DE30: Schaeffler sinks after MDAX removal and profit target cut

Summary:
- European antitrust agency may issue complaints against German carmakers
- DAX (DE30 on xStation5) finds support at the 33-period moving average
- Volkswagen (VOW.DE) extended partnership with TomTom (TOM2.NL)

Despite gains being observed on most of the Asian markets over the night, equities from the Western Europe failed to rally at the beginning of today’s session. Most stock market indices from the Old Continent launched today’s trading lower but some gains could be spotted on Russian bourses. Personal goods companies and miners were outperforming at the beginning of the session while carmaker took the biggest step back.

DE30 continues to find support at the 33-period exponential moving average on the H4 interval (green line on the chart above). Note that today’s initial drop was once again halted by the previous breakout level at 11560 pts handle. As bulls seem to slowly regain control an upward move towards the 11680 pts handle may be on cards. Source: xStation5

The German automotive sector is underperforming today following a report from the Handelsblatt newspaper. According to the paper, the European antitrust regulator will issue formal complaints against BMW, Daimler and Volkswagen. The complaints will contain detailed allegations over collusion in the diesel emission fraud. The newspaper claims that regulators got evidence of three carmakers agreeing not to disclose their fraudulent schemes to the public. Complaints may be followed by fines what would put additional pressure on the already beleaguered German car industry.

Yesterday we wrote about a reform plan of the French President Emmanuel Macron that included setting up an agency aimed at safeguarding elections in the Europe. It looks like he has the backing of one of the European top politicians as Donald Tusk, President of the European Council, stroke a similar tone. Namely, Tusk said that external forces that are hostile to Europe influenced past elections and referendums (including Brexit referendum) and that they are likely to strike again. He called for close cooperation ahead and after the European elections scheduled for May and warned about allowing non-EU forces to decide on key European issues. However, it is unlikely that such agency will be set up prior to the elections and there is risk of dropping the idea later on in case of shift in power.

Major European stock market indices after the first two hours of trade:
- DAX (DE30): -0.3%
- FTSE 100 (UK100): -0.02%
- CAC40 (FRA40): -0.25%
- IBEX (SPA35): +0.12%
- FTSE MIB (ITA40): +0.22%

DAX members after the first two hours of trade. Source: Bloomberg

Company News

Volkswagen (VOW.DE) announced an extension of a global deal with TomTom, provider of mapping software. The move was expected as TomTom (TOM2.NL) is global leader in its business and just recently secured deal from another major carmaker, Nissan.

Schaeffler (SHA.DE) is one of the worst performing stocks on the German stock market. One can named two reasons behind this underperformance. Firstly, the company was moved from the mid-cap MDAX index to the small-cap SDAX index. Secondly, Schaeffler slashed 2020 profit targets. Manufacturer of parts to combustion engines said that it plans to slash 900 jobs and consolidate operations at five European factories. Investors received this messages as downbeat and rushed to sell shares.

Wacker Chemie (WCH.DE) received a downgrade at DZ Bank. The Bank lowered recommendation for the stock from “hold” to “sell”. One-year price target was lowered from €93 to €75. The German chemical company has 9 “buy, 6 “hold” and 7 “sell” recommendations.