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Stocks drop as rate hike odds jump
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DE30 tries to recover from morning drop
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E.ON (EOAN.DE) drops after disappointing expansion plan
European stock markets launched today's trading lower and deepened declines during the cash trading session. There are few reasons behind today's deterioration in moods. More and more countries are starting to consider reimposing strict pandemic restrictions in order to curb growth in new Covid-19 cases. However, monetary policy looks to be a better explanation. Biden picked Powell to head Fed for another term. Powell is seen as a somewhat more hawkish pick than Lael Brainard and the announcement was met with a jump in yields. Rate hike odds also jumped in Europe after ECB members suggested rate hike lift-off after 2022. Interest rate derivatives market now prices in a 100% chance of 10 bp rate hike from ECB in December 2022, up from around 50% yesterday.
Source: xStation5
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Create account Try a demo Download mobile app Download mobile appDE30 dropped below the lower limit of the upward channel yesterday and deepened decline today. Index smashed through the lower limit of the local market geometry, suggesting that short-term trend may have reversed. Daily low was reached near 15,860 pts - the lowest level since early-November - but bulls managed to recover part of losses. Index currently trades in the 15,940 pts area, marked with the 23.6% retracement of recent upward move as well as local peaks from August and September. In case bulls fail to hold the index above this zone, another downward impulse may be generate with 38.2% retracement (15,725 pts) being the next target for sellers.
Company News
E.ON (EOAN.DE) announced that it plans to spend €27 billion over the next 5 years, including €22 billion on new energy networks and €5 billion on customer solutions. Company said that the investment plan is expected to boost core utility earnings by 4% a year. Investments will also allow dividends to grow by up to 5% a year. Ongoing decarbonization in Europe is a prime reason behind the investment plan. However, shares of E.ON are dropping almost 4% today as analysts' see the expansion plan as disappointing.
Thyssenkrupp (TKA.DE) is taking a hit today. Sell-off was triggered by reports that Cevian Capital, the Swedish investment firm, wants to halve its stake in the company. Cevian placed a 6.9% stake in the German industrial company for sale with a guidance price of €10.20.
Aareal Bank (ARL.DE) gains after two private equity companies - Advent International and Centerbridge Partners - announced they want to acquire the real estate lender. Two companies offer €29 for Aareal Bank share. Offered price consists of a 3-month volume weighted price and a 35% premium. Management and supervisory boards of Aareal Bank announced they will support the offer.
Analysts' actions
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Aroundtown (AT1.DE) upgraded to "buy" at Societe Generale. Price target set at €7.70
E.ON (EOAN.DE) plunged after financial institutions labelled its expansion plan as disappointing. Utility company is the worst performing DAX member today. However, share price managed to recover from daily lows and is now trying to climb back above the €10.70 zone, marked with 23.6% retracement of this year's upward impulse. Source: xStation5
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