DE30: European Union to rule on Linde-Praxair merger

Summary:

• German Finance Minister urges Turkey to join IMF aid programme

• DAX (DE30 on xStation5) edges towards the 12350 pts area

• EU to decide on the fate of Linde-Praxair merger today

The Asian equities, especially Chinese,  edged higher on Monday as the concerns over the deepening of the trade spat between China and US eased. In Australia S&P/ASX 200 (AUS200) added 0.1% while in Japan Nikkei (JAP225) erased 0.3%. In China Hang Seng (CHNComp) is trading 1.2% higher while other indices from the country are also advancing significantly.

After the mediocre previous week European investors launched new week in much better moods. Gains are seen all across the continent with each notable blue chip index trading higher following the opening. The biggest advances were observed on the Russian and Polish bourses in the first minutes of trade. Among top performing sectors one can find miners and chemical companies while retailers and personal goods firms were the only sector groups from the Euro Stoxx 600 index to open lower.

In our morning analysis post we wrote about stories from two Mediterranean countries, Greece and Italy, but there is another country from that region which has drawn a lot of attention recently and it will most likely stay this way for some time. We are speaking about Turkey of course. According to Spiegel newspaper, the German Finance Minister, Olaf Scholz, spoke with his Turkish counterpart, Berat Albayrak, via telephone on Thursday and urged him to take particular steps that may help resolve ongoing crisis. Namely, Scholz advised Albayrak to give up the resistance his country puts up and join the International Monetary Fund aid programme. The IMF recommends rising interest rates as well as developing more strict budget policy. The Fund offers anywhere from $30 to $70 billion of help in return. However, the newspaper claims that the Turkish politician stayed reluctant to the idea and said that he will travel to the Gulf area this week to seek financial help from the friendly countries. Olaf Scholz and Berat Albayrak will meet in Berlin on 21st of September, a week before President Erdogan’s visit to the German capital.

Major European stock markets after the first half an hour of trade:

• DAX (DE30): +0.76%

• FTSE 100 (UK100): +0.47%

• CAC40 (FRA40): +0.59%

• FTSE MIB (ITA40): +0.08%

• IBEX35 (SPA35): +0.54%

• WIG20 (W20): +0.92%

The German bulls are competently defending the 12150 pts area (orange circles). Source: xStation5

The German DE30 (DAX futures underlying) bounced from the support level at 12150 pts at the end of the previous week. Do notice the long lower wicks, similar to those seen in at the turn of June and July, suggesting that bulls are looming in this area and are ready to resist the supply side pressures. The benchmark moved higher at the beginning of the new trading week and is rushing towards the resistance level around 12350 pts handle. In this region one can also find the 33-period moving average (H4 interval, green line on the chart above) therefore the significance of this area may be greater. In case buyers fail to maintain their dominance a pullback towards the 12150 pts region may occur.

BASF (BAS.DE) and Bayer (BAYN.DE) are DAX leaders on the back of the positive analyst action. Source: Bloomberg

Company News

Linde (LIN.DE) is the stock that may enjoy bigger interest today. The reason behind this is its merger with the Praxair (PX.US). The European Union authorities are said to issue a statement today saying whether they allow for the deal to be struck or not. Financial Times claims that the authorities are most likely to give deal a green light. However, the newspaper did not cited the source of the information. Apart from that, one should keep in mind that even if the EU give clearance to the merger the companies still need to secure similar permission from the US Federal Trade Commission. After the first half an hour of trade Linde has moved around 1% higher.

Among leaders of the DAX index one can find BASF (BAS.DE) and Bayer (BAYN.DE). Both companies received boost thanks to the positive analyst action. Namely, both companies were reinstated with “outperform” recommendations at Credit Suisse. The price target for Bayer was set at 95 euros while for BASF it was set at 105 euros.