DE30 attempts to break back above 8,600 pts

• European equities sink at the beginning of the week

• DE30 attempts to break back above 8,600 pts

• MTU Aero Engines (MTX.DE) to suspend operations at some production plants

Global equity markets are experiencing heavy declines at the beginning of a new week. The situation comes after the coronavirus death toll spiked over the weekend and the US Senate failed to agree on a coronavirus relief package. However, the discussions are set to continue therefore some related headlines may surface in the afternoon. 

Germany could borrow up to €350 billion to fight coronavirus

So far the German government pencilled in €150 billion additional borrowing this year for a coronavirus fight. While the number itself is big, it may not be the end of the story. Joerg Kukies, Deputy Finance Minister of Germany, said that a rescue fund set to purchase stakes in troubled companies may issue an additional €200 billion in debt. The final size of the borrowings will depend on the number of companies that ask for government aid. A supplementary budget that includes the aforementioned €150 billion borrowings is set to be approved today.

Source: xStation5

In spite of a massive plunge over the weekend, DE30 remained within the Overbalance structure. The index dropped to a low near 8,150 pts shortly after futures markets opened. However, a steady upward move could be observed since and the index closed in on the 8,600 pts handle. The first attempt of breaking higher failed therefore this level could be a resistance to watch during today’s session. Looking for potential support, traders should focus on 8,200 pts in the first place. The two levels that mark overarching trading range are defined by the aforementioned Overbalance structure - 8,000 pts (lower limit) and 9,150 pts (upper limit).

DAX members at 9:20 am GMT. Source: Bloomberg

According to the Welt am Sonntag report, Airbus (AIR.DE) is currently burning through around €5 billion each month. Moreover, the German weekly claims that the European planemaker has only around €15 billions left, so it may run out of funds in three months. Should the newspaper’s claims be true, it would highlight the case for German state aid for Airbus. Troubles come in spite of Airbus massive order backlog as airlines try to postpone their orders.

MTU Aero Engines (MTX.DE) suspended operations at some production facilities as interruptions in material supply have begun. Activities at Munich, Germany and Rzeszów, Poland facilities will be ramped down by the end of the week and are expected to be suspended for 3 weeks starting from April.

Traton, subsidiary of Volkswagen (VOW3.DE), reported full-year 2019 earnings. Sales reached €26.9 billion and after-tax profit stood at €1.52 billion. The company declared a dividend of €1. However, Traton decided to abandon the 2020 outlook due to the coronavirus outbreak and said that it is impossible to update it in the current landscape.

Analyst actions

• BMW (BMW.DE) raised to “overweight” at JPMorgan. Price target set at €50

• Bankhaus Metzler cut the price target for Munich Re (MUV2.DE) to €219. “Buy” rating was maintained

• MTU Aero Engines (MTX.DE) cut to “neutral” at Oddo BHF. Price target set at €170

Share price of Volkswagen (VOW3.DE) recovered a bit at the end of the previous week and managed to close the week above the support zone ranging around €90 handle. However, the stock is pulling back today and eyes a break below 2015 lows. An area near the €80 should be seen as final support. Source: xStation5