DE30: Italy draws attention, FTSE MIB on the rise

Summary:

• European stocks open higher, FTSE MIB surges on upbeat comments from the government

• Italy/Germany bond yields moves lower ahead of the EC review regarding an Italian budget

• Thyssenkrupp (TKA.DE) goes up on the promising next year outlook

European stock markets have entered Wednesday’s trading on a strong footing despite another bleak session seen on Wall Street yesterday. Note that gloomy moods were shrugged off by Asian investors as well where major indices in China and Hong Kong closed slightly higher. Looking forward, the prime topic for today concerns Italy and an expected review of its next year budget coming from the European Commission. Some upbeat remarks were made this morning which helped the Italy/Germany 10Y spread slide. Namely, Italy’s Deputy Prime Minister signalled that the country could open to potential budget revisions, according to La Stampa. Earlier today finance minister Giovanni Tria expressed some concerns about rising yields. What’s more, then some revelations that Italy could bank on shorting bank stocks came out. Note that this move would be aimed at helping them as this sector has been hit hard on the back of the ongoing battle between the Italian government and the European Commission. The latter will offer its opinion on this topic later today and given the fact that some reassuring remarks have begun flowing from the Italy’s govt one may suspect that the heavily indebtedness country could be more willing to collaborate in order to reach an agreement and avoid sanctions.

The DAX held above its important technical level on Tuesday hence some could hope to see a bullish pullback in the nearest future. Source: xStation5

These comments have been positive enough to shore up Italian stocks so far. The FTSE MIB (ITA40) is rising more than 1.1% this morning standing out the most among its major peers in Europe. Those being more interested in trading the German DAX (DE30) should keep a closer look at the chart above. It can offer some hopes that the price will see a bounce in the nearest future as it has stayed above its pivotal support placed in the vicinity of 11040 points. Having said that, taking into account the broader global economic outlook we do not think that the German equity market will be able to show more pronounced gains any time soon. Instead, we see any larger bounces to be faded quite quickly as more sellers are expected to step in the market at a better price. To sum up, a move beyond 11670 points looks unlikely in our eyes.

Only two stocks are trading below the flat line in the morning showing widespread gains in the German stock market. Source: Bloomberg

Looking into the DAX breakdown it’s worth paying a closer attention to Thyssenkrupp (TKA.DE). The company reported that it expects higher profits next year after the weak performance this year (a decline in full-year earnings). The details presented by the firm suggest that EBITDA from continuing operations ought to exceed 1 billion EUR in the 2018/2019 fiscal year compared to 706 million EUR in the 2017/2018 fiscal year.

On top of that, Adidas informed that it sees revenue in 2018 to be around 22 billion EUR. Even as a percentage change is not as good as in the past the stock is trading almost 1% higher this morning.