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European indices trade lower after disappointing PMIs
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DE30 reaches fresh 3-month low near 12,900 pts
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Germany moves to second stage of gas emergency plan
European stock markets are trading lower after flash PMIs for June showed bigger-than-expected deterioration in manufacturing and services sectors. Indices from Western Europe trade 0.5-1.3% lower today, with German DAX leading the drop (-1.3%). Fed Chair Powell will appear in the House today for the second day of semi-annual testimonies. However, the text of the testimony will remain unchanged compared to yesterday therefore any surprise may come from lawmakers' question only.
News hit the market today that Germany is preparing to move to the second stage of its 3-stage gas emergency plan. It is called an "Alarm phase" and indicates that gas supply to the country is disrupted or demand is increased but supply to German households and businesses is secured. However, German authorities warned that the upcoming annual maintenance of Nord Stream I pipeline may push the country into the third stage in which supply is not sufficient to meet general demand. In such a scenario, gas rationing would likely take place. This could be disastrous for the German economy but German economy minister Habeck said that it is still some time away.
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Source: xStation5
DE30 managed to defend the 13,000 pts support zone marked with 78.6% retracement of the upward move started in early-March yesterday. However, relief was short-lived as the index resumed slide this morning following the release of disappointing PMIs for June. As a result the aforementioned support zone is being tested once again today. While the index reached a fresh 3-month low this morning near the 12,900 pts mark, bulls managed to regain some ground and a definite break below the 78.6% retracement is not warranted. Nevertheless, outlook for German equities is rather bearish, especially as the country sees the gas supply situation deteriorating further. In case of a break below, lows from March in the 12,500 pts area may be in danger.
Company News
BMW (BMW.DE) announced that it has opened an extension of its factory in Shenyang, China that will help boost the company's production capacity in the country to 830 thousand vehicles per year, up from around 700 thousand in 2021. Company said that the extension to the Shenyang factory is capable of producing 100% electric vehicles.
Analysts' actions
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Rheinmetall (RHM.DE) downgraded to "hold" at HSBC. Price target set at €240.00
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Salzgitter (SZG.DE) upgraded to "equal-weight" at Morgan Stanley. Price target set at €40.80
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Aroundtown (AT1.DE) downgraded to "underweight" at JPMorgan. Price target set at €3.60
Share price of BMW (BMW.DE) has been stuck in the €75.50-83.50 range since mid-March 2022. Stock made an attempt of breaking above the upper limit of the range at the beginning of this month but it was a failed attempt. The lower limit of the zone is being test now. In case of a break below, a textbook range of a downside breakout from this range hints at the possibility of price dropping to €67.30. Source: xStation5
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