DE30: German stocks catch a bid as political concerns settle down

Summary:

• Europe sees a green open across equity markets, the German exchange leads the gains
• A migration deal brings relief to German stocks ending a row threatened to break up Merkel’s coalition govt
• DAX (DE30) remains stuck within a consolidation, being unable to break out of it despite upbeat news from Germany
• Glencore (GLEN.UK) tumbles following a subpoena from the US Department of Justice concerning money laundering

European stock markets have started Tuesday’s trading on the right foot partly on the back of upbeat revelations from Germany where Interior Minister Horst Seehofer and Chancellor Angela Merkel reached an agreement with respect to immigration. However, even as the German DE30 jumped immediately after the opening, it has given back some of its gains thus far staying within a consolidation looking at a lower time frame. Along with better DE30 performance other equity markets have benefited as well, and around 30 minutes since the start of trading all major indices are moving above their flat lines.

One may conclude that relief came from Germany, which yet yesterday was dragging Europe’s stocks down daunting investors that Merkel might be ousted. Things evolved in favour of riskier assets since then as Merkel and the CSU’s leader Seehofer agreed to tighten controls at the Austrian border in order to stop illegal immigrants. Moreover, they also decided that transit centres will be set up to hold asylum seekers until they can be sent back. Chancellor Merkel described the deal as a good compromise after really tough negotiations. Let us explain that Seehofer took a hard line stance after being pressured by CSU members to defy Merkel’s immigration policy constituting a risk for the country’s stability and safety. In the aftermath of the deal Seehofer has dropped its previous promise to step down both as Interior Minister and the CSU’s leader.

The DE30 remains trapped within a consolidation between 12380 and 12100 points. Taking into account that we’re currently moving in the neighbourhood of the upper limit one may suspect the index could move lower in the near-term for all upbeat outcomes from the German political scene. Source: xStation5

Technically the index keeps trading within quite a wide consolidation which has been successfully preventing the price from making larger moves. Unless the price closes above its upper limit of a consolidation at the daily chart one may forecast that this range trading to last for the time being. Whipping through European indices we may identify that the Italian FTSE MIB (ITA40) is leading the gains as for 9:02 am BST taking the baton from the German exchange. On the other hand, the British FTSE100 (UK100) is experiencing the least increase (just 0.15% at the time of writing) possibly due to simmering Brexit-related concerns.

Most of stocks listed on the DE30 are trading higher in the morning. Source: Bloomberg

Looking at the DE30 breakdown one may notice that there are not outliers here, and gains are more or less equally distributed. Looking broader it’s worth taking a glance at Glencore (being listed in London), GLEN.UK, which is tumbling in early trading in the wake of a subpoena issued by the US Department of Justice regarding money laundering. The documents released by the DoJ relate to the company’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to the present. The stock is plummeting as much as 10% as of 9:10 am BST smashing its technical support at the daily chart.

Glencore (GLEN.UK) are diving on Tuesday after being subpoenaed by the US Department of Justice. The stock has already broken through its support at 3.3 GBP, and the next more notable one might be localized around 2.75 GBP. Source: xStation5