DE30: Volkswagen still expects profit this year

• European indices post minor gains on Wednesday

• DE30 tests 10,800-10,900 pts resistance zone

• Volkswagen (VOW3.DE) saw 23% YoY drop in deliveries in Q1 2020

Stocks in Europe started the day higher but session itself has been volatile so far. Major European indices swing between gains and losses. Polish, Russian and Austrian shares are top performers in the region while French and Swiss equities lag the most.

The latest survey from the Ifo Institute shows exactly why government stimulus programmes are crucial right now. The Ifo Institute asked German companies how long they can survive with their own cash reserves. 29.2% of respondents said that they can survive 3 months or less! What is even more concerning, more than a half of survey respondents (52.7%) said that they can survive less than half a year. Without help from the government we would likely see a massive wave of bankruptcies soon. Stimulus packages will soften the blow but some companies with poor fundamentals are likely to fall anyway.

Source: xStation5

DE30 is trading above the 50-day moving average (green line) for the first time since February 23 - the very beginning of coronavirus panic sell-off. The index tested 50% retracement at 10,900 pts yesterday but failed to break above. The zone ranging between recent highs at 10,800 pts and the aforementioned retracement is likely to serve as a key resistance for now. In case the index pulls back later in the day and paints another pinbar on a daily frame, bulls could be in danger. In such a scenario, an important support zone can be found in the 10,000-10,200 pts area. However, a break above the 50% retracement would pave the way for a test of the next big resistance - zone ranging between 11,450 pts (August 2019 lows) and 11,600 pts (61.8% retracement). Today could be a make or break day for DE30 as the US GDP report at 1:30 pm BST and FOMC decision at 7:00 pm BST could be trendsetters for equity markets.

DAX members at 9:41 am BST. Source: Bloomberg

Volkswagen (VOW3.DE) announced Q1 2020 results today. The company saw 23% YoY drop in deliveries and 25% YoY decline vehicle sales and production. Revenue dropped 8.3% YoY to €55.05 billion. Pre-tax profit dropped 83.3% YoY to €582 million. Net income stood at €517 million, or 83.1% YoY lower. Operating cash flow dropped 71.2% YoY. The company withdrew its 2020 outlook but said that it still expects to be profitable in full-2020.

Daimler (DAI.DE) released a full quarterly report today (company released preliminary results last week). EBIT dropped 78% YoY to €617 million as hinted in the preliminary announcement. The company made interesting remarks relating to its Mercedes Benz Cars & Vans division. Namely, the company said that, in spite of a coronavirus pandemic, it still expects operating profit at the division to be higher in 2020 than in 2019. However, such a situation can be ascribed to a big one-off charge the company took in the previous year and which depressed profit.

Wirecard (WDI.DE) remains under severe selling pressure. Let us recall that the drop was triggered by yesterday's announcement saying KPMG was unable to conduct a full audit of the company's activities in Asia due to lack of access to needed data.The stock dropped below €90 handle today but managed to climb back above it.

Board of Bayer (BAYN.DE) won a vote of confidence during yesterday's Annual General Meeting. It was not fully certain whether executives will receive shareholders support after some dissatisfaction over handling Roundup lawsuits.

Shares of Bayer (BAYN.DE) dropped at today's open and broke below the upward trendline. Stock is currently trading near the 50-hour moving average (green line) and just slightly above the support zone marked by 23.6% Fibo (€59.70). More important support - lower limit of the Overbalance structure - can be found at €57.60. Source: xStation5