DE30 bounces off 12900 pts after solid ZEW data

• European stocks slide as tariff deadline looms large

• DE30 approaches lower limit of the upward channel

• Deutsche Bank (DBK.DE) expects higher trading revenue in the coming years

European stock markets are sinking today following downbeat trade comments from the Chinese foreign ministry. The German DAX broke to the lowest level since the beginning of November but managed to recoup some losses after better-than-expected ZEW data. 

Trade comments send stock markets lower

Chinese foreign ministry urged the United States to “drop cold war mentality” in order to restore stable relationship and stressed the potential for cooperation. These comments were neither new, nor “meaningful” but markets are nervous as new tariff deadline looms large. Traders can expect some volatile swings to occur in the run-up to the weekend.

However, DE30 got some relief after the release of ZEW data for December. Current conditions subindex jumped from -24.7 pts to -19.9 pts (expected -22.3 pts) while expectations gauged moved from -2.1 pts to 10.7 pts (expected 0.5 pts). ZEW institute noted that improvement came as more stable labour market and foreign trade surplus raised hopes for exports and private consumption will develop better than previously expected.

Source: xStation5

DE30 plummeted on Tuesday and broke to the lowest level since the beginning of November. The index is trading within an upward channel but is closing in on the lower limit. Should the ongoing plunge match the size of the previous one (purple box), the index would test the lower limit of the channel (currently in 12760 pts area). This level can be seen as the first support to watch. The more important support can be found slightly lower at 12640 pts - the lower limit of the large Overbalance structure (yellow box). Drop below this hurdle would, at least in theory, hint at trend reversing. 

DAX members at 10:09 am GMT. Source: Bloomberg

Company News

CEO of Deutsche Bank (DBK.DE) said that he is pleased with bank’s revenue performance in the fourth quarter of 2019. According to a statement, revenue from fixed income and FX trading business is said to be higher than in the previous year and the bank decided to make an upward adjustment to its revenue expectations for the coming years. 

Bayer (BAYN.DE) aims to become a CO2-neutral company by 2030. The company plans to reduce emissions through investments in energy efficient and climate-friendly power.

Analyst’ actions

• MTU Aero Engines (MTX.DE) raised to “buy” from “neutral” at UBS. Price target set at €295

• Deutsche Wohnen (DWNI.DE) cut to “neutral” from “buy” at Goldman Sachs. Price target set at €36.30

• Linde (LIN.DE and LIN.US) raised to “neutral” from “sell” at Pareto Securities. Price target set at $201.49

Deutsche Bank (DBK.DE) bounced off the low at €6.30 in the previous week but a run higher was halted at the downward sloping trendline. The index makes a pullback today and is testing a €6.50 swing level. In case of a break lower, a retest of the €6.30 handle may be on the cards. Source: xStation5