Summary
- Bundesbank will not oppose negative-yielding mortgages
- Inverse head and shoulders pattern on DE30 chart still in play
- Vonovia (VNA.DE) rallies as reports hint at rent-cap to be more lenient
Trade optimism continues to fuel gains on the stock markets all across the globe. Situation on the Old Continent today is no different as main indices from the region rally across the board. Equities from Sweden and Poland gain the most while shares from the United Kingdom can be found among the biggest laggards.
DE30 finally smashed through the resistance zone ranging above the 11800 pts handle yesterday being fuelled by trade optimism. The index approaches the next near-term resistance - 11920 pts handle marked by local lows from May and June. Apart from that, one should keep in mind that the inverse head and shoulders pattern is still in play and its potential target can be found in the vicinity of 12030 pts handle. Source: xStation5
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Long period of negative interest rates in the euro area is a major drag for the European banking sector. Not only lenders have to pay for keeping money at the European Central Bank, but they also experienced a massive margin squeeze. As it turned out that making profits on the regular banking activities (lending and borrowing) became a tough job, commercial banks in some countries began to offer mortgages on negative interest. Such a mortgage is beneficial for consumers as it allows them to repay less than they borrow. However, it is also beneficial for banks because the negative rate offered on these is often higher than the one banks’ need to pay on deposits at the central bank. It may also be a gateway for the German lenders soon following remarks from one of the Bundesbank members. Joachim Wuermeling, board member of the German central bank, said that negative-yielding mortgages are conceivable and that Bundesbank will not intervene in case one of lenders wants to introduce them.
DAX members at 8:35 am BST. Source: Bloomberg
Company News
Vonovia (VNA.DE) is leading DAX gains on Friday. The company rallies with the whole real estate sector on the back of Bild report. Newspaper claims that the freeze on rent increases may be more lenient than previously thought. According to the German tabloid, landlords may be allowed to increase rents in order to account for inflation.
According to the Reuters report, BNP Paribas (BNP.FR) plans to bid for Deutsche Bank’s (DBK.DE) equity derivatives book. The auction is expected to be launched in September. Earlier Deutsche Bank said that banks, investment funds and private equity firms have expressed interest in the book.
Daimler (DAI.DE) is trading higher at the beginning of the Friday’s session. Sentiment towards the stock was boosted by an upgrade the company has received at Kepler Cheuvreux. Firm’s analysts raised the recommendation for the stock from “hold” to “buy”. Price target was set at €49.
Audi, subsidiary of Volkswagen (VOW3.DE), is said to be in talks with BYD Company, the Chinese company manufacturing cars and supplies for the automotive sector. Audi is exploring the possibility of purchasing batteries for electric vehicles. Volkswagen plans to deliver as much as 22 million of EVs until 2028 and agreement with the Chinese supplier could help it diversify supply chain. Nevertheless, the talks are not in the advanced stage yet.
Volkswagen (VOW3.DE) share price continues to be locked with the €140-155 trading range. The stock has recently bounced off the lower limit of the range and is moving higher towards the upper limit. However, prior to reaching the resistance zone, the price will have to overcome 50- and 200-session moving averages (green and purple lines, respectively). Source: xStation5
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