DE30: Bayer slumps on updated outlook

• EU to take UK to the court over Internal Market Bill

• DE30 remains stuck in short-term range

• Bayer (BAYN.DE) slumps on updated outlook for crop business

EU-UK skirmish over the shape of the post-Brexit relationship has once again gathered attention in the markets. EC President, Ursula von der Leyen, announced that European Union will seek a legal action against the United Kingdom and recently passed the Internal Market Bill. The Bill allows the United Kingdom to walk away from parts of the Withdrawal Agreement reached last year. News has caused a major pullback on GBP and boosted risk-off flows on the equity market. While most of the stock market indices still trade above yesterday's close, gains are very small.

Source: xStation5

DE30 seems locked in between 50% and 61.8% retracements of the August's upward move. Index seesawed yesterday between the lower limit of the range at 12,665 pts and the upper limit at 12,830 pts and sideways move is being continued today. Today's Brexit developments caused a pullback on the European stock markets but part of losses has been recouped already. DE30 is likely to continue to trade within its current range unless we see a major move in either direction. Today's jobless claims and ISM manufacturing data could provide some more volatility on the equity market but unless we see major deviations from expectations, big move looks unlikely. NFP report for September (Friday, 1:30 pm BST) is the major near-term risk event for stocks as it will be the last jobs report ahead of the US elections. Should bulls regain control and we see a break above the upper limit of the range, swing level at 12,900 pts will come into focus.

DAX members at 10:38 am BST. Source: Bloomberg

Company News

Bayer (BAYN.DE) is the worst performing DAX member today. Company said that the negative impact from the coronavirus on agricultural commodities is likely to extend into 2021 and that it will have to slash around €1.5 billion in annual costs. Moreover, Bayer reportedly considers reducing employment as well as selling some businesses. Announcement triggered a wave of downward revisions to analysts' recommendation, what further magnified negative impact on the share price. Bayer is trading around 10% lower after declining as much as 13% earlier.

The Supervisory Board of Continental (CON.DE) approved a restructuring plan. The plan will affect around 30,000 jobs globally, with 13,000 of these jobs being located in Germany. However, Continental warned that it does not mean that 30 thousand jobs will be eliminated. Apart from that, the company plans to shut the tire plant in Aachen by the end of 2021 as well as discontinued electronics production at the plant in Karben by the end of 2023. Restructuring aims to achieve over €1 billion in annual savings starting from 2023.

Infineon Technologies (IFX.DE) is rallying along with other semiconductor stocks. Sentiment towards the sector improved after STMicroelectronic released preliminary Q3 results. Earnings report highlighted acceleration in demand for various electronic and semiconductor products.

Share price of Continental (CON.DE) continued to rise after the company announced a major restructuring plan. Stock is leaping above the resistance market with 78.6% retracement of September's correction today. Post-pandemic high reached in the first half of June 2020 can be found at €101. Source: xStation5