Summary:
- European stock markets have begun today’s trading with slight declines
- Italian FTSE MIB suffers from the EC report regarding a possible launch of an excessive debt procedure
- DAX (DE30) bounces off the short-term resistance
Most of European equity markets are trading prettly flat this morning except the Italian market. The FTSE MIB (ITA40) is down almost 0.6% in response to the Europea Commission’s report suggesting that the country could face an excessive debt procedure (EDP) in the near future due to a failure in cutting its undue debt. This paves the way for a fine of 3.5 billion EUR - if so, Italy would have to deposit such a sum to the EC as a non-interest bearing deposit. Meanwhile, Bloomberg has come up with an article today suggesting that Italy will seek a seat in the European Central Bank’ Executive Board. This seat is reportedly to serve to force the ECB to buy bonds to fund infrastructure projects. Let us remind that Italy will have no members in the ECB’s board when Mario Draghi leaves the ECB at the end of October. As the article says, Italian Prime Minister Giuseppe Conte is expected to aim for a seat on the board. However, a key role in picking a candidate should be played by Matteo Salvini, the Lega’s leader.
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Looking at the technical landscape of the German DE30 one may notice that the price is coming down after hitting the resistance in the form of the upper boundary of the downward channel. From this perspective one may suppose the price could be heading south even toward the lower end of the mentioned linear pattern. Source: xStation5
After the first hour of trading the FTSE MIB it still the worst performing index being down almost 0.8%. Sentiment has also deteriorated elsewhere. The DAX is losing 0.2%, the French CAC40 is falling 0.2% while the EuroStoxx50 is going down 0.4%. In turn, the British FTSE100 is the sole indicator among major markets in Europe being slightly above its flat line - it is gaining 0.2%.
Looking at the breakdown of the German index one may notice that Linde shares (LIN.DE) are falling the most. This may still be an effect of yesterday’s recommendation from Pareto Securities. The company decided to downgrade the stock to sell from hold. On top of that, it is also worth looking at VW shares being traded barely above the flat line. Over the Asian session we got an article suggesting that the company may be forced to change its battery-purchasing plan worth 50 billion EUR. The prime reason behind a possible change could be a deal with Samsung. The firm was to deliver batteries for just over 20 gigawatt hours, however, after different views on production volume and schedule emerged during negotiations, Samsung cut its pledged supplies to less than 5 gigawatt hours. As the BBG article says, VW will ultimately need 300 gigawatt hours of annual battery cell supply, hence without such equipment it may face serious trouble in developing its electric cars unit.
The German DE30 is falling after the first hour of trading on Tuesday. Linde shares are leading the losses. Source: Bloomberg
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