DE40: Continental shares 8% surge improving sentiments on DAX

• In the absence of Wall Street (Independence Day holiday in the US), sentiment in European equity markets remains solid; DE40 gains nearly 0.2%
• Continental rebounds nearly 8%; company expects improved results in China, balancing weaker sales in Europe
• Automobile manufacturers record a rebound from recent declines. Mercedes-Benz and Volkswagen lead the increases
• Surprisingly weak German industrial orders data; construction PMI slightly higher

After yesterday's record-breaking session in the United States, where the weakest ISM services data in four years weighed on bond yields, and gains were again dominated by Tesla, joined by Nvidia (NVDA.US), we are seeing better sentiment in Europe today as well. German factory orders data pointed to an unexpected -1.6% m/m decline, versus an expected 0.5% increase and -0.2% drop previously. The construction PMI index fared slightly better (but still very low) at 39.7 versus 38.5 in May. Investor attention shifts to 12:30 PM BST when markets will listen closely for any dovish signals in the June minutes, from the ECB meeting.

In addition to gains on Continental (CON.DE), invariably buyers are active today in the stocks of Sartorius (SRT.DE) and Rheinmetall (RHM.DE). Dailmer, Mercedes, Porsche and Volkswagen are also doing better. Source: Bloomberg Financial L.P.

DE40 (M15 interval)

Looking at the DAX futures short-term, we see that the index has a significant rise of nearly 400 points behind it, the scale of which is very similar to the previous impulse, followed by a dynamic correction. A repeat of such a scenario would certainly hurt sentiment, while European benchmarks can count on a favorable 'breeze' from the US, where Wall Street is doing very well and expectations for a Fed rate cut in the fall are rising. A test of resistance at the 18,700 plt. level could open the way for the index to reach the psychological level near 19,000 points.
Source: xStation5

Continental sees rebound on Chinese market

• On a conference call with investors yesterday, Continental made some news that pleased the markets and 'sent' the stock nearly 12% higher. First, the tire maker is counting on accelerated growth in its automotive segment, as higher sales in China will cushion its relative weakness in European demand.

• The company expects China to be its main driver in the second half of the year, while the market was expecting rather cautious comments on demand in the Middle Kingdom's economy.

• Analysts at Warburg Research called the company's comments 'encouraging,' pointing to the prospect of further favorable price negotiations with tire dealers. They estimated that free cash flow could (surprisingly) turn slightly positive in the second quarter of the yea

• Citi points out that the company will be favored by the expected improvement in margins of the automotive sector in the second half of the year, as well as lower costs due to lower prices of raw materials required for tire production. Contientnal will report second-quarter results for the year on August 7.

Continental (CON.DE) shares, D1 interval

Continental's shares are gaining almost 8% today, but initial gains of over 12% were quickly met with profit-taking and the current share price is again trading slightly below the SMA50 (orange line). To test the strength of the trend, at the SMA200 level, the stock still lacks almost 20% growth.

Source: xStation5