DE30: Daimler stays optimistic about 2019

Summary:

• UK lawmakers grow concerned of no-deal Brexit scenario

• DAX (DE30 on xStation5) eyes a test of the 11000 pts mark

• Mercedes-Benz expects record sales in 2019 despite significant slowdown in 2018

Alleged progress in the US-China trade talks lifted equities in the United States and Asia. In turn, European equities also launch the third day of the week in upbeat moods. Blue chips indices from all over the continent opened higher on Wednesday. The biggest gains were seen on the French and Italian bourses in the first minutes of trade while shares in Poland and Spain lagged the most. Carmakers and IT stocks led gains while telecoms and real estate companies experienced the smallest jump higher at the beginning of today’s trading.

DE30 continues its march higher being supported by increased risk appetite. The German benchmark is trading a notch below the resistance zone ranging above 11000 pts mark. Note that in case the index manages to break and close above this hurdle we will experience a break of the downtrend structure. Moreover, it looks like the 50-session moving average (green line) has bottomed and is eyeing turning higher. Source: xStation5

29 March will be certainly a big day for the United Kingdom as the country is set to leave the European Union by then. However, next week may also be crucial as it may shape expectations on how the Brexit process will look like. On 15 January, Tuesday, the UK parliament will vote on PM Theresa May’s Brexit deal. As odds suggest that the Prime Minister may struggle to get needed support some of the UK lawmakers began to worry that no-deal Brexit may become the baseline scenario. To prevent this a vote was called yesterday. Opposition lawmakers voted 303-296 for an amendment to the Finance Bill. The amendment says that the UK government can only use the agreed budget plan in case there is a Brexit deal, the Brexit is cancelled or - in case of a no-deal Brexit - the parliament approves it. Having said that, if the United Kingdom purses the no-deal scenario in opposition to the will of the parliament’s majority it may significantly constrain its ability to act to keep taxation system working after 29 March. Members of May’s cabinet played down the situation so far but will have to address the issue in case vote on 15 January shows no support for current Brexit deal.

Major European stock markets indices after the first hour of trade:

• DAX (DE30): +1.13%

• FTSE 100 (UK100): +0.75%

• CAC40 (FRA40): +1.07%

• IBEX (SPA35): +0.39%

• FTSE MIB (ITA40): +0.92%

Fresenius (FRE.DE) surges after upgrade at UBS while Deutsche Bank (DBK.DE) slumps on news of unsold risky debt instruments. Source: Bloomberg

Company News

Mercedes-Benz, subsidiary of Daimler (DAI.DE), announced that it delivered 2.31 million vehicles in 2018. While this is a better outcome than in 2017, annual growth reached just 0.9%. This marks a significant slowdown as Mercedes-Benz enjoyed a double-digit rates of growth in the past years. Moreover, a bulk of this minor growth came from China and the demand in this country also weakened as of late. Nevertheless, Daimler expects Mercedes-Benz to outperform even despite this headwinds. The company expects its luxury car segment to post record sales in 2019.

Fresenius SE (FRE.DE) is trading among DAX leaders today. The company was upgraded at UBS from “sell” to “neutral”. One-year price target was set at €46.

On the other hand, Deutsche Bank (DBK.DE) is one of the worst performing DAX stocks today. Poor condition can be ascribed to the report that surfaced over the night. According to the Bloomberg report, the group of lenders led by Deutsche Bank failed to sell to its clients in 2018 a part of the $1.8 billion loan granted to ConvergeOne, the IT services provider. The group is said to have as much as $1.2 billion of the unsold debt connected to the company. Deutsche Bank is said to restart marketing efforts for this debt as soon as next week.