DE30: Volkswagen surges after electric vehicle was unveiled

Summary:

• May warns about no-deal in case her party members do not back her

• DAX (DE30 on xStation5) surges at the beginning of Tuesday’s session

• Volkswagen (VOW.DE) surges after an electric vehicle was unveiled

Despite the US announcing a new round of tariffs to be imposed on the Chinese goods, the Asian trading session was marked by gains. The Australian S&P/ASX 200 (AUS200) was the only major stock index from the region to close lower what can be accounted to AUD strengthening (strongest G10 currency at press time). When it comes to the Japanese and Chinese equities significant gains can be spotted. Nikkei (JAP225) added 1.44%. Most of the Chinese benchmarks trade over 1% higher.

European equities launched Tuesday’s trading on the back foot. However, the downward price gap was small in most cases and majority of the European stock indices managed to close it in the first minutes of trade. Swedish companies were lagging the most during the opening while Polish stocks outperformed. Retailers and IT companies were among biggest laggard in the first minutes of trade while miners and carmakers led the gains.

DE30 (DAX futures underlying) surged in the first hours of Tuesday’s trading. The benchmark smashed through the 33-period moving average and the resistance level at 12150 pts. One should keep in mind that such a rapid rally at the beginning of the session is often subject to correction later on. Nevertheless, in case we see daily candlestick close above the swing levels from end-June and mid-August a recovery cannot be ruled out. Source: xStation5

While on the global scale the Trade Wars theme will mostly dominate markets in the days to come, in Europe Brexit remains at the top of the agenda. Michel Barnier, the EU’s top Brexit negotiator, said that the talks are going in a “spirit of good cooperation” before meeting Spanish Prime Minister yesterday. Spain is one of the European countries that are especially interested in how the deal would look as Gibraltar, an area on the Spanish southern coast, is the British territory. However, things do not look so rosy in the United Kingdom. Prime Minister Theresa May said yesterday that in case rebels in her party do not back her deal proposal the UK will departure from the EU structures without a deal in place. The comment came not long after the IMF Managing Director, Christine Lagarde, said that a no-deal Brexit may cause the UK economy to shrink.

Elsewhere, the German Chancellor Merkel is facing another problem resulting from the migration policy her government conducts. After Hans-Georg Maassen, one of the German intelligence chiefs, questioned her condemnation of the far-right protests in August the Chancellor may be set to oust him from the post, according to Die Welt report. Situation is tricky as Horst Seehofer, the German Interior Minister, backed Maassen and his Ministry is responsible for overseeing the federal agency Maassen works for. Seehofer is also the leader of the Christian Social Union (CSU), one of the Merkel’s major coalition partners, therefore an attempt to fire Maassen could see a possible split in the governing majority of the biggest EU economy. Angela Merkel is said to meet with coalition leaders today to discuss and resolve the issue.

Car makers lead DAX gains on Tuesday morning. Source: Bloomberg

Company News

SAP (SAP.DE) is one of the worst performing DAX stocks today. While no major negative news concerning the company spurred lately, its major competitor released lacklustre earnings report. Oracle (ORCL.US), the US software company, missed analysts’ estimated in terms of both, revenue and earnings. Additionally, the US company issued a weaker guidance for the next quarter saying that the growth is most likely to remain weak. In turn, SAP could have been hit by the ricochet along with other industry members.

On the other hand, Volkswagen (VOW.DE) can be found among the best performing DAX stocks today. Audi, subsidiary of the German carmaker, unveiled its electric vehicle yesterday. The reception was quite good and the company said that the first models will be sold and delivered in the first half of 2019. While some time ago the electric vehicle market was mainly associated with Tesla (TSLA.US), some major car manufacturers announced their own electric automobiles lately, including BMW and Mercedes-Benz.