DE30: UBS drops as earnings report unveils lower client activity

Summary:

• M&A in German-speaking countries is booming

• DAX (DE30 on xStation5) tries to close the downward price gap

• Daimler (DAI.DE) to build EV battery factory in Poland

Shares of the European companies underperformed at the beginning of Tuesday’s session. Investors’ moods were spoiled by the lacklustre forecasts of global growth issued by IMF. Italian and Belgian stocks are experiencing the biggest selling pressure while Polish and Swedish equities manage to stay afloat. Travel companies and real estate stocks gained the most while banks and refiners took the biggest step back.

DE30 launched today’s trading significantly lower. Nevertheless, the benchmark managed to push higher following the opening and in turn it is trading a notch below yesterday’s close. Price is locked in between the downward sloping trendline and support zone ranging around 11000 pts mark. Source: xStation5

According to the data compiled by Bloomberg, the previous year was a stellar one for the German, Swiss or Austrian companies in terms of deals. Companies from these three German-speaking countries announced over 3300 M&A transaction during 2018. The aggregate value of all M&As is said to be around $350 billion, marking a 30% increase against a year earlier. European companies were the most often targeted ones ($232.7B), followed by their US peers ($95.5B). Among sectors enjoying the biggest M&A interest in 2018 one can find: consumer staples ($107.5B), financials ($51.7B) or industrials ($47.8B). Analysts expect this upbeat momentum to prevail during 2019 with energy, industrials and chemicals stocks enjoying the most dealmaking. This is due to the trend among conglomerates to divest their non-core assets and focus on the main source of revenue. However, hurdles resulting from the uncertain geopolitical landscape as well as rising protectionism are said to be the main factor potentially limiting international M&A activity.

The German ZEW economic sentiment indicator was released at 10:00 am GMT. The headline reading came in at -15 pts, against expectations of a drop to -18.4 pts. On the other hand, current situation sub index plunged severely from 45.3 pts to 27.6 pts.

Major European stock markets after the first two hours of trade:

• DAX (DE30): -0.11%

• FTSE 100 (UK100): -0.39%

• CAC40 (FRA40): -0.26%

• IBEX (SPA35): -0.16%

• FTSE MIB (ITA40): -0.51%

Wirecard (WDI.DE) leads DAX gains for the fifth day in a row. Source: Bloomberg

Company News

Bloomberg reported that Daimler (DAI.DE) has chosen the Polish city of Jawor as the location for its EV battery factory. The company already operates a combustion engine production plant there. The planned EV battery factory is expected to produce around 100,000 batteries per year. The report was not confirmed by Daimler yet. However, Markus Schafer, member of Mercedes-Benz Board, is meeting with the Polish Prime Minister Mateusz Morawiecki today and the plant is said to be the main topic of the meeting.

Linde (LNA.DE) announced a huge share buyback programme yesterday. The company said that it will buy up to $6 billion worth of shares in the period between 1 May 2019 and 1 February 2021. This amount equals around 15% of Linde’s outstanding shares.

Wirecard (WDI.DE) can be found among the best performing DAX stocks today. One can name words of Markus Braun, company’s CEO, as a reason behind today’s good performance. The executive said that the final quarter of 2018 was “very strong” for Wirecard. The company will report its earnings on 1 April.

While UBS (UBSG.CH) is not a DAX member we should pay some attention to it today. The Bank reported its earnings for the final quarter of 2018 as the first of major European banks. The report turned out to be a huge disappointment. UBS suffered $13 billion of withdrawals during the fourth quarter of the previous year - $8 billion outflows in the wealth management business and $5 billion in asset management unit. The company said that client activity is still recovering after poor end of 2018. However, UBS said that there is a number of factors that may lead whole 2019 to be similarly downbeat.

UBS (UBSG.CH) slumped following today’s opening on the back of lacklustre earnings report. The company has been trading within a downtrend since it peaked at €19.755 at the beginning of 2018. Source: xStation5