Summary:
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EU finance ministers approved Lane nomination for ECB chief economist post
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DAX (DE30 on xStation5) crawls back into recent trading range
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German car industry stocks are moving higher today
Major stock market indices from the Old Continent opened reasonably higher on Tuesday. The biggest gains were seen on the German bourses in the first minutes of trade while Russian and UK shares lagged the most. Carmakers were among leaders at the beginning of the session while retailers were the underperformers.
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DE30 crawled back into its recent trading range of 10990-11650 pts. The latest local peak at 11380 pts should be treated as the first level to watch. Once this hurdle is out of the way one, an upward move towards the upper limit of the aforementioned range may be on cards. Source: xStation5
Jeremy Corbyn, leader of the Labour party and the UK parliamentary opposition, wrote a letter to the UK Prime Minister Theresa May last week in which he outlined Brexit demands of his party needed to be fulfilled in order to secure Labour’s support. Among the proposals was the idea of remaining in the EU customs union. PM May recently replied to the letter saying that there is no way that the United Kingdom will stay in the EU customs union after the Brexit as it would deprive the country of the privilege to strike its own trade deals. While this could have been expected it is quite unfortunate to see the UK cabinet keeping a hard line on this one. Michel Barnier, the EU chief Brexit negotiator, praised the idea proposed by Corbyn saying it could have broke the impasse over the Brexit deal and would please UK lawmakers. Nevertheless, as such a plan was ruled out we are back to square one and chaotic no-deal Brexit in just over a month and a half remains the base case scenario.
Elsewhere, finance ministers from the euro area member countries approved nomination of Philip Lane, governor of the Irish central bank, for the post of the European Central Bank Chief Economist. This comes as no surprise as Lane was the only contender for a job. He will succeed Peter Praet whose term ends on 31 May. Lane is seen as neutral central banker, neither too hawkish, nor too dovish.
Major European stock market indices after the first hour of trade:
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DAX (DE30): +1.25%
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FTSE 100 (UK100): +0.55%
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CAC40 (FRA40): +0.85%
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IBEX (SPA35): +0.73%
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FTSE MIB (ITA40): +0.86%
Car industry stocks push higher while ThyssenKrupp (TKA.DE) lags after earnings release. Source: Bloomberg
Company News
An interesting case can be spotted on the German stock market today. Nissan, the Japanese carmaker, cut its full-year operating income forecast today. Given Nissan’s scale such an announcement should weigh down on the global car sector. However, this is not the case today. Continental as well as major German car makers (Daimler, Volkswagen and BMW) are all showing decent gains at the beginning of today’s session.
Thyssenkrupp (TKA.DE) is the leading DAX underperformer today. The company reported earnings for the fourth quarter of 2018 today. Thyssenkrupp managed to provide better than expected revenue of €7.942 billion, around 4% above median estimate. On the other hand, the company provided an EPS of just €0.11 against expected €0.21. Thyssenkrupp blamed the US tariffs as well as cost pressures in China as main factors contributing to the lacklustre performance. Downbeat earnings from Thyssenkrupp highlight weakness of the German manufacturing sector that was recently stressed by the data from the Europe’s biggest economy.
Covestro (1COV.DE), the German plastic manufacturer, is one of the DAX outperformers today. Interview with Markus Steilemann, company’s CEO, can be named as a reason behind good condition of Covestro’s shares. Executive said that the company is holding “concrete” M&A talks at the moment. The company target small and medium sized entities as potential acquisition targets. However, no details or particular names were offered.
Covestro (1COV.DE) was underperforming significantly following a painting of the double top pattern at the turn of 2017 and 2018. The stock managed to halt decline at 161.8% exterior retracement level of the upward move started in mid-2017. The resistance zone ranging $51-52 can be seen as the first major obstacle for bulls on their march higher. Source: xStation5
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