DE30: European equities gain in spite of Middle East risks

• German car production dropped to 23-year low in 2019

• DE30 surge halted at the 200-hour moving average

• Infineon (IFX.DE) gains on strong results reported by Microchip Technologies

European equities are trading higher at the beginning of Tuesday’s session. Indices dipped in the pre-market trading on reports that Iran considers 13 retaliation scenarios against the United States but this drop was completely erased by now. DAX (DE30 is the leading index in Europe as it gains around 0.9%. On the other hand, Polish WIG20 (W20) is one of the biggest laggards as it trails in the vicinity of Friday’s closing price.

German car production at 23-year low!

According to data released by VDA automotive group, German car production plunged 9% YoY in 2019 and has reached the lowest level since 1996. Details show that the decline can be ascribed to lacklustre foreign demand as car exports dropped to 3.5 million, a decline of 13% YoY. On the other hand, new registrations in Germany reached 3.6 million, an increase of 5% YoY. This was the biggest increase since 2009. Details do not bode well for the German economy as it is driven by exports. Moreover, the situation could get even worse as carmakers need to adapt to new emission rules this year.

Source: xStation5

DE30 plunged yesterday at the beginning of the session and touched 12950 pts handle. However, bulls regained control afterwards and the index climbed back towards the zone at 13150 pts. Upward move continued today but was halted by the 200-hour moving average (purple line, 13250 pts area). The index has been trading between 100- and 200-hour moving average since (13225-13250 pts range). Those levels should serve as the near-term support and resistance to watch over the next hours. A break above the 13250 pts could trigger an acceleration in the upward move and could cause the index to test the key zone at 13300 pts.

DAX members at 9:28 am GMT. Source: Bloomberg

Infineon Technologies (IFX.DE) is the best performing DAX member today. Upbeat performance of the European tech sector can be ascribed to solid fiscal-Q3 results reported by US company, Microchip Technologies (MCHP.US). Microchip said that bookings were strong in December and has improved backlog for the first calendar quarter of 2020. Results can be seen as promising for Infineon as, similarly to Microchip, it focuses on automotive and industrial markets.

Citi decided to lower earnings forecasts for Covestro (1COV.DE) for 2019-2021. The reason behind a downward revision is decline in polycarbonate prices in the final quarter of 2019. Moreover, the bank also sees limited scope for a major recovery on rising supply. Citi holds “sell” rating for the stock and a price target of €36.

Analyst actions

• Delivery Hero (DHER.DE) was cut to “reduce” from “hold” at Commerzbank. Price target was set at €62

Infineon Technologies (IFX.DE) painted a pin bar pattern at the €19.50 support level yesterday. The stock opened with a major upward price gap today being boosted by solid results reported by Microchip. The nearest important resistance to watch is the zone ranging above the €21.20. Source: xStation5