Summary:
- CDU/CSU wins the European elections, SPD experiences a sharp drop in support, excellent result for Greens
- European elections are another warning signal for the ruling coalition
- German DAX rebounds from its crucial technical support and faces a resistance
The start to the new week across European equity markets has been quite successful as investors are digesting the European elections’ results. The DAX (DE30) is trading 0.65% higher, the CAC40 (FRA40) is rising 0.6%, the Italian FTSE MIB (ITA40) is moving up 1.35% while the Spanish IBEX (SPA35) is going up 1.3%. This upbeat performance has come despite a victory of Eurosceptic parties in Italy or France (in the UK pro-Brexit party also won, the stock exchange in London is closed due to a holiday though). Why are investors deciding to buy stocks? The answer could be quite a projected structure of a new European parliament - Eurosceptics are not expected to increase their presence there. On the other hand, the EP elections’ fallout could be a warning signal for countries like Italy and France ahead of elections at a national level.
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The DE30 jumped shortly after the opening, however, it has retreated to some extent since then. From a technical viewpoint the price bounced off the local resistance in the form of the upper boundary of the short-term bearish channel. Thus, one may expect a possible corrective move back toward the lower boundary of the same structure. A move through the upper bound would see the price rising even toward 12 440 points. Source: xStation5
The same concerns Germany. Although the Merkel’s CDU/CSU managed to win gathering 28.5% of the votes, it means a decrease in support compared to support of 35.3% in the last elections in 2014. However, the SPD turned out to be the largest loser seeing its support almost halving to 15.3% compared to 27.3% five years ago. At the same time, both the Greens and the AfD saw a jump in support with the former getting 20.6% of the votes (10.7% in 2014) and the former finishing with support of 10.8% (7.1%). As one may notice, if the elections had taken place yesterday, the ruling coalition CDU/CSU-SPD would have lost a majority resulting in a big political change in the largest European economy. Although the elections’ outcome in Germany should have rather a short-lived impact on financial markets, it may become much more important in the future if the change we saw at the political scene continues evolving in such a manner (rising support for opposition parties).
After the increase seen at the beginning of trading, the German DE30 has come back a bit but still trades in the positive territory. Source: Bloomberg
Wirecard shares (WDI.DE) are on the rise this morning following the updated recommendation from Deutsche Bank. The German bank upgraded the stock to buy with a new price target at 200 EUR (the spot price is 158.6 EUR at the time of writing).
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