DE30: Siemens eyes a big deal in Iraq

09:21 24 September 2018

Summary:

  • The German grand coalition members reached compromise over intelligence officer issue

  • DAX (DE30 on xStation5) halts rally after failing to break above the resistance zone

  • Siemens (SIE.DE) is negotiating deal to build power stations in Iraq

Equities in Asia declined today after China decided to call off trade talks with the United States. In Australia and Hong Kong stocks moved lower while Chinese and Japanese stock exchanges were shut today for holiday.

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Developments in the trade conflict between China and the US caused European equities to put the strong streak of gains on halt and open lower. Indices from the Western Europe trade lower in the first hours of Monday’s session. On the other hand, shares in Poland and Russia managed to move higher. Car makers and miners can be found among biggest laggards from the Euro Stoxx 600 index while media companies and refiners push higher.

After a stunning rally the German DE30 (DAX futures underlying) failed to break above the resistance zone ranging 12380-12420 pts in the previous week. News of China calling off the trade talks with the US caused DE30, as well as other major European benchmarks, to open significantly lower on Monday. However, after opening lower the German index resumed upward march and is trading a notch below the lower limit of the aforementioned zone. As the outlook remains unclear right now much can depend on the closing price of today’s daily candlestick. Source: xStation5

Last week we wrote about a crack in the German governing coalition over one of the German intelligence chiefs that questioned and criticized Chancellor Merkel. Leaders of the coalition met over the weekend to discuss the issue and decide on further actions. The compromise has been reached and therefore a break of the coalition was avoided. However, many commentators claim that this is just another “technical” compromise as the coalition members do not seem to get well together. Let us recall that the coalition was formed after months of political gridlock resulting from the indecisive elections held in September last year. Additionally, since the government took office in March this year numerous spats between coalition members took place, mostly over Merkel’s immigration policy. Opinion polls show that the support for both governing parties, SPD and Union (CDU + CSU), shrunk since the beginning of the year. Meanwhile, support for the Alternative for Germany, the German nationalist party, increased quite noticeably. Next federal elections will be held no later than 24 October 2021 so there is still plenty of time for Angela Merkel and her allies to regain trust but in case they fail to do so or continue to diverge a major shift on the German political scene may occur.

Siemens (SIE.DE) resists downward pressure thanks to news concerning the Iraqi deal. Source: Bloomberg

Company News

German car makers can be found among biggest DAX laggards today after the trade conflict between China and the United States intensified once again. Apart from that, it is worth to mention meeting that took place in Berlin on Sunday. Chancellor Angela Merkel met with representatives of the automobile industry to discuss possible solutions that would enable a large scale diesel car ban in German cities. A shift in the Merkel’s attitude was observed during the meeting as the politician backed the idea of retrofitting engines rather than just updating software. Retrofitting is more efficient but it is also more costly. The threat of banning diesel cars from the German cities is an aftermath of the diesel emission scandal that took place in the country in 2015.

Siemens (SIE.DE) is one of the DAX stocks that resists downward pressure today and in turn can be found among leaders. The company is said to be in the finalization phase of the Iraq deal. Under the agreement the company would build power stations in the country. The deal is said to be worth $15 billion and would increase Iraqi power generating capacity by a half during the next four years.

Siemens (SIE.DE) bounced off the €108 handle and is marching towards the resistance zone ranging €111.70-113.40. In case the Iraqi deal is signed the company’s share price may be set to raise. However, it should be noted that the stock is still trading below its long term downtrend line (light blue line on the chart above). Source: xStation5

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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