DE30: Stocks advance as trade deal signing looms

• Stocks gain as investors await signing of ‘Phase One’ trade deal

• DAX (DE30) trims early gain but still trades higher on the day

• Wirecard (WDI.DE) gains after Chairman steps down

Stocks in Europe launched new week higher echoing good performance of the Chinese indices. Gains could be spotted all across the Old Continent at the opening. Upbeat performance can be ascribed to an anticipated signing of a ‘Phase One’ trade deal. However, DAX trimmed most of its gain during the first hour and a half. Tech stocks and industrials lead advance while carmakers lag the most.

Watch for German GDP numbers this week!

The week ahead can be considered light when it comes to the German data. Final CPI figures for December will be released on Thursday but this should not have much of an impact on the market. However, the Federal Statistical Office will release GDP numbers for the full 2019 on Wednesday, 9:00 am GMT. The reading is expected to show a growth rate of 0.6%, marking a significant slowdown from 1.5% recorded in 2018. 2019 was a tough year for the German economy as the manufacturing sector dipped into recession. However, survey gauges began to improve recently suggesting that the German economy may improve in 2020. The reading is likely to cause bigger swings on EURUSD rather than DE30.

Source: xStation5

German DE30 launched a new week with an upward price gap but is being traded below 2-year high reached on Friday. Upside for the index is being limited by the ATH area ranging above 13530 pts handle. This is the key resistance to watch over the next couple of days. Looking for potential support levels that saw some price reactions recently, one should focus on limits of recent consolidation - 13150 pts and 13300 pts. According to the Overbalance methodology, the final support guarding the upward trend can be found at 13150 pts. However, reaching it would require an over 10% drop so it seems unlikely that the index will test it anytime soon. The near-term risk event for DE30 is release of German GDP data (Wednesday, 9:00 am GMT)

DAX members after the first hour and a half of trade. Source: Bloomberg

Wulf Matthias, Chairman of Wirecard (WDI.DE),  resigned amid months long controversy over the company's accounting practices. Personal matters were cited as an official reason behind the departure. Matthias will remain board’s member while Thomas Eichelmann will take over as a new Chairman. Wirecard shares are trading over 40% lower against ATH from March 2018.

In spite of climate activists’ protests, Siemens (SIE.DE) decided to respect terms of the contract and supply signaling systems to Australian coal mines. The company said it would be legally and economically impossible to step away from the contract without breaching fiduciary duties. However, the company said it will set up a sustainability committee that will have a say on whether to stop or escalate future projects.

According to the Financial Times, ThyssenKrupp (TKA.DE) increased its efforts to sell Industrial Solutions unit, that specializes in factory building. Chinese state-owned companies are said to be among interested parties. The Industrial Solutions unit booked a loss of €110 million last year.

Markus Steilemann, CEO of Covestro (1COV.DE), said in an interview with Sueddeutsche Zeitung that his company seeks more wind and solar power supply contracts to power its factories in Germany. Covestro’s production is almost fully (99%) based on crude oil. 

Analyst actions

• Deutsche Boerse (DB1.DE) was rated “buy” at Jefferies. Price target was set at €165

Deutsche Boerse (DB1.DE) launched an upward move after it had reached the target of the head and shoulders pattern from October 2019. The stock jumped significantly last week and is trading between €143.50 and €147.75. The former is a support marked with shoulder line of the SHS pattern and Thursday's low while the latter is a resistance marked by all-time high. Source: xStation5