DE30: Mixed moods across European stock markets

Summary:

• Snap elections looming in Spain

• DAX (DE30 on xStation5) rise met with selling pressure above 11200 pts handle

• Airbus (AIR.DE) to cease production of world’s biggest passenger jet

Stocks from Western Europe are trading higher today with the biggest gains being spotted in Switzerland and France. On the other hand, weakness can be spotted in eastern part of the Old Continent as blue chips indices from Russia, Hungary and Poland all trade lower today. Apart from that Italian stocks are underperforming and Spanish IBEX (SPA35) is holding just slightly above yesterday’s closing price.

DE30 keeps trading above the 33-period moving average on the H4 interval but fails distance away from it. Note that the long upper wick of the latest candlestick hints at significant selling pressure above the 11200 pts handle therefore the index may tread water was some time. Source: xStation5

Investors should pay bigger attention to Spanish assets in the nearby future due to developments on the domestic political scene. Prime Minister Pedro Sanchez led the minority government that was relying on support of Podemos and separatist parties from Catalonia. Joint efforts to produce a budget agreement came to failure in the previous week as Catalonian politicians stayed reluctant to back the government amid starting trial of 12 politicians linked to Catalonia secession attempts. The government budget bill was rejected by the Spanish parliament this week and PM Sanchez needs to decide what to do now. Early general elections seem to be the most likely option. The decision is expected to be announced on Friday after cabinet meeting. Note that in case this scenario materializes Spain will extend a saga of political uncertainty as it will be its third general elections during the past four years. If snap elections are to be called one, potential way for Sanchez to maintain power is to team up with Vox. Vox is an anti-immigration movement that did stunningly well in the recent regional elections in Andalusia. Such an outcome could be seen as U-turn for Sanchez as Vox movement is a vivid, public accuser of Catalan independence leaders - former allies of the Prime Minister. A move would fit into a trend observed across the Old Continent for some time - populists stepping into mainstream politics. Note that in case snap elections are called it is likely that they will be held ahead of the European Parliament elections scheduled for May. Strengthening of support for anti-immigration movement in another region of Europe could result in populists winning a significant stake in EU structures and in turn may put deeper integration efforts in vain by shifting European approach from bloc-oriented to more nation-oriented.

Revision of the Q4 2018 GDP report from the euro area was published at 10:00 am GMT. Unsurprisingly, growth numbers came in line with initial estimates of 0.2% QoQ and 1.2% YoY. Labour data released along with GDP report showed employment increasing by 0.3% QoQ (expected 0.2% QoQ) and 1.2% YoY (expected 1.3% YoY). It was the second consecutive quarter of such a lacklustre growth on QoQ basis and another the weakest one on YoY basis since Q2 2015.

Major European stock market indices after the first two hours of trade:

• DAX (DE30): +0.20%

• FTSE 100 (UK100): +0.28%

• CAC40 (FRA40): +0.44%

• IBEX (SPA35): +0.08%

• FTSE MIB (ITA40): -0.31%

DAX members breakdown after the first two hours of trade. Source: Bloomberg

Company News

Deutsche Bank (DBK.DE) is one of the worst performing DAX stocks today. As a reason behind today’s lacklustre performance one can name Financial Times report. FT reported that 4 out of 10 Deutsche Bank’s biggest shareholders want company’s CEO to deliver deeper cuts to the US investment banking business. Apart from that, Handelsblatt reported that Deutsche Bank is planning to cut around 1200 jobs during integration with Postbank.

Airbus (AIR.DE) announced that it will stop delivering A380 superjumbo jet models. A380 is the largest passenger jet in the world but has seen little interest and slow sales. Airbus moves was decided after Emirates carrier, the only major buyer of A380s, scaled down its orderbook by close to 40 aircrafts.

Theodor Weimer, CEO of Deutsche Boerse (DB1.DE), said in an interview today that his company is pursuing growth in the first place. He added that because of that the Deutsche Boerse have preference for M&A deals rather than stock buyback schemes. Executive said that the company has as much as €1.5 billion of funds ready for deals. Nevertheless, investors treated this message as a downbeat one and in turn the stock is trading among weakest DAX members today.