DE30: TUI mulls expanding jetfleet

Summary:

• UK membership in GPA under threat as other members mull blocking accession

• DAX (DE30 on xStation5) defends the 11800 pts handle

• TUI (TUI.DE and TUI.UK) considers increasing jetfleet as higher oil prices may push competitors out of the industry

Mixed moods were observed at the launch of Wednesday’s European trading session. Most of the major stock benchmarks from the Western Europe opened lower with Italian shares being top laggards. On the other hand, equities in the eastern part of the continent were coping quite well with gains seen on the Russian and Polish bourses. Refiners led gains followed by financial services stocks and retailers. Technology sector and utility companies opened with the biggest downside gap.

The German DE30 (DAX futures underlying) plunged to as low as 11800 pts in the second part of the yesterday’s trading session. However, bulls were quick to recoup those losses and in turn the index finished trading flat. However, since the launch of today’s trading an underperformance could be spotted therefore it cannot be ruled out that we will see DE30 testing the lower bound of the support zone in the upcoming hours. Source: xStation5

Following the departure from the European Union structures in March next year the United Kingdom will no longer be subject to various trade agreements unless it reapplies to be included. One such agreement is the General Procurement Agreement (GPA) that regulates government procurements. GPA allows foreign competition and boosts transparency of the procurement process. While the UK was a member of GPA because of its membership in the EU it never ratified the Agreement independently. UK authorities claim that the country should be included in the agreement due to its former membership. However, some countries oppose such a simplified approach and urge the United Kingdom to apply as all other candidates do. According to Bloomberg report, the United States as well as two other unidentified countries are said to be the biggest opponents of the UK joining the Agreement without prior ratification. In case the UK fails to get included in the GPA it will lose access to the market worth $1.7 trillion.

The major European stock indices after the first hour of trade:

• DAX (DE30): -0.23%

• FTSE 100 (UK100): -0.14%

• CAC 40 (FRA40): -0.46%

• IBEX (SPA35): -0.50%

• FTSE MIB (ITA40): -0.06%

Infineon (IFX.DE) leads DAX losses as semiconductor industry shows no signs of relief. Source: Bloomberg

Company News

While the broader US tech sector recovered somewhat during yesterday’s session on Wall Street and Asian trading today it does not mean that all the industries out of woods. The European semiconductor manufacturers remain under pressure at the beginning of the trading session on the Old Continent. The reason of the underperformance did not change - trade wars. Threat of tariffs on various electronic products  puts the robust demand cycle in the semiconductor industry under question and deteriorates outlook. Infineon (IFX.DE) is one of the biggest semis manufacturers in Europe and it is also one of the biggest laggards among DAX stocks today.

TUI (TUI.DE and TUI.UK), the world’s biggest holiday company, is eyeing an expansion of its jetfleet. TUI sees an opportunity in the rising oil prices. Namely, more expensive oil makes smaller TUI rivals to feel the pain and increases their bankruptcy risk significantly. Such a situation benefits TUI as it poses a chance for the company to take even more market share than it currently has. Therefore it seems reasonable to increase fleet now so the company will be prepared once the demand for its services raises. TUI is seen to increase its Boeing 737 orders by 50 to a total of 120. The company is also considering boosting its fleet of mid-range jets.