Summary:
- Significant deterioration in the German manufacturing sector
- DAX (DE30 on xStation5) test 11500 pts handle
- Siemens (SIE.DE) said to be in talks with Mitsubishi over cooperation
Stock from the Old Continent launched final trading session of the week in green. Good moods were seen all across the continent after optimism was present during Asian trading hours. German and Dutch equities outperformed while weakness could be spotted on Polish and Russian bourses. IT stocks and retailers led gains while telecoms and healthcare companies lagged.
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DE30 erased early gains following the release of PMIs. The index is trading in the vicinity of 11500 pts handle at press time and may be set to test the swing level at 11400 pts later on. Note that DE30 broke below the upward sloping trendline recently therefore technical situation seems to favour bears. Source: xStation5
Preliminary German PMI readings for March were released at 8:30 am GMT today. While services gauge experienced slightly smaller drop than expected, manufacturing print gather the most attention. The German manufacturing PMI plunged in March from 47.6 pts to 44.7 pts while markets expected an uptick towards 48 pts. In turn, the index found itself at the lowest level in 79 months! Backlog of orders fell by the biggest in close to 10 years hinting that weakness may be here to stay for some time. Moreover, economists from IHS Markit highlighted near-stagnation in the manufacturing input price that cause factory prices to rise at the slowest pace in 2 and half a year. Combining it with low business optimism we may see further contraction. Decision to launch new round of TLTROs may help ease this trend but an instant U-turn should not be expected. Still, slowing European economy may need even more stimulus to avert dipping into recession.
Major European stock market indices after the first hour and a half of trade:
- DAX (DE30): -0.65%
- FTSE 100 (UK100): -0.77%
- CAC40 (FRA40): -0.90%
- IBEX (SPA35): -0.74%
- FTSE MIB (ITA40): -1.06%
Only a few DAX stocks trade in green after the release of devastating PMIs. EON is performing quite good on the back of Texas project news. Source: Bloomberg
Company News
Deutsche Bank (DBK.DE) resists broad downward pressure today and is one of a few DAX stocks that trade higher. The Bank announced that it decided to slash bonus pool for 2018 to €1.9 billion from €2.2 billion in 2017. Moreover, the company plans to revive its European private banking business. Just recently major jobs cuts among regional managers were announced while experienced ex-Goldman Sachs banker took over the control of a unit.
Reports surfaced yesterday saying that Mitsubish Heavy is in talks with the German Siemens (SIE.DE) on cooperation in gas turbine business. The companies are said to be discussing a merger of the respective units. While such a deal certainly creates profit potential for Siemens the stock failed to rally on the news so far.
EON (EOAN.DE) can be found among DAX outperformers today. The company announced that it has started construction works in Texas. The German utility company is setting up a 151 megawatt wind farm in the US. Commission of a deal is expected before the end of the year.
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