Summary:
- Stock markets in Europe begin Tuesday’s trading lower after revelations from the trade front
- DAX reverses after closing the important technical resistance
- Thyssenkrupp (TKA.DE) down on a slew of comments from BofA and Morgan Stanley
A beginning to Tuesday’s trading has not been the best for bulls to say the least as major indices have opened clearly lower compared to Monday’s closing levels. This underperformance seems to stem from adverse revelations from the US-China trade front we were offered on Monday afternoon. Namely, officials from both countries are reportedly struggling to agree on when they could meet once again to resume trade negotiations later this month. Let us also remind that these difficulties came hours after Washington rejected a Chinese request to put off tariff which ultimately came into effect on Sunday. Although it does not mean that the US and China will be unable to hold a meeting later in September, these kind of issues do not bode well for future talks (if they struggle to even set the date when to meet, it is pure and simple that they will have even larger issues when talks kick off). In response to the bearish information European equity indices are moving down with the German DAX leading the losses (down 0.5%), and sentiment is not going to improve when New York investors enter the day as SP500 futures are pointing to a red opening (down 0.8%).
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Open account Try demo Download mobile app Download mobile appThe German DAX looks as if it would be ready to head lower in the near-term. The price failed to break through the bullish trend line yesterday, therefore a pullback seems to be on the cards. If so, a downward move even toward 11 300 points seems to be possible. Source: xStation5
After the first hour of trading the German DAX is falling 0.5% while its peers are not performing much better - the CAC40 is down 0.4%, the EuroStoxx50 is down 0.4%, the FTSE100 is pretty flat, the FTSE MIB is down 0.2% and the IBEX35 also slips 0.2%. When it comes to specific news from companies listed on the DAX it is worth focusing on Thyssenkrupp (TKA.DE) as the stock is down more than 3% at the time of writing. The decline appears to have something to do with comments from Bank of America as well as Morgan Stanely. The first bank said that although it sees European steelmakers as cheap (as many of them trade below 0.5x P/BV), they are facing a lot of challenges, hence it could be a “value trap”. Either way, BofA analysts maintained its buy call for Thyssenkrupp with the price target of 15 EUR (the spot is 10.7 EUR). In turn, quite upbeat comments came from Morgan Stanley as the bank said that Thyssenkrupp has scope to unlock meaningful value by restructuring its portfolio. Analysts added that an IPO of elevator business would be a good starting point to release capital to help restructure remainder of the company.
Thyssenkrupp (TKA.DE) is leading the losses in the German DAX on Tuesday. Source: Bloomberg
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