DE30: European indices benefit from post-FOMC euphoria

• European indices trade higher

• DAX breaks above neckline of inverse head and shoulder pattern

• Earnings from Airbus, BMW and Zalando

European indices are trading higher on Thursday, benefitting from post-FOMC euphoria. Majority of blue chips indices from Europe trade over 1% higher today. Dutch AEX (NED25) is a top performer, gaining almost 1.7% at press time. On the other hand, Polish WIG20 (W20) is a top laggard with a gain of just 0.2%.

German factory orders data for March was released this morning at 7:00 am BST. Report showed a 4.7% MoM drop while the market expected a decline of just 0.7% MoM. Drop was driven by a 6.7% MoM plunge in foreign orders. Domestic orders were 1.8% MoM lower in March. Reading hints that macroeconomic conditions continue to deteriorate with supply bottlenecks weighing on production.

Source: xStation5

Post-FOMC market euphoria allowed DE30 to break above the neckline of an inverse head and shoulders pattern. However, subsequent upward move was rather short-lived with advance stalling at 14,320 pts resistance zone. Index trimmed gains later on and pulled back to the neckline of the pattern in 14,180 pts area. Reaction to this level will be crucial. If it is only a post-breakout retest and bulls regain control, a move towards the textbook range of the inverse head and shoulders pattern at 14,725 pts remains possible. On the other hand, should we see a break back below 14,180 pts zone, a pullback towards the lower limit of recent range in the 13,900 pts area cannot be ruled out.

Company News

Airbus (AIR.DE) rallies 7% and is the best performing DAX member following the release of Q1 results. European planemaker reported 15% YoY jump in revenue to €12.00 billion (exp. €11.99 billion). Adjusted EBIT jumped 82% YoY to €1.26 billion (exp. €0.71 billion) while net income reached €1.22 billion (exp. €0.43 billion), up from €0.36 billion in Q1 2021. Airbus confirmed full-year guidance and said that it wants A320 production rate to increase to 75 per month in 2025, up 50% from current rate.

BMW (BMW.DE) reported a 12% YoY jump in Q1 2022 EBIT, to €3.39 billion (exp. €2.9 billion). Sales increased 16% YoY to €31.14 billion (exp. €30.83 billion), with automotive revenue accounting for €26.73 billion in sales, up 17% YoY but below the €27.08 billion forecast. Company confirmed the full-year forecast and still expects automotive EBIT margin to reach 7-9% this year. Company does not expect semiconductor shortages to ease until the second half of 2022 at earliest.

Zalando (ZAL.DE) reported a 1.5% YoY drop in Q1 2021 revenue to €2.21 billion, in-line with market expectations. Gross merchandise volume (GMV) increased 1% YoY to €3.18 billion (exp. €3.21 billion). Adjusted EBIT loss reached €51.8 million (exp. -€52.4 million) while net loss turned out to be €61.3 million. Company said that it now expects full-year results to be near the lower end of its guidance range.

Airbus (AIR.DE) is the best performing DAX member today. Solid Q1 release pushed the stock 7% higher today. However, advance was halted at the 200-session moving average (purple line) in the €111 area. A break above would allow share price to test the upper limit of a mid-term trading range (€95.50-116.50). Source: xStation5