DE30: European equities continue rally in spite of poor PMI data

• European investors launch new week in upbeat moods

• DE30 fails to break above the local resistance at 13373 pts

• China threatens to retaliate against German cars over potential Huawei ban

Stocks launched a new week higher as investors’ moods remain upbeat due to trade optimism and better-than-expected Chinese data. Even poor manufacturing PMI data from Europe did not derail market sentiment. Gains can be seen all across the Old Continent with UK and Dutch equities gaining the most.

Dismal PMIs do not derail sentiment

A set of preliminary PMI indices from Europe was released this morning. Manufacturing gauges from France and Germany disappointed with the former coming in at 50.3 pts (expected 51.5 pts) and the latter at 43.4 pts (expected 44.5 pts). Services indices were either in line with estimates of slightly above. Preliminary manufacturing PMI for the whole euro zone came in at 45.9 pts, way below the forecasted 47.3 pts. In spite of the fact that this data casts a shadow on recovery in the European manufacturing sector, investors does not seem to be distracted with the poor data as major stock market indices from the region made just a small pullback after the release.

Source: xStation5

DE30 surged to new YTD highs at the end of the previous week but did not hold onto these gains for long. The index pulled back in the second half of Friday’s session and retested price zone ranging around the 13300 pts handle. DE30 tested local high from November 19 (13373 pts) at the beginning of today’s session but failed to break above so far. The level is likely to be the near-term resistance to watch throughout today’s session while the aforementioned zone at 13300 pts should act as the first support to watch. Preliminary PMI data was the key release scheduled for the German index today but some additional volatility may also follow the release of the US PMI data (2:45 pm GMT). Apart from that, traders should watch out for trade-related news although these are more likely to surface during the US trading hours.

DAX members at 9:42 am GMT. Source: Bloomberg

After months of talks, the German authorities are expected to pass a legislation that will ban purchases of 5G equipment from “untrustworthy” vendors. The decision would significantly harm Huawei’s business in Europe’s biggest economy. Chinese ambassador to Germany warned that his country would retaliate against such measures and hinted that China may target imports of German cars. The story is worth watching as it could be a catalyst for moves on stocks like Daimler (DAI.DE), Volkswagen (VOW1.DE), BMW (BMW.DE) or Continental (CON.DE). German cars account for around a quarter of 28 million cars sold in China annually.

Analyst actions

• HeidelbergCement (HEI.DE) was cut to “underweight” from “equal-weight” at Barclays. Price target was set at €65.

HeidelbergCement (HEI.DE) is trading within an ascending triangle pattern. The stock is nearing a break from the pattern. Should it break above the topside resistance, a following rally could take the price to as high as €79.40. Source: xStation5