Summary:
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Deutsche Telekom warns that banning Huawei would put European telecom sector at disadvantage
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DAX (DE30 on xStation5) fails to gain traction above downtrend line
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SAP (SAP.DE) and Siemens’ Healthineers submitted earnings reports today
Stocks from the Old Continent trade higher in the first hours of Tuesday’s session. The biggest gains are seen on the UK market thanks to GBP weakness. On the other hand, some underperformance could be spotted on the German, Italian and Russian stock exchanges. Personal goods and travel companies are among today’s leaders while car makers take the biggest step back.
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DE30 (DAX futures underlying) struggles after breaking above the downward sloping trendline at the end of the previous week. The index fails to generate any bigger price moves since. However, brief declines met this week were halted above the aforementioned trendline therefore potential for recovery remains in place. Source: xStation5
Deutsche Telekom, major German telecommunications firm, warned EU authorities against taking too bold actions against Huawei. The German telecom said that banning Huawei from Europe could put companies from the Old Continent at disadvantage against US and Chinese peers when it comes development of 5G technology. Warning comes after some Huawei employees were arrested in various countries of the world over spying allegations. Huawei systems are installed in thousands of wireless towers in Germany as well as play a vital role in domestic cloud products. It should be noted that the Deutsche Telekom made some big investments in Huawei systems therefore the warning may be just an attempt to avoid forced replacement of infrastructure. Nevertheless, it is unquestionable that Huawei is one of world’s leaders when it comes to wireless technologies therefore European companies could suffered significant losses if they were to be banned from using its products.
Major European stock market indices after the first two hour of trade:
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DAX (DE30): -0.01%
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FTSE100 (UK100): +1.17%
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CAC40 (FRA40): +0.50%
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IBEX (SPA35): +0.36%
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FTSE MIB (ITA40): +0.03%
Earnings miss weighs on SAP (SAP.DE) valuation today. Source: Bloomberg
Company News
SAP (SAP.DE) reported its earnings report for the fourth quarter of 2018 today as the first DAX member to do so. The company managed to generate revenue of €7.434 billion, 2.84% higher than median estimate. On the other hand, EPS came in at €1.51, 2.71% below expectations. The company disappoint especially in terms of new cloud bookings. While bookings grew by 23%, still it was a slowdown against the previous period. Let us recall that the company spend as much as $10 billion on acquisitions last year and is gearing up for a major restructuring. The restructuring process should begin this year.
Siemens Healthineers, a subsidiary of Siemens (SIE.DE), also reported its earnings today. The company’s revenue came in at €3.3 billion, in-line with median estimate. Adjusted profit of €545 million missed expectations slightly (€560 million). Lacklustre earnings of the company resulted from a 24% decline in diagnostics division.
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