DE30: BMW under pressure as European car sales drop again

Summary:

• European equity markets open lower after the news from China
• European car sales drop in April, the eighth consecutive month of declines
• BMW shares in a retreat this morning falling more than 6%

Uncertainty is the worst thing for markets and this is currently seen across financial markets. A tug-of-war between the US and China has sown a lot of uncertainty in addition to what we already had. Each day we are offered different revelations from both sides which does not act in favour of better sentiment. The most recent news came from China that the country is reportedly not interested in negotiating with the US under a threat that the latter may come up with yet higher tariffs. As a consequence, Chinese equities dipped on Friday. In Europe, the start of trading has also been downbeat as all major indices are hovering clearly below their recent close levels. Moreover, the newest data on car sales from the old continent did deteriorated already poor market sentiment. Namely, in April we got the eight decline in car sales in a row and naturally shares of European carmakers are down this morning. One may notice that BMW shares have taken the brunt of the release in the largest extent as they are trading down 6%.

April saw the eight consecutive month of European car sales. BMW shares are down in response to this report. Source: Bloomberg

A technical landscape for the DE30 does not look so bad. At first, we would like to notice that the price managed to stay within the bullish channel after a successful test of the support - the lower end of the mentioned channel along with the 50DMA. As a consequence, we saw three consecutive days of gains. Nevertheless, having in mind that the latest news from Beijing one may call into question the further rebound. What’s more, even as bulls try to keep climbing, they will face a notable resistance nearby 12 400 points. In turn, the closest support may still be found in the vicinity of the above-mentioned lower boundary of the bullish channel.

The DE30 saw three days of gains after testing the lower end of the upward channel. Source: xStation5

As we mentioned earlier, BMW shares are among the largest losers of the news regarding the falling number of car sales in Europe. In April a number of cars sold fell 0.4% in annual terms, however, this decline came partly due to a demanding base from the same time last year. In the first three months of the year car sales declined 3.5% in annual terms.

Looking at the BMW weekly chart one may arrive at a conclusion that the worst may be already behind as the price is approaching the crucial technical support nearby 64 EUR per share. This level was a springboard for rises in the past, hence bulls may hope for the same this time around. If this is the case, a possible rebound could reach at least the upper boundary of the bearish channel followed by 78 EUR. Source: xStation5