DE30: Juncker delivered State of the Union speech

Summary:

• Jean Claude Juncker delivered his final State of the Union address today

• DAX (DE30 on xStation5) trades above the psychological 12000 pts level

• E.ON (EOAN.DE) underperforms severely after Morgan Stanley issued downbeat report

While all three major stock benchmarks from Wall Street managed to produce decent gains yesterday, same optimism was not seen during the Asian session. The Australian S&P/ASX 200 (AUS200) was the best performing major blue chips index from the region as it lost only 0.06%. Nikkei (JAP225) was next in line with 0.24% drop while Chinese equities were the biggest underperformers in the region.

Most of the European blue chips indices opened higher on Wednesday with stocks from the UK and Spain lagging a bit behind their Western European peers in the first minutes of trade. Miners and refiners were among best performing European stocks during the opening while utilities and telecoms took the biggest step back.

DE30 managed to rebound off the support zone. The index is trading a notch above the psychological 12000 pts level at press time and if it managed to stay above this handle an upward movement towards the resistance level at 12150 pts cannot be ruled out. However, keep in mind that the benchmark will need to overcome the 33-period moving average first (green line, H4 interval). Source: xStation5

As we have mentioned in our morning analysis Jean-Claude Juncker, the European Commission President, said that the European Union will not ease its stance in the negotiations with the UK. Such an announcement suggests that Brexit talks are still far from over. Having that in mind, one should not be surprised that leaders of various European countries are trying to assess the impact of potential no-deal Brexit. Germany is the last country to do so. According to the Handelsblatt newspaper, the German Chancellor Angela Merkel ordered country’s ministries to evaluate potential risks associated with the UK departure from the EU structures without a deal. Merkel wants government departments to focus on laws and regulations that would need to be changed in case of so-called “hard Brexit”. Deadline to deliver the list of aforementioned regulations was scheduled at September 17.

Apart from that, it is worth mentioning that Jean-Claude Juncker delivered State of the Union speech today. European Commission President hailed the European growth in the after-crisis period and strong jobs growth. Moreover, topics concerning the European election standards and procedures as well as role of euro in the World were also raised. Juncker said that the coast guard force will be strengthened to help tackle the migration crisis. While no direct references were made to the US, the politician said that he is no supporter of “selfish unilateralism” and he is in favor of multilateralism. Staying in the trade theme the European Commission President proposed EU-African alliance that could create up to 10 million jobs in Africa. In terms of Brexit Juncker said that he looks forward to forming a relationship with the UK after Brexit takes place in March next year. It was his fourth and final  annual address to the European politicians in Brussels.

E.ON (EOAN.DE) sinks on the back of downbeat Morgan Stanley report. Source: Bloomberg

Company News

E.ON (EOAN.DE) is the worst performing DAX stock today. The lacklustre performance of the company’s shares could be attributed to the Morgan Stanley report. The Bank said that shares of the electric utility company may be pressured in the short term due to headwinds surfacing that are likely to extend over the next year. Morgan Stanley recognized that E.ON will likely continues to face FX headwinds in Turkey, Sweden and Hungary. Apart from that, restructuring costs may take their toll on the company's earnings in the near-term as well. The Bank left its recommendation for the stock unchanged at “equal-weight” while lowering its price target from €10.50 to €9.50.

E.ON (EOAN.DE) shares underperformed recently and in turn price moved to the short term support zone that coincides with the upward trendline. The reaction to this technical hurdles may be crucial for the stock in the nearby future. In case we see a rebound an upward movement towards the long term resistance zone ranging €9.60-9.75 may be on cards. Source: xStation5