DE30: European economic growth slows in 2018

Summary:

• German retail sales plunged the most in December since at least 2000

• DAX (DE30 on xStaiton5) treads water in the vicinity of 11200 pts handle

• Bafin set to investigate news that caused Wirecard’s (WDI.DE) share price to plunge yesterday

Most of the stock market indices from the Old Continent trade higher today following gains seen in the United States and Asia. Russian equities are the biggest outperformers while stock in the Netherlands, Spain and Italy take a modest step back. Refiners gain the most while telecoms are subject to the biggest downward pressure.

DE30 (DAX futures underlying) still waits for a bigger price impulse. The index keeps treading water in the vicinity of 11200 pts handle. However, repeated unsuccessful attempts to break below the downward sloping trendline look promising. Source: xStation5

We wrote about looming end of Mario Draghi’s tenure as ECB chief a few times in the past months. However, before that happens another shift among ECB top executives will occur. Peter Praet, the ECB Chief Economist, is set to leave his post when his tenure ends on 31 May. Deadline for declaring potential successor of Praet ended yesterday. However, only one candidate declared interest, Philip Lane. Lane is the governor of the Central Bank of Ireland and a member of ECB Governing Council. When it comes to market views, Lane is considering a centrist - somewhat in between hawks and doves. As the ECB Chief Economist is responsible for preparing recommendations regarding monetary policy decision such neutrality is a desired feature. Group of euro area minister will decide fate of the candidate on 11 February. However, as Lane is the only candidate it is likely that he will be chosen and in that case official nomination is expected to be announced at 12 February.

December 2018 was the worst December for the German economy in terms of retail sales since at least 2000. Source: Macrobond, InsiderFX

The German retail sales report for December was released at 7:00 am GMT. Data can be named disappointing to say the least. Volume of sales at retail level declined by 4.3% MoM, the weakest reading since at least the turn of millenia. What is even more grim is that is figure does not include auto sales. Apart from that, the GDP report for the final quarter of 2018 from EMU was released at 10:00 am GMT. Growth figures came in line with estimates on both, annual and monthly basis. Growth slowed to 1.2% YoY confirming that the European economy is indeed slowing.

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

• DAX (DE30): +0.20%

• FTSE 100 (UK100): +0.64%

• CAC40 (FRA40): +0.33%

• IBEX (SPA35): -0.32%

• FTSE MIB (ITA40): -0.33%

DAX members breakdown after the first two hours of trade. Source: Bloomberg

Company News

Wirecard (WDI.DE) plunged severely yesterday. Financial Times reported that one of company’s senior executives raised suspicions of using forged documents in several transactions. Decline of Wirecard stock price reached even 25% at one point. However, it looks like the information was fake and the price is recovering today. Moreover, Bafin, the German financial watchdog, said that it will look into the news to see whether it can be considered an attempt to manipulate market.

Siemens (SIE.DE) is one of the worst performing DAX members today. The company is trading lower as everything suggests that the European authorities will reject its merger with the French company, Alstom (ALO.FR).

Airbus (AIR.DE) said that its jetliner business was targeted by hackers. Due to the data breach hackers accessed some personal information of company’s employees. However, Airbus said that the data breach did not affect production in any way. The company is working with investigators in order to track who was responsible for attack and what exactly was he looking for.