DE30: Volkswagen surges on solid Porsche sales

Summary:

• Netherlands are said to become European trading hub after Brexit

• DAX (DE30 on xStation5) struggles in the vicinity of 61.8% Fibo level

• Volkswagen (VOW.DE) and Deutsche Lufthansa (LHA.DE) in the spotlight after earnings release

Major stock market indices from Europe launched Tuesday’s trading higher. Gains could be seen all across the continent in the first minutes of trade with just a few exceptions. The biggest gains were seen on Italian and Portuguese bourses while Russian and Belgian equities were the only ones to underperform at the beginning of the session. Refiners and miners could be found among leaders while personal goods and construction companies were the biggest laggards.

DE30 (DAX futures underlying) managed to bounce off the price zone that saw some price action earlier this decade. However, the rebound was limited by the 61.8% Fibo level of the upward movement started after the US presidential elections in 2016. In case sellers return to the market a retest of the previously mentioned zone may be on cards with a chance to break below a visit the support in the vicinity of 78.6% retracement level. Source: xStation5

The European Union is taking a bolder stance towards money laundering schemes. According to the document dated 29 October, ECB and European Commission will review potential money-laundering incidents by mid-2019. The paper lists various short-term measures to be taken until the end of 2019 with an aim of improving Union’s capability of preventing financial crimes. However, the paper does not address demands of ECB to form an agency that would supervise financial criminal activity in the whole bloc. The measures listed in the document are said to be implemented in early December.

While Brexit is certainly a hurdle for the United Kingdom it may be an opportunity for other European countries. We have wrote earlier that Paris and Frankfurt are likely to benefit from banks moving their operations there. On the other hand, Luxembourg and Dublin are said to be desired location for asset managers moving out of London. Netherlands are also expected to get a piece of a cake. The Netherlands Authority for the Financial Markets (AFM) released a statement on Monday saying that it expects numerous trading houses to move there. AFM claimed that it is in talks with over 150 entities interested in the Dutch trading license. AFM Chairwoman said that she anticipates 30-40% of the European trading activities to be conducted in the Netherlands, making it the European trading hub.

Major European stock benchmarks after the first hour of trade:

• DAX (DE30): -0.39%

• FTSE 100 (UK100): -0.04%

• CAC40 (FRA40): -0.53%

• IBEX (SPA35): +0.15%

• FTSE MIB (ITA40): -0.14%

Volkswagen (VOW.DE) and Deutsche Lufthansa (LHA.DE) are DAX top movers on Tuesday morning. Source: xStation5

Company News

Volkswagen (VOW.DE) is the best performing DAX stock on Tuesday morning. The German car maker published its earnings report for the third quarter of the year. Despite hurdles arising from the trade conflict between China and the United States the company managed to beat expectations in terms of both, earnings and revenue. Volkswagen generated revenue of €55.2 billion (ex. €54.22 billion) and provided EPS of €6.477 (ex. €5.138). The company upheld its full-year guidance as solid sales of Porsche vehicles helped offset headwinds from trade tensions and slowing demand in China. Note that Daimler and BMW, Volkswagen main rivals, lowered their full-year guidances.

On the other hand, Deutsche Lufthansa (LHA.DE) submitted weaker than expected earnings and in turn the company is trading as the worst DAX stock today. EBITDA, the company’s preferred measure of performance, came in at €1.35 billion, 5% below median estimate. Lufthansa stressed that buying jets from depressed rival Air Berlin allowed the company to boost its market share but integration processes led to flight delays that ultimately resulted increased costs for the carrier. Moreover, having the market share boosted Lufthansa plans to ease its growth next year and focus on profitability instead. This combined with expected €850 million and €900 million fuel costs rises in, respectively, 2018 and 2019 deteriorated investors’ sentiment towards the company.