DE30: European carriers pull back on Ryanair profit drop

Summary:

• Former Italian Finance Minister warns about government doings

• DAX (DE30 on xStation5) tries to move higher at the beginning of new trading week

• Deutsche Bank (DBK.DE) may reveal details of restructuring plan on Wednesday

Asian investors launched new week in mixed moods as gains were seen on the Chinese stock markets while other noteworthy equity benchmarks from the region moved lower. In Japan Nikkei (JAP225) slumped almost 1.4% as the domestic currency surged. The Australian S&P/ASX 200 (AUS200) closed 0.93% lower. Chinese Hang Seng (CHNComp) added around 0.5%.

Red colour dominated during opening of the European session. Declines were observed across blue chip indices from Western Europe. However, equities in the eastern part of the Old Continent resisted downward pressure and in turn we saw Polish WIG20 (W20) and Russian RTS (RUS50) marching higher in the first minutes of the European trading. Real estate companies and telecoms were among the best performing stocks at the beginning of today’s session while utilities were the biggest laggards.

Pier Carlo Padoan, a former Italian Finance Minister, expressed his dissatisfaction with plans of the new government. Padoan claimed that the reforms proposed by the populist leaders pose a threat to the economy as they may reverse all the efforts that has been made during his duty in Finance Ministry. Let us recall that new government forged by the Five Star Movement and League aims to greatly cut taxes while boosting social spending on the poor. Budget limits set by the EU do not seem to bother governing coalition as Matteo Salvini, leader of the League, said in an interview today that the tax cuts will be coming in the next budget adjustment and Brussels will need to review its rules.

Major European stock indices after the first hour of trade:

• DAX (DE30): -0.15%

• CAC40 (FRA40): -0.50%

• FTSE 100 (UK100): -0.70%

• IBEX (SPA35): -0.35%

• FTSE MIB (ITA40): -0.55%

DE30 bounces from the support level at 12450 pts. Source: xStation5

DE30 (DAX futures underlying) plummeted on Friday on the back of Trump’s comments reigniting the Trade War. The German index halted decline a notch above the support level at 12450 pts and even managed to bounce higher from there. After opening lower today the benchmark pushed higher and in case no negative news spur that could alter the technical landscape a test of the 33-period moving average may be on cards. A dozen points above it one can find a relevant resistance level (12600 pts) therefore in case bulls take control over today’s session the 12580-12600 pts area may be prove to be a major hurdle.

Lufthansa (LHA.DE) slumps on the back of Ryanair profit drop. Source: Bloomberg

Company News

Deutsche Bank (DBK.DE), the biggest German lender, may attract additional interest in the upcoming days. According to the Bloomberg reports some top shareholders of the company want Christian Sewing, CEO who replaced John Cryan, to provide them with details of his restructuring plan. Sewing said that he wants to bring the Bank back on track by scaling down its investment banking business (mainly in the US) and cutting as much as 7000 jobs. However, let us recall that it will be the fourth Deutsche Bank’s restructuring plan in three years. Major stakeholders want the executive to unveil details on Wednesday when the Bank will present its second quarter earnings. After the first hour of trade Deutsche Bank has traded 0.15% higher.

It is also worth to highlight the poor performance of Lufthansa (LHA.DE) at the beginning of today’s session. No major negative news concerning the company has spurred lately therefore a sell-off can be attributed to the industry-wide factors. Ryanair, an Irish discount airline, submitted an earnings report today and it showed a huge drop in profits. The company accounts it to the traffic-control strikes and trade union walkouts, factors that cause consumers to be less eager to book flights. Adding to that higher oil prices we get a gloomy picture of the industry. The fact that all of the factors mentioned can be applied to any European carrier may reason today’s Lufthansa’s sell-off. After the first hour of trade Lufthansa has traded 2.1% lower.

After climbing back to the range of the downward channel Deutsche Bank (DBK.DE) failed to surpass the resistance zone ranging 10.50-10.75. In case the restructuring plan disappoints shareholders a test of the support level at 10.00 may be on cards. Source: xStation5