Kong
- Global COVID cases rise by most on record
- DAX drops as Germany R-rate rises to 2.88
- Lufthansa (LON:0H4A) bailout hangs in the balance
Opening Calls
FTSE 100: 6,225 (-67 pts)
DAX: 12,165 (-165 pts)
S&P 500: 3,077 (-20 pts)
Markets
Markets are taking the concerning rise in coronavirus cases on the chin. Asian shares were mixed with the Hang Seng the biggest decliner. European shares are opening in the red but so far without a sense of panic. Wall Street looks on course for a lower open. Currency markets are mostly flat with the pound higher, unwinding some of last week’s big fall. Gold is hovering just under the key $1750 threshold while oil prices are positive as the US rig count continues to drop.
COVID Update
A sharp rise in COVID cases in the Americas, specifically Brazil and the US caused the biggest daily rise in new global cases. At the same time, Germany’s virus reproduction rate jumped to 2.88 – meaning one infected person will on average infect almost three others. Germany’s economic reopening rested on the figure being bellow 1.0. The DAX is slipping close to 1%. If sustained, Germany will have to delay aspects of the reopening and slow the economic recovery. The losses are being contained since officials have so far dismissed the idea of another full lockdown.
'Security Office'
The decline in Hong Kong shares were brought on by the release of more details on the new China security law. The central government will have jurisdiction in certain security cases and China will establish an office in Hong Kong. It looks like an incremental step toward the mainland taking complete control of Hong Kong. Shares are lower as investors react to the speed in which China is acting having just passed the law.
Lufthansa
German airline will face a vote on its government bailout package this week. The bailout feels like its still not a done deal. Top shareholder Heinz Herman Thiele isn’t happy with the current terms and so few shareholders have registered to vote on the deal that a two-third majority is needed to carry it through. We think most shareholders will see that beggars can’t be choosers; a deal along the lines of the current conditions will likely be agreed.
Chart: DAX (6-months)
Germany’s DAX index has retraced 2/3rds of its drop from 12,900 – an area that can sometimes begin a second leg lower.