DE30: DAX pulls back below 12000 pts

08:10 13 May 2019

Summary:
- Rumours on Renault-Nissan merger send German carmakers lower
- DAX (DE30 on xStation5) breaks below key support zone

- Thyssenkrupp (TKA.DE) stays open to partnerships after abandoning merger with Tata Steel

Stock markets on the Old Continent opened slightly higher on Monday in spite of worsening climate in the global trade. Nevertheless, the bulk of the European blue chips indices turned lower later on. Russian equities underperformed the most while Polish stocks led higher in the first minutes of the session. Food, utility and healthcare companies were among leaders while carmaker shares declined.

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Lack of progress in the US-China trade talks continues to be a drag for global equities at the beginning of the new week. The German DAX (DE30) dipped below the 61.8% Fibo level of last year’s downward move and is eyeing a test of the demand zone ranging around 11850 pts handle. Note that the 50-session moving average can also be found there therefore significance of this area is greater. Source: xStation5

Renault-Nissan merger rumours send German car sector lower

The German carmaker shares may enjoy elevated volatility on Monday. The Japanese broadcaster TBS reported that Renault has made a “formal” merger proposal to Nissan. In case the merger go through a decades-long global alliance would be sealed as a holding structure. However, neither Nissan, nor Renualt has confirmed the information yet. The word on the street is that in case Renault merges with Nissan the two may make a joint bid for Fiat Chrysler. As Renault-Nissan-Mitsubishi alliance trails only Volkswagen (VOW.DE) in terms of car sales, deeper cooperation could create global industry leader. Given a possibility of such a strong competitor arising, one should not be surprised that the German carmakers like Volkswagen, Daimler (DAI.DE) or BMW (BMW.DE) are trading lower on Monday.

DAX members following the first 46 minutes of trade. Source: Bloomberg

Other company News

E.ON (EOAN.DE) published first quarter earnings today before the session open. The German utility company reported the EPS of €0.30, lower than a year ago (€0.33). Revenue at €9.162 billion was over 3.5% lower than market estimate of €9.507 billion. The company said that it still expects to reach full-year targets but noted that price limits and significant competition in the United Kingdom are likely to be headwinds over the remaining part of the year. On the other hand, the company managed to increase the number of customers in Germany by over 100k what seems to be enough to keep the shares afloat today.

Thyssenkrupp (TKA.DE) jumped over 26% on Friday thanks to the news that it is abandoning a merger with Tata Steel. The stock is the worst performing DAX stock today but one should not be too worried as it is not uncommon to a kind of corrective move following such a steep gain. Meanwhile, Handelsblatt interviewed CEO of Thyssenkrupp - Guido Kerkhoff. Kerkhoff said that the company is still open to partnerships but does not think that a big-scale EU merger is possible with current stance of the European Commission. The executive said that the company may sell some assets from industrial construction and shipbuilding divisions.

E.ON (EOAN.DE) is trading higher today as maintaining full-year targets seem to have won investors’ appeal. Stock bounced off the €9.30 handle at the beginning of the previous week and has been moving higher since. In case the upward move is continue, the 50-session moving average near €9.75 may turn to be the first major hurdle for buyers. 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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