DE30: European equities remain under pressure

• European equities open higher but pull back later on

• DE30 attempts to hold above 9,500 pts mark

• Adidas (ADS.DE) gathers bad publicity for freezing rent payments

European equities launched the week around 1% above Friday’s closing prices. However, optimism did not last long and indices from the Old Continent turned lower. Declines for major indices range from -1.5 to -2.5%. Trump’s interview on Fox News at 12:55 pm GMT may have an impact on sentiment.

More German companies negatively impacted by coronavirus

German engineering association VDMA released some data on the impact of the coronavirus pandemic on local companies. According to VDMA, the share of German firms being affected by the COVID-19 outbreak stands at 84%, marking an increase from 64% two weeks ago. However, the association also said that the situation in South Korea and China seems to be improving. Moreover, a significant increase in orders from Chinese consumers was recorded. Supply chain links with Italy are said to be 75% disrupted, while the figure for China and US stands at 51 and 25%, respectively.

Source: xStation5

DE30 started today’s trading slightly lower but made an impressive run higher overnight. The index was testing resistance zone at 9,700 pts shortly before the opening of the European cash session. However, following the launch of cash trading, the index started to erase gains. The downward move was halted slightly above low from March 25 (9,410 pts). DE30 attempts to recover but resistance above the lower limit of the earlier trading range (9,530 pts) is strong. These are the two levels to watch for the European session. In case of a break of one of those levels attention will shift to 9,700 pts (resistance) or 9,150 pts (support). Note that Trump’s interview at 12:55 pm GMT may be a trigger for some volatile swings or even a shift in the sentiment.

DAX members at 9:38 am GMT. Source: Bloomberg

Everything hints on lockdowns being extended further and, in turn, it does not look like the outlook for the airline industry is likely to improve anytime soon. Most of the carriers decided to ground part of their fleet. However, budget UK airline easyJet (EZJ.UK) announced today that it will ground ALL of its planes and cease any commercial flights. This shows how big coronavirus impact may be for companies like Lufthansa (LHA.DE).

Very poor performance of cyclical stocks like MTU Aero Engines (MTX.DE) or HeidelbergCement (HEI.DE) highlights that concerns over shape of the economy dominate.

Adidas (ADS.DE) has gathered bad publicity in Germany after the company announced on Friday it will freeze rent payments for the time its shops are closed. While such measures are allowed under German relief package, they were adopted to help companies with existential threats rather than big companies with billions in profits in 2019. Some German politicians called for a boycott of Adidas’ products.

Deutsche Bank (DBK.DE) along with other major investment banks assured their employees that they are putting massive jobs cuts plans on halt amid the coronavirus pandemic.

Analyst actions

• Independent Research maintained a “neutral” rating for HeidelbergCement (HEI.DE). Price target was set at €44

Adidas (ADS.DE) recovered and reached the resistance zone at €215 but failed to break above it. The stock is pulling back today and looks to test the psychological €200 level. Should it succeed with breaking lower, the next two levels to watch are €190 and recent low near €157.50. Source: xStation5