Before the bell: Rollercoaster

European and U.S. stock futures point to a green start for today’s trading session.

After heavy losses on Asian markets, European and U.S. exchanges also opened sharply lower yesterday. At least part of those losses was clawed back. In Brussels, the Bel20 ended 4% lower after an early dip of 6.5%. Umicore (-6%), GBL (-6.5%), and Elia (-7.3%) still sank deeper. In Frankfurt, the DAX crashed 10.4% in early trading but closed the day down just 4.1%. At one point, the index even showed a slight gain. The least one can say is that investor nervousness led to plenty of market swings. That’s also reflected in the VIX, which measures volatility in the S&P 500. Yesterday, the VIX spiked to 47.4, indicating high levels of fear and tension among investors. Wall Street eventually closed with only a slight loss for the S&P 500 (-0.2%), while the Nasdaq (+0.1%) managed to end in positive territory. Trump, meanwhile, threatened to hit China with new tariff hikes today.

This morning, Asian markets are seeing a modest recovery. In Hong Kong, the Hang Seng Index is up 1.6%. Geely Automobile (+4.5%), Xiaomi (+5.1%), and JD.com (+6.9%) are performing even better. In Japan, the Topix is up 5.6%, with Toyota gaining 6.4%. In the U.S., we’re expecting earnings from lubricant producer WD-40 Company and pharmacy chain Walgreens Boots Alliance.

Defense Under Fire

Rheinmetall announced the acquisition of a chemical company yesterday—one that produces raw materials for coatings. Hagedorn-NC will now need to change course quickly, as it will be repurposed for ammunition production. The German defense company is attempting to ramp up production capacity to meet the rising demand in the defense sector. Interestingly, Rheinmetall’s own stock came under pressure yesterday, dropping as much as 26.9% during morning trading. A swift recovery followed, and by market close the loss had narrowed to just 2.5%. That’s a 15 billion euro swing in market value. How does that happen? Not long ago, the European defense sector was the place to be for investors. Over the past five years, Rheinmetall’s share price surged more than 1,800%. But the trade war is driving investors away. Perhaps some hedge funds exited or speculators got hit with margin calls. Either way, the strong rebound demonstrates the stock’s resilience.

(Don’t) Go With the Flow

In Amsterdam, shares of Flow Traders closed with a gain of 2.1% yesterday. During the morning session, the stock was even up 6.6%. Flow Traders is a market maker that continuously posts buy and sell prices for financial instruments such as BlackRock (iShares) ETFs. Fund providers typically don’t—or aren’t allowed to—quote prices for their own ETFs. Flow Traders earns a fee from the asset manager and profits from the spread between bid and ask prices. On a volatile, high-volume day like yesterday, the firm likely saw strong revenue. Still, we would steer clear of the stock. The Dutch company pays its management and employees generous bonuses, but shareholders receive no dividend at all.

Did you know…

that European and Wall Street markets are expected to open higher today? That’s what stock futures suggest. The S&P 500 and Nasdaq are set to rise about 1.5%, while European markets could open as much as 2.5% higher.

This article was translated from Dutch and was originally published on Spaarvarkens.be.