DE40: German market hopeful for rebound

• Germany's economy is back on track, according to Lagarde
• Adidas raises full-year forecasts
• ASML shares lose 4% after earnings release
• Continental loses due to weakening auto market in Europe

Overall market situation:

The German stock market rises in the first half of the session, with most European companies posting gains on Wednesday. Investors are still awaiting the opening of the US stock market, which has so far brought declines to the German market.  Germany's economy appears to be slowly getting back on track, as ECB President Christine Lagarde emphasized in her speech today. After a series of strong swings hitting the German economy due to, among other things, the deterioration in China, a leading export market for Germany, German economic data released in April may herald an improvement. Further down the line, however, this is not entirely evident in company listings, which have been under pressure from negative macroeconomic data from the United States for the past week. Today's quotations so far leave room for sustained positive sentiment and a slight reversal of declines, while the narrative from the US will continue to be the main factor. German 10-year bond yields remain around 2.49%.

European companies listed during Wednesday's trading session are currently trading up. Source: xStation 5

The German benchmark DE40 is recording 0.50% gains during today's session, thus defending the key support zone of the uptrend located near the 50-day exponential moving average (blue curve on the chart). Source: xStation 5

News:

Adidas (ADS.DE) is one of the leading stars of today's session on the German stock market. The company raised its full-year forecast, estimating operating profit for 2024 at €700 million. The previous forecast was for €500 million. At the same time, the company expects a mid to high single-digit growth rate. The increase in forecasts is due to higher-than-assumed demand for classic athletic shoe models, i.e. Samba, or those associated with the drop of Yeezy's collection. The company's stock price gains about +7% and reaches its highest values since March 2022

ASML (ASML.NL) shares are losing nearly 4.7% during today's session, following the publication of lower-than-expected quarterly results. Moreover, the company reported lower-than-expected bookings for its flagship EUV lithography tool. The weak results undermined optimism about the company's 2025 results. A light in the tunnel, however, is higher orders from Chinese customers. Below are selected company results and forecasts:

• Bookings €3.61 billion, -61% q/q, forecast €4.63 billion
• Net sales €5.29 billion, -27% q/q, forecast €5.47 billion
• China's net sales increased q/q to 49% (previously it was 39%)
• China's net sales increased q/q Q2 net sales are expected to be in the range of €5.7-6.2 billion; estimates were €6.46 billion 49% (previously it was 39%)
• The company still expects total net sales in 2024 to be similar to 2023. "Our outlook for the full year 2024 remains unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry's continued recovery from the slowdown."

Contintental (CON.DE) released its preliminary results for Q1 2024, which came in well below market expectations. Preliminary sales came in at 9.8 billion euros (versus 10.1 billion euros forecast). Operating profit margins fared even worse, coming in as much as 1.7 p.p. below assumptions at 2%. Despite the disappointing preliminary data, the company maintained its forecasts, assuming that the next half of the year will be more successful. For now, however, the company must contend with a deteriorating car market in Europe and increasingly fierce negotiations with vehicle manufacturers. In response to the news from the company, the share price recorded a -5.5% decline.

Sector breakdown of companies included in the German DAX index. Source: Bloomberg Finance L.P.