DE30: German carmakers surge but Daimler lags on earnings

Summary:

• Trump and Juncker boost European equities by striking trade deal

• DAX (DE30 on xStation5) makes another attempt to break above the 12750 pts handle

• Daimler (DAI.DE) earnings report unveils the impact of tariffs on cars produced in the US

Yesterday’s US session pushed major benchmarks from Wall Street higher with Nasdaq (US100) being the leader. However, it should be highlighted that after the market close Facebook reported disappointing earnings and its price has plunged in the post-session trading erasing as much as $150 billion. When it comes to Asian trading we saw rather downbeat landscape. Australian and Japanese equities underperformed slightly as ASX/S&P 200 (AUS200) and Nikkei (JAP225) closed 0.05% and 0.16% lower respectively. Chinese equities are facing bigger sell-off as Hang Seng (CHNComp) is trading 0.5% lower.

Major stock benchmarks from the Old Continent opened higher on Thursday being possibly boosted by the trade deal struck by Trump and Juncker yesterday. However, it should be noted that the UK and Belgian equities lagged behind their region peers. The biggest gains were observed on the Swiss and German stock markets in the first minutes of trade. Personal goods companies and telecoms were sectors that opened with the biggest upside gap while technology and utility shares accounted biggest losses following the launch of European trade.

The hard border with Ireland is issue often raised while discussing the Brexit. Let us recall that the island of Ireland is divided in two parts: Republic of Ireland (independent country) and Northern Ireland (a part of the United Kingdom). British lawmakers has been concerned over how to deliver a Brexit that would cut the ties with the EU while avoiding the hard border on the island. The latest leaks suggest that in case no better deal is worked out the option of the last resort would be to leave the Northern Ireland… under the EU market regulations. Such a development could doom the PM May as her party depends on Northern Ireland’s Democratic Unionist Party to secure the majority allowing to pass legislation. However, it should be noted that the vast majority of the Northern Ireland citizen has voted “Remain” in June 2016.

Major European stock indices after the first hour of trade:

• DAX (DE30): +1.37%

• FTSE 100 (UK100): 0% (trades flat)

• CAC40 (FRA40): +0.7%

• IBEX (SPA35): +0.42%

• FTSE MIB (ITA40): +0.75%

Bulls have defended the support level at 12600 pts yesterday allowing DE30 to make a repeated test of the 12750 handle at the beginning of today’s session. Source: xStation5

After failing to break above the 12750 pts handle for the second time the German DE30 (DAX futures underlying) pulled back towards the support level at 12600 pts. Taking a look at the chart on H4 interval we can see that an attempt to break below has been ruthlessly obliterated by market bulls (long lower wick marked by the orange circle). In turn a pin bar was painted in the vicinity of mentioned support level and the 33-period moving average. In theory such a formation bodes well for buyers and so it was this time. The benchmark surged and is now trading a notch below the 12750 pts handle. In case this hurdle is finally surpassed an upward movement towards the resistance level at 12900 pts may on cards. However, given that the DE30 is making its third attempt to break above 12750 pts handle in the past two weeks it may not come easily.

Daimler (DAI.DE) lags on earnings while other carmakers surge on trade deal. Source: Bloomberg

Company News

Given that the Trump and Juncker agreed to put car tariffs on hold and to bring down the industrial tariffs it is not surprising that Volkswagen (VOW.DE), BMW (BMW.DE) or Thyssenkrupp (TKA.DE) are surging today. 

However, one can notice that Daimler (DAI.DE) does not benefit from this revelations. As a reason behind this one can name second quarter earnings. While the market consensus pointed for around 3.1% increase in the revenue YoY the total value of sales in the second quarter declined 1.1% to 40.76 billion euros. The EBIT fell by 21% YoY to 2.64 billion euros. In turn the company’s net profit declined to 1.73 billion euros from 2.44 billion euros one year ago. Daimler named car tariffs on its Mercedes-Benz cars manufactured in United States and exported to China as a reason behind such poor performance. According to the company the imposition of tariffs resulted in weaker prices what in turn shrinked company’s profit. After the first hour of trade Daimler has traded 0.1% higher.

Daimler (DAI.DE) failed to break above the resistance level at 59.05. In turn we saw the price retreating from the vicinity of mentioned technical hurdle. Today’s deterioration in outlook caused by disappointing earnings brought carmaker shares below the 57.70 and the stock may be set to test the lower limit of the downward price channel. Source: xStation5