DE30: Continental slumps 10% on disappointing guidance

• European markets give up early gains

• Barnier to brief investors on EU-UK trade talks progress

• Merck (MRK.DE) sees limited impact of coronavirus on business

European markets opened higher being encouraged by big gains achieved on US and Asian stock exchanges. However, gains were being erased as the time passed. Currently almost every major stock market index from the Old Continent is trading below yesterday’s close. Michael Barnier, EU chief Brexit negotiator, will hold a press conference on the first round of EU-UK trade talks at 12:00 pm GMT.

Source: xStation5

Trading range we have defined in our previous DE30 analyses is doing a good job limiting the movements of the index. German benchmark has been trading near the upper limit of the range (12200 pts) over the night but bulls surrendered after the opening of today’s European cash session. DE30 makes a move below the 12045 pts swing level at press time as investors take note of coronavirus spread in the US. Should downbeat moods persist, the next support can be found at 11900 pts. Economic calendar is light today therefore news on coronavirus developments should have the biggest impact on market sentiment. Apart from that, traders should also watch OPEC meeting as decision of oil producers may also impact moods.

DAX members at 9:25 am GMT. Source: Bloomberg

Merck (MRK.DE) reported Q4 sales that were 12.7% YoY higher (€4.38 billion). Organic sales growth was 4.3% driven by Healthcare and Life Science units. However, net income plunged 87% YoY to €318 million. Earnings per share dropped to €0.73. The company sees limited impact from coronavirus outbreak and expects it to subside in the second quarter of the year.

Airbus (AIR.DE) is considering whether to cut production after AirAsia X, one of its biggest customers for wide-body jets, said it will defer deliveries. AirAsia X accounts four around 25% of Airbus outstanding orders for the A33neo model.

Continental (CON.DE) reported an adjusted EBIT of $3.23 billion for 2019, marking a 22% YoY decline. The company had a net loss of €1.23 billion. However, such a weak result was expected as the company carried significant write-offs during the year. Revenue increased slightly to €44.5 billion. The company expects revenue of €42.5-45 billion in 2020 but said that headwinds in the year are likely to be much bigger than in 2019. The company slumps over 10% today.

Vonovia (VNA.DE) reported earnings for full-2019. The German rental company generated rental income of €2.07 billion and adjusted EBITDA of €1.76 billion (+13% YoY). Full-year profit stood at €1.29 billion. The company expects organic rent growth of 3.5-4% in 2020, down from earlier forecast of 4%. 2020 investments are expected in the €1.3-1.6 billion range (€1.49 billion in 2019).

Swiss International Airlines, subsidiary of Lufthansa (LHA.DE), informed that it will cut flight to Tokyo and Singapore as well as Osaka. The airline will also make adjustments to the short- and medium-haul flight schedule. The move was prompted by coronavirus disruptions.

Merck (MRK.DE) restarted upward movement after release of Q4 earnings. Investors seem encouraged by the company's claim that it does not see material impact from coronavirus. Share price is surging and the stock eyes return to the ATH area at €125.50. Source: xStation5