DE30: Thyssenkrupp may be removed from the DAX index

Summary:

• Giovanni Tria roasted by EU finance ministers over Italian budget

• DAX (DE30 on xStation5) fails to break downtrend structure

• CFO of BMW (BMW.DE) says company is disappointed with progress in Brexit talks

Dow Jones (US30) moved close to the ATH during yesterday’s session on Wall Street but failed to hold this gains until the end of Monday’s trading. The situation was similar for S&P 500 (US500) while Nasdaq (US100) moved subtly lower. Moods during Asian session were less optimistic as S&P/ASX 200 (AUS200) and Nikkei (JAP225) declined 0.75% and 0.07%, respectively.

Most of the major European stock indices opened lower on Tuesday. The biggest losses were observed on the German and Italian bourses in the first minutes of trade. On the other hand, Russian equities opened higher. Almost all sector subindices from the Euro Stoxx 600 index performed poorly at the beginning of the European session. Biggest losses were seen among banks and insurers. Refiners were the only group of stocks to open higher.

DE30 (DAX futures underlying) pushed higher at the beginning of the yesterday’s session. However, the German bulls failed to hold this gains and in turn the benchmark pulled back to the 33-period moving average. Initial surge at the beginning of today’s session was halted by the aforementioned moving average and the benchmark moved lower later on. As one can see the downtrend structure of lower highs still holds in place therefore from the technical point of view bears may be better positioned in the days to come. Source: xStation5

The Italian budget was a vivid topic among the European finance ministers during their meeting yesterday. The Italian Finance Minister, Giovanni Tria, tried to defend the budget with bigger deficits proposed by the Five Star Movement and League coalition. He said that a breach of the deficit limits was necessary given ongoing slowdown in Europe and Italy. However, his attempts were in vain as his European counterparts warned him that Italian fiscal policy is too relaxed and may lead to another Greek-type crisis. The European Commission President, Jean-Claude Juncker, said after the meeting that one crisis was enough given how tough it was to cope with it and Europe must do everything to avoid another one. The Italian budget will be presented to the Commission in the middle of October but some EU politicians already expressed that it is breaching bloc’s rules and may not be approved.

Major European stock indices after the first hour of trade:

• DAX (DE30): -0.35%

• FTSE 100 (UK100): -0.26%

• CAC40 (FRA40): -0.51%

• IBEX (SPA35): -0.54%

• FTSE MIB (ITA40): -0.63%

Siemens (SIE.DE) sinks after downbeat analyst action. Source: Bloomberg

Company News

Siemens (SIE.DE) is the worst performing DAX stock today. The company was downgraded at HSBC to “hold” from “buy”. Price target was lowered from €140 to €123, what is still around 12% above yesterday’s closing price. Earlier, Siemens had 20 “buy”, 8 “hold” and 2 “sell” recommendations.

Yesterday we wrote about decision of the board of Thyssenkrupp (TKA.DE) to split the company into two separate units. During an interview with Westdeutsche Allgemeine Zeitung company’s CEO, Guide Kerkhoff, said that newly formed companies probably will not meet DAX index criteria and therefore it is probable that Thyssenkrupp will be removed from the benchmark following a split.

Nicolas Peter, CFO of BMW (BMW.DE).said in an interview with Sky News that he is disappointed with progress made in Brexit talks. Having that in mind the executive continued that the company is preparing for various Brexit scenarios, including hard Brexit scenario where supply chains could be distorted for couple of weeks”. Peter added that the United Kingdom is a country of strategic importance for the company.

Siemens (SIE.DE) has been been slowly moving lower after peaking at €133 in mid-2017. The stock broke below the support zone ranging €108-109 recently and may be set to revisit this year’s lows in the vicinity of €100 handle. Source: xStation5