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European indices trade slightly lower
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DE30 tests lower limit of the downward channel
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Covestro drops after disappointing Q1 guidance
Major stock market indices from Europe are trading lower near the midpoint of today's cash session on the Old Continent. Indices launched trading lower and deepened declines slightly after hawkish European CPI reading. ECB minutes are also scheduled for release today (12:30 pm GMT) and could be another source of market volatility.
European flash CPI reading for February was released today at 10:00 am GMT and, just like the German reading yesterday, it showed a hawkish surprise. While CPI inflation in the euro area decelerated from 8.6% to 8.5% YoY, the market expected a slowdown to 8.3% YoY. Core CPI reading was even more hawkish as the core gauge accelerated to 5.6% YoY instead of staying unchanged at 5.3% YoY as market expected. Such a reading gives the ECB more reason to deliver another 50 bp rate hike in March. Money markets currently almost fully price in a 50 bp rate hike at the next ECB meeting on March 16, 2023.
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Source: xStation5
DE30 broke below the lower limit of the short-term trading range in the 15,300 pts area. Index continued to move lower following a break and painted a daily low near 15,160 pts mark. A point to note is that it is almost exactly the same spot where the lower limit of the short-term downward channel runs. A positive price reaction to this hurdle and subsequent rebound gives some hopes for DE30 bulls. A break back above the aforementioned 15,300 pts would be welcome. However, a move above a previous local high in the 15,500 pts area would be needed to snap a downtrend sequence.
DAX members on Thursday. Source: xStation5
Company News
Covestro (COV1.DE) is dropping following the release of the Q4 2022 earnings report. Covestro reported a 8.6% YoY drop in sales, to €3.96 billion (exp. €3.88 billion), as well as EBITDA loss of €8 million (exp. €12.7 million). Net loss reached €899 million, compared to a €302 net profit a year ago. Covestro did not declare a 2022 dividend due to a net loss in Q4 2022. Covestro also provided a disappointing EBITDA guidance for Q1 2023, with the company expecting it to reach €100-150 million (exp. €173.5 million).
Merck (MRK.DE) warned that its profit in 2023 may decline amid weaker demand for Covid-related products of its life-science unit. Merck said that it expects earnings to be either flat or slightly lower this year. Merck CEO said that he expects sales of pandemic-related products to drop from €800 million last year to around €250 million in 2023.
Covestro (1COV.DE) launched today's trading with a big bearish price gap following release of Q4 2022 earnings. An attempt was made at the beginning of the session to climb back above 38.2% retracement in the €40.00 area but bulls failed to sustain momentum. Source: xStation5
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