DE30: US-China phone call supports risk-on moods

• Stocks gain on US-China trade call

• DE30 breaks above resistance at 13,100 pts

• German Q2 GDP revised higher

European stock markets are trading higher on Tuesday after a constructive phone call between China and the United States on trade. Two countries said that progress is being made on the 'Phase One' trade deal. Stocks from Belgium and France lead gains followed by German and Spanish equities. Indices from Eastern and Central Europe lag.

While the US-China trade call is the main reason behind today's good performance of stock markets, two upbeat reports from Germany support sentiment further. Revised German Q2 GDP report showed 9.7% QoQ contraction against 10.1% drop signalled in preliminary reading. Private consumption was weaker than expected while capital investments surprised to the upside. Apart from that, German Ifo business climate index for August came in at 92.6 against 92.1 expected. Expectations subindex stood at 97.5 (exp. 98) while current assessment subindex at 87.9 (exp. 86.2). Ifo economists expect 7% QoQ growth in Q3 2020 in Germany.

Source: xStation5

DE30 broke above the resistance zone ranging between 78.6% retracement of late-July correction and 13,100 pts handle. German index made a test of a local peak from July 23 at 13,185 pts but failed to break above and a pullback was launched. Near-term support marked by local market geometry (orange boxes) can be found at 13,100 pts. However, a drop has slowed after the start of European cash session so traders should look out for bullish candlestick patterns. 13,185 and 13,300 pts are resistance levels to watch. Key support marked by large Overbalance structure can be found at 12,750 pts.

Stocks with positive trade correlation - Infineon Technologies (IFX.DE), MTU Aero Engines and Continental (CON.DE) -  can be found among today's leaders. Source: Bloomberg