DE30 pulls back below 10,000 pts as optimism starts to fade

• European equities add to yesterday’s massive gains

• DE30 broke above 10,000 pts but backed off later on

• Citi slashed price target for Lufthansa (LHA.DE) to just €0.50

German DAX surged 10.98% yesterday on hopes that coordinated actions from central banks and governments will prove effective in combating coronavirus spread. European equities and US futures extended gains at the beginning of today’s session after Democrats and Republicans agreed on a stimulus package overnight. Meanwhile, incoming hard and survey data continues to show poor picture of the economy amid coronavirus outbreak

Ifo numbers for March miss estimates slightly

Ifo Institute released its indices for March at 9:00 am GMT. The business confidence index dropped from 96 pts in February to 86.1 pts in March. Market expected a reading of 87.5 pts. Expectations sub-index dropped from 93.1 pts in February to 79.7 pts in March, while current conditions gauge dropped from 99 to 93 pts. While the data itself is very poor, comments from Ifo economists are even more grim. They said that depending on the length of shutdown, drop in GDP may be anywhere from 5 to 20% this year.

Source: xStation5

DE30 made a massive jump yesterday, gaining over 1,000 points. It was the biggest single day gain for the German index on the record. The index added to those gains today and managed to break above the 10,000 pts handle earlier in the day. However, a pullback occurred later on and now DE30 is trying to hold above the important price zone at 9,800 pts. Failure to do so could see the index pullback all the way towards the 9200 pts swing area. On the other hand, should bulls regain ground and push DE30 above 10,000 pts once again, buyers may get more encouraged and look towards the resistance at 10,400 pts.

DAX members at 9:55 am GMT. Source: Bloomberg

EON (EOAN.DE) is surging today after the company reported full-year results. EBIT of €3.2 billion matched median estimate. The same can be said about adjusted net income of €1.5 billion. Revenue grew 38% in 2019 and reached €41.5 billion. The company said that a coronavirus outbreak is likely to have a temporary impact on its earnings and may cause delays to energy infrastructure projects. EON expects 2020 full-year EBIT in €3.9-4.1 billion range and full-year net income in €1.7-1.9 billion range.

Thyssenkrupp (TKA.DE) decided to deliver deeper job cuts than earlier announced. The company will lay-off 1,000 more employees. The German industrial conglomerate also reached agreement with labour unions to eliminate a total of 3,000 jobs by 2026. Thyssenkrupp also agreed with unions to work on measures aimed at contending the spread of the virus within the company.

Lufthansa (LHA.DE) is bucking a trend and trading lower today. The German airline is being pressured by a massive price target cut at Citi. The Bank maintained a “sell” rating but slashed the price target from €10 to just €0.50, implying a 95% decline against yesterday’s close.

Analyst actions

• Continental (CON.DE) raised to “buy” at Jefferies. Price target set at €78

• Daimler (DAI.DE) raised to “buy” at Jefferies. Price target set at €40

• Deutsche Boerse (DB1.DE) raised to “buy” at DZ Bank. Price target set at €130

• Deutsche Bank maintained a “buy” rating for Covestro (1COV.DE). Price target was lowered from €58 to €45

Deutsche Boerse (DB1.DE) is having a great week as it trades 25% above last week’s close. The upward move stalled today at the 50% retracement of the recent downward move (€125 area). Should optimism fade, the stock may become locked in between the aforementioned 50% retracement and the 38.2% retracement at €118. Source: xStation5