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European indices slump
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DE30 decliens 2% on the day
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SAP (SAP.DE) drops 20% after releasing earnings report
European stock markets are trading lower at the start of a new week. Surging Covid-19 infections and risk of new lockdowns are the main reason behind today's pessimism. German DAX is the worst performing European blue chips index as it drops over 2%. However, in this case the release of the Q3 earnings report also played a major role. SAP is one of the biggest companies in the DAX index and drops around 20% today!
Source: xStation5
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Create account Try a demo Download mobile app Download mobile appDE30 painted a lower high at the 33EMA on Friday (green line, H4 interval). Index launched new week with a strong downward move being pressured by rising Covid-19 infections as well as disappointing earnings release from SAP. Index dropped to as low as 12,250 pts at the beginning of today's cash trading - the lowest level in almost 3 months. However, DE30 started to recoup losses later on and managed to climb back above the price zone at 12,350 pts. From a technical point of view, the question is whether German index finished today's trading below this zone or not. If DE30 drops back below 12,350 pts support and move towards multi-month lows could be on the cards in the later part of the week. Note that decisions on new coronavirus restrictions as well as US election sentiment are likely to be the main drivers behind stock market moves in the days to come.
DAX members at 10:19 am GMT. Source: Bloomberg
Company News
SAP (SAP.DE), the German software company, reported Q3 earnings ahead of the session open today. Pre-tax profit increased 31% YoY to €1.65 billion while total revenue declined 4% YoY to €6.54 billion. Earnings per share were 26% YoY higher at €1.32 and operating profit dropped 12% YoY to €1.47 billion. However, while results are not that bad, the company has slumped in today's trading. SAP released a new outlook for 2020 and 2021 and said that it expects revenue to be in the €27.2-27.8 billion this year (prior range €27.8-28.5 billion). German company said that returning Covid-19 restrictions are likely to negatively impact the demand environment in 2021 and possibly beyond. Stock was trading over 20% lower but managed to recover part of losses.
According to German media, Adidas (ADS.DE) is considering the sale of a Reebok brand. Adidas is reportedly planning to conclude a transaction by March 2021 and VF Corporation, US apparel company, as well as China's Anta Sports are said to be among interested parties.
Bayer (BAYN.DE) said that it will acquire Asklepios BioPharmaceutical, the US biotech firm, for $4 billion. Acquisition is aimed at boosting the drug making unit of Bayer.
While SAP reported decent earnings for Q3, outlook for future periods sent share price into freefall. Stock has dropped below the 200-session moving average (purple line) and has erased over two-thirds of gains made since the market bottomed out in March 2020. Source: xStation5
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