DE30: Volkswagen blames Bosch for diesel scandal?

Summary:

• United Kingdom reaches continuity trade deal with Switzerland

• DAX (DE30 on xStation5) attempts to break above the 11000 pts mark after higher opening

• Deutsche Post (DPW.DE) benefits from postage hike rumours

Stocks in Europe struck an upbeat tone at the beginning of a new trading week. Gains are seen all across the Old Continent. The biggest advance could be spotted on the French and Swiss markets in the first minutes of the session while shares from Poland lagged the most. Miners and IT sector led gains at the beginning of the European trading while healthcare stocks and utilities lagged the most.

DE30 broke below the support zone ranging around the 11000 pts mark at the end of the previous week. The downward move was later halted by the 10850 pts handle. A subsequent bounce higher brough the index back towards the aforementioned price zone. Price reaction to this technical hurdle could be determinant of whether the ongoing recovery will last or not. Source: xStation5

While the United Kingdom is receiving a deserved dose of criticism over the mess Brexit has become, the UK government is actually making progress. However, not with the European Union. The UK trade department announced that the United Kingdom and Switzerland will sign an agreement today on keeping preferential terms of bilateral trade after the Brexit date. Having said that, the UK secured trade ties with its tenth biggest trading partner ($32.7 billion trade flows in 2017). Earlier similar agreements were announced with Israel, Australia and New Zealand. On the other hand, Japan and South Korea want to wait with similar move until there is more certainty about the future of EU-UK trade ties. This might come as a blow for the UK economy given that EU-UK trade deal still seems to be out of reach and in turn there is a risk of not signing a deal with Japan or South Korea prior to 29 March. Japan and South Korea were, respectively, 14th and 20th biggest trading partners of the United Kingdom in 2017 with combined trade flows of over $31.6 billion.

Meanwhile, Halle IWH, one of the Germany’s top economic institutes, issued a report on the impact of no-deal Brexit on the German labour market. According to the research, as much as 100 thousand German jobs may be adversely affected by the chaotic withdrawal of the United Kingdom from the European Union. Authors claim that automotive industry will be the most impacted one with significant lay-offs being possible at Volkswagen and BMW’s operations in Wolfsburg and Dingolfing-Landau. The report also concludes that the German economy is likely to be the most impacted one in case of no-deal Brexit as it relies to great extent on exports.

Major European stock market indices after the first hour of trade:

• DAX (DE30): +1.03%

• FTSE 100 (UK100): +0.92%

• CAC40 (FRA40): +1.10%

• IBEX (SPA35): +1.14%

• FTSE MIB (ITA40): +1.45%

Wirecard (WDI.DE) and Deutsche Post (DPW.DE) lead DAX gains on Monday morning. Source: Bloomberg

Company News

According to Spiegel news magazine, Volkswagen (VOW3.DE) will file a claim against its one of its major suppliers. Bosch, the German company that was supplying Volkswagen for decades, is likely to face investigation over its involvement in the diesel scandal. According to the report, software and hardware from Bosch was identified as the cause of the emission scandal. Prosecutors from Stuttgart opened proceedings against the company.

Deutsche Post (DPW.DE) is one of the best performing DAX members today. The company received a boost after FAZ report. According to the newspaper, postage may rise from €0.70 to €0.90 in 2019, more than previously expected. However, the price hike will probably take effect later than previously assumed, in July rather than April. The newspaper cited interpretation of a draft for German economy ministry as a source of the information.

Wirecard (WDI.DE) continues to suffer from a range of the Financial Times reports concerning alleged misconduct at company’s Asian unit. Stock price dropped to fresh one-year low around €86.60 handle on Friday. However, the company’s executives are ready to fight back. Markus Braun, Wirecard’s CEO, said on Friday that the law firm report that was cited by Financial Times is indeed authentic but may not be based on factual informations. Braun said that a bulk of allegations is based on emails provided to the law firm by a person called “Bobby”, an unnamed Wirecard employee. Braun reasons that the law firm never had access to the company’s network and therefore could not identify whether those emails are authentic or forged.

Deutsche Post (DPW.DE) bounced off the support level at €23.40 at the end of 2018. The stock launched new week with an almost 2.5% upward price gap. While the postage hike rumour is definitely a reason to cheer for Deutsche Post investors, one should be aware of the fact that 200- and 50-week moving average are close to painting a death cross, the bearish signal. Source: xStation5