DE30: Siemens sinks following earnings report release

Summary:

• German lawmakers veto Chinese takeover of German company

• DAX (DE30 on xStation5) smashes through support level at 12600 pts

• Siemens (SIE.DE) slumps on huge earnings miss

After a mixed session on Wall Street we have witnessed a heavy sell-off of Chinese equities. The reignited trade spat seems to weigh on the equities from the whole region. In turn we saw Nikkei (JAP225) closing 1.03% lower and S&P/ASX 200 (AUS200) declining 0.56%. In China Hang Seng (CHNComp) is trading 2.3% lower.

Investors in Europe launched Thursday’s trading in downbeat moods. Major stock benchmarks from the Western Europe opened noticeably lower with the biggest declines being seen on the German and Italian bourses. Food companies and insurers were the only equity groups to open higher on Thursday. On the other hand, miners and carmakers launched today’s trading with the biggest downward price gap.

The “Made in China 2025” policy aims at turning the world’s second biggest economy into a leader of the high-profile manufacturing. Chinese companies expand into new technologies often by acquiring enterprises from the other countries. Such approach was criticized by the US and called stealing intellectual property that poses a national security risks. Germany seems to be adopting similar approach as Angela Merkel’s government vetoed the takeover by Chinese company for the first time yesterday. Namely, an acquisition of the Leifeld Metal Spinning AG by the Chinese Yantai Taihai Group was halted by the German authorities claiming that such transaction would raise national security concerns. Despite the fact that Yantai Taihai Group withdrew its offer the German government proceeded with vetoing as the precautionary measure.

Major European stock indices after the first hour of trade:

• DAX (DE30): -1.33%

• FTSE 100 (UK100): -0.53%

• CAC40 (FRA40): -0.42%

• IBEX 35 (SPA35): -0.73%

• FTSE MIB (ITA40): -0.85%

DE30 smashed through the support level at 12600 pts following a lower opening. Source: xStation5

DE30 broke below the 12740 pts handle yesterday and managed to overcome the 33-period moving average (green line on the chart above) as well. In the late evening bulls managed to push the benchmark higher, back to the vicinity of the mentioned moving average. Nevertheless, today’s opening smashed buyer’s hopes for a bounce higher. The benchmark opened noticeably lower and plunged in the first hours of Thursday’s trading. DE30 left the range of the upward price channel and broke below the relevant support level at 12600 pts. In case the downward move is to be continued the 12450 pts area may be a level to watch as some price action occurred there in the past.

Siemens (SIE.DE) sinks on the back of a huge earnings miss. Source: Bloomberg

Company News

Siemens (SIE.DE) has reported its earnings report today. The company reported revenue of 20.473 billion euros missing slightly the estimate of 20.765 billion euros. The net income was 1.060 billion euros against expected 1.185 billion euros. In turn the company’s earnings per share ratio (EPS) came in at 1.284 missing the estimate of 1.520 by more than 15%. However, it is the company’s CEO interview on BloombergTV what shareholders may find especially interesting. Joe Kaeser announced that the company will restructure its business. The process will include decreasing amount of company’s operating divisions from five to three. Moreover, Siemens aims at boosting revenue and return on sales by 2 percentage points over the medium term. It is quite rare to see company’s top executive making such clear promises. The German manufacturer goes to the great lengths to avoid the fate of its US peer, General Electric. After the first hour of trade Siemens has declined almost 4%.

Siemens (SIE.DE) failed to overcome the 121 euro mark and painted a double top in the vicinity of this handle. Today’s major slump poses a risk of stock testing its medium term support zone ranging 111.6-113.3 in the nearby future. Do note that today’s pullback brought the price back below the downtrend line and in case the stock breaks below the 200-session moving average (purple line on the chart above) the technical outlook may become grim. Source: xStation5