DE30: European indices rise ahead of finance ministers call

• European markets launched today’s session mixed but attempt to push higher

• DE30 tests swing level at 12090 pts

• Carmakers dropped after China’s car sales report

European indices started Tuesday’s session mixed. Major indices swung between gains and losses with DAX attempting to hold above 12,000 pts mark. European car makers took a hit after the release of China’s car sales data. Poland reported the first coronavirus cases, bringing the tally of European countries with virus to 29 (over 50%). EU finance ministers are expected to hold a coronavirus-related conference call at 2:00 pm GMT.

EU may toughen rules on public aid for banks

European Union is reportedly mulling new rules that would limit public aid available to banks that are close to collapse. The move is caused by dissatisfaction over governments pumping taxpayers’ money into struggling lenders after the global financial crisis. Public bailouts were carried recently in Germany and Italy. Italian politicians also said that they are ready to help another struggling bank, Banca Carige. Cracking down on such measures would have a positive political effect as there is no reason why everyone should pay for struggles of particular banks. On the other hand, European banking sector is weak and letting banks fail may have grave consequences for the euro area.

Source: xStation5

DE30 retested lower limit of the trading range at 11750 pts over night but managed to recover since. The German index has some troubles with breaking above the 12090 pts swing level. However, once it is finally cleared, the index will have an open way towards the topside resistance the trading range at 12200 pts. Yesterday’s Fed rate cut did little to support markets and today’s gains seem to be fuelled by good performance of Joe Biden in “Super Tuesday” primaries. The near-term risk factor for European stock markets is a conference call of finance ministers that is expected to be held at 2:00 pm GMT. Eurogroup president will make a statement after the call and it may be related to joint actions aimed at limiting economic damage from the virus. On the other hand, in case statement lacks essence, DE30 may continue to trade in 11750-12200 pts range.

DAX members at 9:09 am GMT. Source: Bloomberg

European carmakers took a hit in the morning after reports surfaced saying car sales in China dropped 80% YoY in February. This is the biggest drop on the record and caused Daimler (DAI.DE), BMW (BMW.DE) and Volkswagen (VOW3.DE) to erase gains. However, automotive stocks caught a bid later on and recouped losses.

SAP (SAP.DE) plans to use IT contracts in Ethiopia as a driver for African revenue. The country started to liberalize the telecommunications sector and it poses significant opportunities for the German company. SAP also agreed to work on a new billing system for state-owned utility company. The company also plans to expand into Uganda.

Share price of Metro (B4B.DE), the German wholesaler, surged 19% yesterday. According to a Bloomberg report, Sysco (SYY.US) has approached the company about a potential takeover. Sysco first expressed interest in buying Metro last year and has made fresh offers recently. However, financial details of the potential deal were not disclosed.

Analyst actions

• Bayer (BAYN.DE) raised to “buy” at Deutsche Bank. Price target set at €85

• Munich Re (MUV2.DE) raised to “hold” at Jefferies. Price target set at €215

• HeidelbergCement (HEI.DE) raised to “buy” at LBBW. Price target set at €60

• Infineon Technologies (IFX.DE) raised to “buy” at Bankhaus Lampe. Price target set at €21

Metro (B4B.DE) rallied yesterday on news that Sysco approached the company with a takeover offer. Rally was halted at the 50-sesion moving average (green line) that runs near the €12.60 swing level. The stock is pulling back today and the support zone at €11.50 is being tested. Source: xStation5