DE30: European stocks erase post-PMI jump

• European equities slide during cash session

• DE30 tested support at 12,225 pts

• Volkswagen (VOW3.DE) considers takeover of Europcar

European stocks markets launched today's cash session slightly below yesterday's closing prices. However, a strong downward move started in the first minutes of trading and has continued since. DE30 is trading around 2% lower and has erased jump triggered by solid PMIs yesterday.

German IFO indices for June were released at 9:00 am BST. Headline business climate index jumped from 79.7 pts (revised higher from 79.5 pts) to 86.2 pts, above 85 pts expected by the market. Expectations subindex improved from 80.5 to 91.4 while current assessment subindex moved from 78.9 to 81.3 pts. IFO economists said that German economy has already passed economic trough and should continue on an upward trajectory now. IFO expects positive 7% GDP growth in Q3 2020.

Source: xStation5

DE30 did not manage to smash through resistance ranging around 78.6% retracement of February-March drop (12,550 pts area). The index tested 200-hour moving average (purple line) and a support at 12,225 pts in the aftermath of today's steep drop. As one can see on the chart above, part of the decline has been recouped already but the index still trades around 2% lower on the day. Coronavirus is once again becoming a major theme in the markets following recent rise in hospitalizations and deaths in the United States. Should this trend continue, the situation could continue to weigh on market sentiment. However, unless a major catalyst is offered to investors, DE30 may remain range bound between 12,200 pts and 12,550 pts with 12,400 pts serving as a near-term resistance.

DAX members at 9:50 am BST. Source: Bloomberg

According to a Bloomberg report, Volkswagen (VOW3.DE) is exploring takeover of French rental car company Europcar Mobility Group (EUCAR.FR). Considerations are said to be at an early stage and Volkswagen may decide not to proceed with the acquisition.

13 executives from a subsidiary of Siemens (SIE.DE) as well as other companies were arrested by Italian police over alleged corruption. Prosecutors accuse executives of working together to alter public tenders involving Italian subway. Spokesman for Siemens confirmed that company's offices in Milan were searched and that the company cooperates with authorities.

Bayer (BAYN.DE) shares jumped yesterday after Handelsblatt reported the company is close to striking a settlement deal relating to Roundup weedkiller. According to the report, executives at Bayer are expected to vote in the coming days on a settlement package valued between $8 and $10 billion.

Analyst actions

• Infineon Technologies (IFX.DE) raised to "overweight" at JPMorgan. Price target set at €28

• Lufthansa (LHA.DE) cut to "sell" at Goodbody. Price target set at €4.20

• Gerresheimer (GXI.DE) maintained "buy" at Deutsche Bank. Price target raised to €92

Volkswagen (VOW3.DE) seems to be unable to break above the long-term price zone ranging around the 23.6% retracement of the post-pandemic recovery move (€137.50). Recent low at around €128 is the level to watch should a pullback deepen. Source: xStation5