DE30: European stocks edge lower at the beginning of the session

Summary:

• Italian 2019 budget announcement said to be delayed

• DAX (DE30 on xStation5) breaks below 33-period moving average

• Bayer’s Monsanto accused of ghostwriting review of its Roundup weed killer

All three major benchmarks from Wall Street closed lower yesterday with Dow Jones (US30) accounting biggest drop. Similar downbeat moods were observed during Asian trading as the Japanese Nikkei (JAP225) and the Australian S&P/ASX 200 (AUS200) declined 0.82% and 0.18% respectively. Stock indices in China are all trading lower at press time.

Major European stock benchmarks opened lower on Thursday following losses seen on Wall Street yesterday and during today’s Asian session. The biggest declines were observed on the Italian stock market in the first minutes of trade while no blue chips index from the region opened higher. Food companies and refineries were the only sector groups to open higher on Thursday while banking sector underperformed the most.

DE30 broke below the 33-period moving average on the H4 interval (green line on the chart above) in the morning. As pessimism dominates European stock markets in the morning the benchmark may be set to continue its downward move in case no major positive news surface. If this is so the next level to watch could be resistance around 12150 pts. Source: xStation5

The United Kingdom is not the only European country going through uncertain times right now. The Italian 2019 budget was set to be agreed on today but it seems like the decision will be delayed. While the negotiations over how the budget will look like were close to an end the Five Star Movement is said to made a last-minute demand on increased spending that would cause the deficit to be around 2.4% of GDP. As a result the Italian Finance Minister Giovanni Tria threatened to resign as he will not accept any budget with a deficit bigger than 1.9%. Asked for commentary the Italian undersecretary of infrastructure said during the radio broadcast today that the date and time of the final cabinet meeting over fiscal targets is still to be decided as policymakers want to take time to include commitments they did to their voters. These news are said to be a reason behind significant drop in euro valuation in the morning.

Elsewhere, one European company may be actually set to benefit from the ongoing trade conflict between China and the United States. Airbus is said to revive talks with China over $18 billion deal that were put on hold at the beginning of the year. Delegation of the high-profile Airbus executives is currently visiting China what is view as an opportunity to strike a deal. China may favour Airbus over Boeing to somewhat punish the United States for its latest protectionism push.

Major European stock indices after the first hour of trade:

• DAX (DE30): -0.87%

• FTSE 100 (UK100): -0.16%

• CAC 40 (FRA40): -0.42%

• IBEX (SPA35): -1.21%

• FTSE MIB (ITA40): -1.73%

Lufthansa (LHA.DE) leads DAX losses on the back of downbeat analyst action. Source: Bloomberg

Company News

Bayer (BAYN.DE) may come under pressure today after new revelations concerning Monsanto’s Roundup weed killer spurred recently. One of the academic journals claims that Monsanto was ghostwriting a 2016 review of its product. The review was later used by Monsanto to defend Roundup after it was claimed to cause cancer. Ghostwriting is an action of writing an opinion in some else’s name. However, it should be noted that the journal did not questioned results of the review but solely insufficient disclosure of Monsanto’s involvement in the paper.

Lufthansa (LHA.DE) is one of the worst performing DAX stocks today. The carrier was downgraded at Kepler Cheuvreux from “hold” to “reduce”. The price target for the stock was lower from €22.50 to €19.30, implying a 12% downside from the yesterday’s close. Lufthansa had 14 “buy”, 9 “hold” and 4 “sell” recommendations earlier. The average one-year price target for the stock is €27.62.

Despite breaking above the downward trend line at the beginning of August Lufthansa (LHA.DE) struggled to gain traction. The stock failed to break above the resistance zone ranging €23.90-24.30 and ultimately fell sharply this week. Source: xStation5