DE30: Daimler dips after weak preliminary earnings

10:00 22 January 2020
  • Trump repeats EU car tariff threat

  • DE30 paints fresh all-time high but fails to hold the gains

  • Preliminary 2019 results from Daimler (DAI.DE) miss expectations

Trading on the European stock exchanges is mixed on Wednesday. German, UK and French indices move higher while other benchmarks trade lower. Russian and Italian equities are among top laggards. Reports surfaced saying that Luigi di Maio, leader of the Five Star Movement, may resign today. Such a move would put another strain on the already-fragile Italian governing coalition.

Trump repeats EU car tariff threat

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Donald Trump addressed the World Economic Forum in Davos yesterday. The US President used the speech to remind everyone what he has done since the start of the presidency. Trump also said that the United States will negotiate a “big trade deal” with the European Union. The speech was a non-event but an interview with the Wall Street Journal was not. During the interview the US President said that unless the United States can get a fair deal, he will impose tariffs on the European cars. A point to note is that such a move would likely trigger a retaliatory action from the European Union. As Sino-US trade relations are on the sidelines now, EU-US trade may be a major theme in 2020.

Source: xStation5

DE30 surged to all-time highs and broke above the 13600 pts handle for the first time in history. The latest short-term upward impulse matched the size of the previous one (green lines). However, the index failed to hold onto these gains and moved lower after the opening of Wednesday’s cash session. The dip was halted near the 13575 pts handle - lower limit of the 1:1 market structure (green box) and recent local peak. This level is likely to be in the centre of markets’ attention today. Final support is marked with the lower limit of the wide Overbalance structure (13450 pts, yellow box). The near-term resistance is marked with an intraday ATH of 13635 pts and break above would put the German DE30 in an uncharted waters.

DAX members at 9:41 am GMT. Source: Bloomberg

Preliminary results from Daimler (DAI.DE) for 2019 came in below expectations. 2019 EBIT dropped by around a half, to €5.6 billion. Moreover, the German carmaker expects to book expenses of €1.1-1.5 billion related to the diesel-cheating scandal. The company will release its annual report on February 11.

According to the Handelsblatt report, Munich Re (MUV2.RE) aims to increase annual profit to over €3 billion over the coming years. The German reinsurer plans to do it via a long-term plan that will be revealed this fall. Around half of the increase is to be generated from “classic” business while the remaining half should come from business innovation.

Analyst actions

  • Deutsche Wohnen (DWNI.DE) rated “outperform” at RBC. Price target set at €43

  • Nemetschek (NEM.DE) cut to “hold” at Bankhaus Metzler. Price target set at €66

  • Vonovia (VNA.DE) rated “sector-perform” at RBC. Price target set at €52

  • MTU Aero Engines (MTX.DE) cut to “hold” at LBBW. Price target set at €296

Daimler (DAI.DE) finally managed to break below the support zone at 23.6% Fibo level of the downward move started in January 2018. The zone will now act as a near-term resistance to watch. The German company takes a dive today due to disappointing release of preliminary earnings for 2019. However, an initial test of the support zone ranging around €45 handle was met with a quick reversal. Source: xStation5

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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