DE30: Fresenius surges on dividend increase plans

Summary:

• France and Germany plan to subsidy EV battery cell factories

• DAX (DE30 on xStation5) broke to new 2019’s high in the early trading

• Fresenius (FRE.DE) surges after proposing to raise dividend for the 26th year in a row

Stocks in Europe opened with modest gains on Wednesday. Swedish equities were the only exception as OMXS30 index was trading slightly below yesterday’s closing price. Elsewhere, Polish and Russian equities outperformed leaving most of the Western European benchmarks far behind. Miners and carmakers surged while retailers lagged in the first minutes of trade.

DE30 broke to the highest level of 2019 in today’s early trading. However, bears managed to push the price back to the vicinity of 11375 pts handle later on. While a test of the recent high can be seen as a confirmation of the upward momentum, one should not forget that the German index still trades over 15% below its ATH. To put this figure into context the S&P 500 index sits around 5.5% below record high. Source: xStation5

So far the prosperous EV battery cell market looks dominated by the manufacturers from Asia. However, as more and more countries start to embrace the potential electric vehicles holds, it should not come as a surprise that some economies try to launch domestic production. Such efforts are especially seen on the Old Continent, a region with known for its cars. According to the Bloomberg report, French and German governments are teaming up in order to begin EV battery production in Europe. Germany and France will devote, respectively, €1 billion and €750 million to subsidy companies setting up the production lines in their countries. During the joint press conference economy ministers of France and Germany said they hope that other countries like Spain, Sweden and Poland will join the initiative and decide to support their domestic companies as well. Note that the EV battery cell market is expected to grow to €250 billion by 2025. To picture the scale it is more or less the size of Denmark economy right now. However, the decision whether subsidies will be granted or not will be made by the European Commission in April.

Meanwhile, Joan Ryan, the UK lawmakers, became the eighth Member of Parliament to depart from the Labour Party structures. Ryan reasoned his stance saying that he is concerned about the anti-Semitism allegations raised by other Labour dropouts earlier this week. Joan Ryan will now join the Independent Group founded by other ex-Labour MPs. However, a total of 8 lawmakers is unlikely to make much difference in the current UK political landscape.

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

• DAX (DE30): +0.72%

• FTSE 100 (UK100): +0.46%

• CAC40 (FRA40): +0.32%

• IBEX (SPA35): +0.49%

• FTSE MIB (ITA40): +0.19%

Both Fresenius stocks can be found among DAX outperformers today. Source: Bloomberg

Company News

Deutsche Bank (DBK.DE) announced that it aims to hire 26 new employees in its South African branch. While this may not be a big figure for such a big bank, one may find decision a bit surprising given that the Deutsche Bank slashed workforce in South Africa just half a year ago. However, explanation offered by the company causes the information to make perfect sense. Namely, the Bank phased out its South African advisory, corporate banking and sponsor services units in mid-2018 and now plans to increase number of jobs in, for example, fixed income trading division. Such a move is a part of Christian Sewing’s strategy to scale down unprofitable businesses and focus on company’s strengths.

Stocks associated with Fresenius brand can be found among DAX leaders today. Fresenius Se (FRE.DE) published earnings for the 2018 today. The company managed to generate better-than-expected revenue of €33.53 billion. On the other hand, earnings disappointed with EPS of €3.368 coming in 2.2% below median estimate and net income missing forecasts by 1.1%. While this paints a mixed picture it should be said that the company managed to deliver on its targets in the previous year. However, what is probably the main cause behind today’s rally is the fact that the company proposed to increase dividend payout for the 26th year in a row.

Allianz (ALV.DE) announced today that it will provide a capital boost to Allianz X, company’s venture capital fund. Funds size will be boosted to the level of €1 billion. In turn Allianz X will become the largest VC fund being backed by such a big institution.

Thanks to the last week’s strong upward price move Allianz (ALV.DE) stock managed to break above the downward sloping trendline. Company is trading reasonably higher today after launching session with an upward price gap. The latest peak at €194.50 handle can be seen as the first level to watch for buyers. Source: xStation5