DE30: Lufthansa overtakes Air-France as Europe’s biggest carrier

Summary:

• Time runs out for Theresa May to secure needed Brexit support

• DAX (DE30 on xStation5) eyes a test of the 11000 pts mark

• Chinese Geely Group halved its stake in Daimler (DAI.DE)

Stocks from the Old Continent opened higher on Friday after gains were spotted during the Asian session and Wall Street managed to reverse early losses yesterday. Indices from Poland and Sweden gained the most in the first minutes of trade while shares in Spain lagged the most. Refiners and miners surged at the beginning of the session while carmakers and IT stock took the biggest step back.

Despite underperformance during yesterday’s morning DE30 managed to end Thursday on the right foot. The German benchmark surged ending the day just a notch below 11000 pts mark. The index test the resistance zone ranging above this level during today’s session. Note that it will be the second attempt to break above after the first one failed in mid-December. Source: xStation5

The United Kingdom is preparing for a crucial week. Let us recall that the UK parliament is set to vote on the Prime Minister Theresa May’s deal on Tuesday, 15 January. PM May met with the Japanese counterpart Shinzo Abe yesterday. Japan’s PM expressed his support for Theresa May’s deal during the press conference following the meeting. Moreover, the Japanese politician urged UK lawmakers to back the deal as avoiding no-deal Brexit is “the whole wish of the whole world”. Nevertheless, gaining support abroad is unlikely to help the UK Prime Minister get the deal through the parliament. According to the BBC analysis published on Thursday, as much as two-thirds of the British MPs is likely to vote against the Brexit deal. While it is hard to assess and judge what will happen after the vote, the results may come as a relief ending months long uncertainty. However, as the odds does not seem to support current deal one should be aware that May’s defeat may actually spur additional uncertainty as the country may have to gear up for the chaotic scenario. Meanwhile, Jaguar Land Rover, the UK carmaker, said that it plans to reduce employment by 4500 jobs due to sales deterioration resulting from Brexit uncertainty while Jeremy Corbyn, leader of the Labour party, said that his group does not rule out possibility of backing idea of extending the Article 50. Amid all of this uncertainty one things seems certain - no one will complain about lack of emotions.

Major European stock market indices after the first hour of trade:

• DAX (DE30): +0.23%

• FTSE 100 (UK100): +0.80%

• CAC40 (FRA40): +0.2%

• IBEX (SPA35): +0.41%

• FTSE MIB (ITA40): +0.28%

German blue chips trade broadly higher on Friday with Lufthansa (LHA.DE) being among leaders. Source: Bloomberg

Company News

Deutsche Lufthansa (LHA.DE) can be found among the best performing DAX members today. The company moved closer to Air France-KLM (AF.FR) in 2017 in terms of RPK metric (revenue passenger kilometers). Lufthansa boosted passenger traffic by 9% in 2018 while its French counterpart achieved growth almost three times smaller. In turn, Lufthansa surpassed Air France in terms of RPK in 2018 and became the biggest carrier in Europe. Beat was minor but big enough to end 14-year long dominance of Air France on the Old Continent.

One of the worst performing DAX stocks today is Daimler (DAI.DE). The German carmaker found itself under pressure after reports spurred saying that Chinese Geely Group halved its stake in the company. Let us recall that the Group, led by Chinese billionaire Li Shufu, acquired a 9.7% stake in Daimler last year, what was the biggest foreign acquisition of the Chinese car manufacturer.

Volkswagen (VOW.DE) submitted a claim to the labor court in Braunschweig. The German carmaker decided to take legal action against Olivier Schmidt, one of the company’s former engineers and executives, due to his involvement in the diesel emissions scandal. The company seeks reimbursement of Schmidt’s defense costs in the United States. However, Handelsblatt reported citing unnamed attorney that the claim is likely to be rejected as the Volkswagen’s compliance system is to blame for the affair. Let us recall that Schmidt was sentenced to serve seven years in prison due to the scandal.

Lufthansa took a dive yesterday following a profit warning from the American Airlines (AAL.US). However, the stock managed to recoup some of the losses thanks to good passenger traffic data. Nevertheless, the downtrend structure remains intact therefore outlook does not bode too well for the future. Source: xStation5