DE30: Deutsche Boerse expects earnings boost from market volatility

Summary:

• Germany’s plan to cut coal plant output may result in a volatility spike on the emission market

• DAX (DE30 on xStation5) finds support a notch above the 50-period moving average

• Fed is launching investigation into Deutsche Bank transactions with Danske Bank

Bears dominated yesterday’s trading on Wall Street causing all major stock indices from the US to close over 1% lower. Downbeat moods were spotted in Asia later on. However, in this region declines were minor. Nevertheless, most of the European blue chips benchmarks turned lower at the beginning of Wednesday’s session.

DE30 pulled back after failing to break above the downward sloping trendline. The benchmark is struggling in the vicinity of the price zone ranging around 11000 pts mark. Note that the decline was halted yesterday at 50-period moving average therefore a bounce higher may be looming. Source: xStation5

Germany, Europe’s biggest economy, is slowly reducing its dependence on coal power plants. Amount of energy generated through renewable energy sources surpassed the one generated by coal plants in the previous year. Germany plans to completely phase-out industry by 2030s. The process will be divided into few phases. While little details are available at the moment, the situation may changed at the beginning of February when the German Coal Commission issues a report on the matter. However, it should be noted that the Commission postponed the release twice already. When it comes to the report traders are mostly focused on the news on how much capacity will be shut during the each phase and what will be the exact timing of winding down operations. Analyst following the energy markets warn that in case the pace of the process will be rapid one may expect wilder prices swings on the carbon emission market. One way to prevent this spike in volatility is to reduce the number of emission permits sold. In case the quotas are reduced along the process it is likely that the impact on the emissions markets would be neutral.

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

• DAX (DE30): -0.23%

• FTSE 100 (UK100): -0.39%

• CAC40 (FRA40): +0.01%

• IBEX (SPA35): +0.59%

• FTSE MIB (ITA40): -0.06%

Deutsche Boerse gains on upbeat earnings guidance. Deutsche Post benefits from upgrade at DZ Bank. Source: Bloomberg

Company News

Deutsche Boerse (DB1.DE) is one of the DAX members proving to be more resilient to the downward pressure than its peers. The company announced new 2018 earnings guidance today. Thanks to increased volatility in the second half of 2018 Deutsche Boerse now expects a 17% increase in profits in comparison to 2017. Previous guidance pointed to a 10% increase. Moreover, company also expect this factor to support its performance throughout 2019.

Deutsche Bank (DBK.DE) can be found among DAX underperformers today. The US Federal Reserve announced that is is launching a probe into suspicious transactions of the Deutsche Bank relating to the Danske Bank case. Let us recall that the ongoing Danske Bank case is said to be the biggest money-laundering scandal in history.

Oddo BHF began following Salzgitter (SZG.GR). In its initial recommendation the financial services company ranked Salzgitter as “reduce”. The one-year price target was set at €26, implying a 0.5% decline from the yesterday’s closing price.

Deutsche Post (DPW.DE) received an upgrade at DZ Bank. The Bank upgraded the Deutsche Post to “buy” from “hold”. One-year price target was set at €32, implying 25% increase from the yesterday’s closing price.

Deutsche Post (DPW.DE) has been trading within a downtrend since the turn of 2017 and 2018. The stock managed to halt decline at the long-term support level (€23.40) recently. In case the current upward move is to be extended one may expect price to test the resistance level at €27.60 in the nearby future. Source: xStation5