DE30: BMW mulls issuing bonds in China

Summary:
- European countries start to follow Chinese way in supporting companies
- DAX (DE30 on xStation5) may have formed trading range
- BMW (BMW.DE) is said to be considering issuance of panda bonds

European equities followed into footsteps of their Asian peers and headed lower at the beginning of Thursday’s session. Spanish and UK stocks underperformed the most while Polish companies managed to post minor gain. Food companies gained the most while miner lead laggards.

DE30 (DAX futures underlying) continues to find support at the recently broken downward sloping trendline. The benchmark failed to break above the local peak from early-December around 11560 pts and this may be the first level to watch for bulls. Unless a major price impulse is spotted the index may continue to trade in this somewhat widening range for some time. Source: xStation5

Yesterday we wrote about speech from the German Chancellor Angela Merkel in which she called to support European companies more in order to help them compete with global leaders. A call for government intervention can be seen as somewhat strange given that the era of state-controlled European economies is long over. However, the truth is that such approach is already being undertaken by European countries. Germany advocates merger of the Deutsche Bank and Commerzbank to strengthen German lenders abroad, Italy raised stakes in Alitalia and Telecom Italia, French and German authorities publicly expressed their outrage when the European Commission blocked Alstom-Siemens merger. Adding fact that the major UK opposition group - Labour Party - scored high in 2017 elections by promising to nationalize rail, energy and water industries we can see that the European economy steers away from being market-driven. Of course, such approach caused Chinese economy to thrive but question remains whether this is the way European leaders want to follow given how fragile China looks right now.

Major European stock market indices after the first hour of trade:
- DAX (DE30): -0.30%
- FTSE 100 (UK100): -0.82%
- CAC40 (FRA40): -0.12%
- IBEX (SPA35): -0.61%
- FTSE MIB (ITA40): -0.14%

Infineon (IFX.DE) leads DAX losses after sentiment towards tech sector was spoiled. Source: Bloomberg

Company News

BMW (BMW.DE) is said to be looking for financing on a whole new market. According to Bloomberg report, the German carmaker is in talks with banks over debut panda bond offering. Panda bonds are renminbi-denominated bonds offered in China by foreign companies. If successful, issuance of panda bonds may be cheaper way to finance BMW’s operations in China.

Infineon Technologies (IFX.DE) is taking a hit today after sentiment towards tech companies was spoiled. Lacklustre earnings reports from the US tech companies as well as concerns over falling memory prices in Asia exerted pressure on tech stocks, especially from the semiconductor industry, and Infineon is no exception. However, as these reasons are not company-specific the stock may regain some ground later on.

EON (EOAN.DE) announced today that it has joined consortium of Engie and EDPR and will be bidding with those companies for an offshore wind farm project. The 600-megawatt English Channel project was announced by the French government and is expected to be completed by 2025.

After some underperformance in the final quarter of 2018 EON (EOAN.DE) managed to climb back above the long-term upward sloping trendline. The stock reversed after touching the resistance zone ranging 9.85-9.95 and in turn one cannot rule out a test of the 9.50 handle. Source: xStation5