DE40: DAX pressured by Wall Street. Varta and Kion stock deepens declines📉

• DE40 records 0.4% drop, pressured by contract declines on Wall Street
• A day of three hags and an all-time record volume of options expiring today could bring higher volatility to indices, including in Europe
• Weak manufacturing PMI from Germany; Kion (KGX.DE) shares lose 9% after a downgrade recommendation at UBS; the stock records its biggest sell-off since October 2023
• Varta (VAR1.DE) shares deepen declines to 8%, after full-year forecast cut and Warburg Research comments
• Rheinmetall (RHM.DE) stands out today as the strongest gaining stock among major German companies

Today's data from the Eurozone came in below forecasts and showed that German industry still has a lot of catching up to do if we are to talk about a steady rebound in the economy. The services sector fared disappointingly in preliminary PMIs, for June, despite the European soccer championship being played in Germany, which some economists thought could bring a recovery. The manufacturing PMI fell to 43.4 from 45.4 previously, although the market had hoped for a rebound to 46.4. The services index showed 53.5 and remains relatively high, although here too an increase was expected from 54.2 previously to 54.4. The composite PMI showed 50.6 and is on the verge of an economic 'unwinding', while an improvement to 52.7 from 52.4 in May was expected. Few stocks from the German stock market are posting gains today; the standout is Rheinmetall, where investors are still discounting the record $8.5 billion munitions supply contract the company received from the Bundeswehr.

DE40 (M1 interval)

Active selling volume prevailed in the German market before noon, and DE40 quickly resumed declines after the recent roll-off. With today's expiration of contracts and options on Wall Street (every third Friday of the month, ending the quarter), some funds may be hedging a bullish close with increased selling volume (options gamma), which usually carries short-term consequences.Source: xStation5Rheinmetall and e.ON are performing stronger today against the rest of the DAX. The stocks of companies related to industry and its equipment, including Infineon, Siemens and Heidelberg Materials, are losing. Source: Bloomberg Finance L.P.
 

DE40 (interwał M1)

Przed południem na niemieckim rynku przeważa aktywny wolumen sprzedający, a DE40 szybko wrócił do spadków po ostatnim rolowaniu. Wobec dzisiejszego wygaśnięcia kontraktów i opcji na Wall Street (każdy trzeci piątek miesiąca, kończącego kwartał) część funduszy może zabezpieczać bycze zamknięcie zwiększonym wolumenem sprzedaży (gamma opcji), co niesie ze sobą zazwyczaj krótkoterminowe konsekwencje. Źródło: xStation5

Rheinmetall i e.ON wypadają dziś mocniej na tle pozostałych firm z DAX. Tracą walory spółek związanych z przemysłem i jego wyposażeniem m.in. Infineon, Siemens i Heidelberg Materials. Źródło: Bloomberg Finance L.P.

News from German companies

• The shares of industrial equipment maker Kion Group are trading down today. The company announced the launch of a new production line a few days ago, and yesterday Soc. Generale raised its recommendation for it, but on the wave of today's German manufacturing PMI readings and UBS Group's updated assessment, we see an extension of the sell-off that has been underway in recent weeks. UBS believes that orders will remain seasonally lower in the second part of the year; analysts have also expressed concern that the company remains overly optimistic about orders for trucks and warehouse equipment, and that a larger rebound won't materialize until at least 2025. The analysts have now lowered their annual profit target to €50 million from the previous €63 million, and are below the market consensus in their forecast. Analysts noted, however, that the shares are trading relatively low, but it is difficult to say whether they fully reflect the weaker fundamentals.

Kion Group (D1 interval)

Source: xStaiton5

Varta (VAR1.DE) warned that business conditions in its key energy storage business are deteriorating, calling into question its previously issued full-year forecasts. As a result, the company was forced to lower them. 

• Analysts at Warburg Research do not find the company's comment disappointing, given its poor performance to date; the company also became the target of a cyberattack in Q1 2024. Varta's comments forced analysts to lower their profit and revenue forecasts for this year.
• Analysts also don't see growth catalysts on the horizon, given the postponed release of last year's results, which will keep investors in the dark - probably until August. Warburg believes the downside potential is limited, given the currently very low valuation, but the weakness of the business and the uncertainty surrounding the stock leads them to maintain a sell recommendation with a target price of EUR8 per share nearly 15% below current market prices.

Varta shares (VAR1.DE, D1 interval)

Source: xStation5

Rheimetall shares (RHM.DE interval D1)

The company's shares bounced off the 100-period moving average yesterday and opened the session with an upward gap after reports of a large munitions order for the German army. The stock is consolidating after reaching maximums, in April.Source: xStation5