DE30: Bayer plunges as company was found guilty of groundskeeper’s cancer

Summary:

• Stocks in Europe start the day with substantial losses following the bleak session in Asia

• DAX (DE30) trades below its critical support, the lowest since mid-December 2016

• Bayer (BAYN.DE) declines more than 7% at the opening following the news from the US regarding a groundskeeper’s cancer caused by a Roundup weed killer

Sour moods across financial markets are taking their toll as both stocks and bond yields are falling this morning. Is the worst still ahead of us? Writing about European equity markets the major attention is paid to Italy and its battle with the European Commission over a budget, and it seems that this is going to be the prime driver for both stocks in Europe as well as the common currency. In this regard it is worth mentioning a morning report brought by Il Messaggero that Italy is reportedly ready to make adjustments to the budget of markets react negatively. Note that earlier there have been remarks that breaching the 4% handle in the Italy/Germany 10Y yield spread could lead to significant ramifications to the Italian banking system. A flight to safe haven is also seen in bond markets with the US 10Y yield sliding over 4 basis points toward 3.15% this morning and the German counterpart trading almost 2 basis points lower.

The German DAX (DE30 on xStation5) has opened with the bearish gap below 11400 points. Source: xStation5

Technically the German DAX has started the Tuesday’s session with a loss ca. 1.4% beginning trading below 11400 points, the crucial level from a this point of view. This threshold is also underpinned by the 50% retracement of the rally taking place between mid-June 2016 to the peak in January this year. We have been already writing that this level could be remarkably important for investors basing on a technical analysis. If they begin selling their holdings after the prices closes below the above-mentioned retracement, it would add downward pressure to the German index and push the price even toward 10800 points in relatively short time.

Bayer (BAYN.DE) is leading the losses on Tuesday following the adverse news from the United States. Only three stocks are trading above the flat line this morning. Source: Bloomberg

After 30 minutes of trading the German DAX is falling 1.4%. Indices in France, the UK and Italy are declining 1.15%, 1.1% and 0.9% respectively. Stocks in Spain (SPA35) are down 1.1% as well. Tuesday is going to be dominated by developments with regard to the Italian budget. It is worth mentioning that the Italian 10Y yield has erased gains after the earlier mentioned remarks from Il Messaggero. It is trading at 3.43% as of 8:45 am BST, down from today’s peak at 3.56%.

Bayer (BAYN.DE) is plunging this morning following a verdict of a California state judge which set aside a verdict in the first trial over allegations that the Bayer’s Roundup weed killer causes cancer. At the same time the San Francisco Superior Court Judge Bolanos reduced the August verdict to $78.6 million from $289 million, the amount Monsanto needs to pay as a fine. Why did the stock’s price react so negatively? The heavy declines seen this morning are primarily due to the fact that the California-based decision opens the way to an array of subsequent allegations from people affected by Roundup, causing possible costs to the group.