DE30 tests 11,500 pts as risk-on moods prevail

• Stock markets gain on vaccine hopes

• DE30 tested 11,500 pts but failed to break above so far

• Lufthansa (LHA.DE) has reached a rescue deal with German government

Upbeat news from Novovax on its vaccine as well as lack of actions leading to China-US escalation allowed global stock markets to make a big jump. DAX tested 11,500 pts handle while S&P 500 futures broke above 3,000 pts - highest levels for both indices in over 2 months. US investors will return to the market after a long weekend today so volatility during US open may be slightly higher than usual.

Source: xStation5

DE30 made a big surge yesterday and today during the Asian session. The German index tested 11,500 pts handle but failed to break above so far. Taking a look at a higher time frame (D1), one can see that the index has entered a resistance zone stretching between 11,450 pts (August 2019 lows) and 61.8% retracement of February-March sell-off. The big theme in the markets is China-US relations but as there were no retaliatory actions from China, markets play it down for now. Nevertheless, this is certainly a story to watch. Failure to break above the aforementioned 11,500 pts and subsequent pullback below the breakout level at 11,250 pts would be the first warning sign for bulls. A strong support zone can be found ranging below 50% retracement.

DAX top movers at 10:06 am BST. Source: Bloomberg

Lufthansa (LHA.DE) and the German government agreed on a state aid for the carrier. Rescue deal is worth €9 billions. German government will take a 20% stake in the company but intends to sell it by end-2023. Apart from that, German government will inject €5.7 billion into the company with an option for these funds to be converted into an additional 5% equity stake. Option would be used by the German government to prevent hostile takeovers.

The German Federal Court of Justice ruled against Volkswagen (VOW3.DE) in a landmark "dieselgate" case. The court ordered German carmaker to reimburse a customer for faulty vehicles (after taking depreciation into account). While the case relates to just one car owner, it will serve as a benchmark for around 60,000 similar cases. Volkswagen said it will offer one-off payments to affected customers. Carmaker has already settled one class action lawsuit relating to 235,000 cars for €830 million.

Wirecard (WDI.DE) is missing on today's risk-on rally and pulls back. The German payments company announced that it will postpone release of 2019 annual results by 2 weeks. Report will now be released on June 18. Company said that decision was taken as not all audit procedures have been completed. Note that this is the third time Wirecard postpones release of 2019 results.

In spite of an unfavourable court ruling, Volkswagen (VOW3.DE) opened higher today. However, as one can see on the chart above, the stock was unable to break above the upper limit of the upward channel in the first hours of European cash session. However, another attempt is being made at press time. Source: xStation5