Summary:
- Low Rhine levels may hit German economy this summer as well
- DAX (DE30 on xStation5) tries to break back above the support zone
- Deutsche Boerse (DB1.DE) buys the UK risk management software firm
Equities in China manages to push somewhat higher during today’s Asian trading while stocks in Australia finished more or less flat. On the other hand, stocks in Japan took a dive in spite of the upbeat data from the manufacturing sector and weaker JPY. Nevertheless, the performance of the European equities at the beginning of Wednesday’s trade was quite optimistic. Gains were seen all across the Old Continent with Spanish stocks being the outperformers. Real estate companies surged the most while healthcare and personal goods stocks were the biggest underperformers.
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Beginning of the yesterday’s session on the Old Continent was pretty optimistic with gains seen all across the region. Nevertheless, a U-turn in the early afternoon brought the index back into the range of the support zone (11810-11920 pts). However, today’s price action suggests that bulls have not surrendered yet and we may see the benchmark closing above the aforementioned zone. Source: xStation5
The German economy took a hit last year from low levels on the Rhine that made river impassable for the biggest ships. While intense rainfalls at the beginning of 2019 as well as melting snowcaps in the Alps helped restore levels needed for economic exploitation, this year’s “dry season” starts with lower water than a year ago. Such a situation rises risk of Rhine being impassable this summer as well. German and Swiss scientists argue that it is an aftermath of the global warming and while 2018’s summer was exceptionally warm, the situation is likely to repeat more often in the future. Note that areas near the Rhine river, especially in the North-Rhine Westphalia region, are heavily industrialized as river transport is cheaper than road or rail one. This was exploited by the German companies like BASF (BAS.DE) or Thyssenkrupp (TKA.DE) for decades. However, last year’s drought surprised these companies and significantly distorted their operations. For instance, BASF said that the drought cost it around €250 million as low water levels prevented output of its Ludwigshafen plant from reaching export markets. German authorities plan to dredge Rhine river but process may take as long as 10 years and during this time German companies will have to either risk being cut-off by low water levels or switch to more costly road/rail transport.
Major European stock market indices after the first hour of trade:
- DAX (DE30): +0.37%
- FTSE 100 (UK100): +0.01%
- CAC40 (FRA40): +0.37%
- IBEX (SPA35): +0.41%
- FTSE MIB (ITA40): +0.24%
DAX members after the first 50 minutes of Wednesday's trading. Source: Bloomberg
Company News
Deutsche Boerse (DB1.DE) announced that it is buying Axioma, the UK risk management software provider. The German stock exchange operator will spend $850 million on the entity. Deutsche Boerse plans to merger Axioma with its index business in order to create new analytics company.
EON (EOAN.DE) can be found among the biggest DAX laggards following a downgrade at MainFirst. The bank lowered recommendation for the stock from “neutral” to “underperform”. One-year price target was lowered from €9.30 to €8.10, 19% below yesterday’s closing price.
On the other hand, ProSiebenSat.1 (PSM.DE) received an upgrade at Macquarie, the Australian investment bank. Recommendation for the company was raised to “outperform” from “neutral” and a price target was upheld at €18. Bank’s analysts reasoned their decision saying that while the company is likely to experience some cyclical weakness due to the economic slowdown, the sell-off may be already overblow. ProSiebenSat.1 share price declined around 50% in 2018.
E.ON (EOAN.DE) broke above the recent local peak at €9.95 handle in the second half of March 2019. The stock began to struggle later and taking a look at the chart above one can see that bears seem to be looming in the €10.05-10.15 area. Source: xStation5
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