DE40: Negative sentiment in German industry weighs on DAX

• DAX continues declines 
• ZEW index data show deteriorating sentiment 
• Sentiment around U.S. data spooks investors in Europe 
• Hugo Boss lowered its full-year forecasts 

The economic calendar for the European markets remains relatively empty today. The most important reading from the German perspective was data on the ZEW index showing general sentiment toward the German market. The reading came in slightly above expectations at 41.8 (versus forecasts of 41). Despite beating forecasts, the reading indicates a negative trend for the German economy, as it marks the first m/m decline in the index value this year. At the same time, the value fell below April's reading. 

The German economy continues to face strong competition from China, which does not help German industry, one of the most important components of the country's economy. Growing price competition from China, on the one hand, poses a very big challenge for European companies at the price level, which is theoretically supposed to be solved by tariffs imposed on Chinese goods by the EU. From the perspective of German companies, however, this is setting themselves up for an increase in risk associated with the introduction of tariffs by the Chinese side, and the market there is a major destination for many German manufacturers. 

Due to the lack of significant (except for the ZEW index) macroeconomic data for Europe today, investors are shifting their gaze to the ocean. The mood on the Old Continent is dictated, on the one hand, by the strong rise in support for Trump, which, in view of the candidate's isolationist plans, will negatively affect the ratings of European companies. On the other hand, Powell's relatively dovish comments are helping to reinforce the soft landing scenario, which should positively influence investor sentiment and bolster the stock market. Today, the DAX is losing more than 0.5%, continuing the yesterday’s declines.

Declines in today's session are led by auto manufacturers. Porsche is down nearly 5%, Mercedes-Benz is down 1.4%, and Volkswagen is down -1.3%. Source: Bloomberg Finance L.P.

Declines in the luxury goods sector and auto manufacturers are pulling the consumer discretionary sector to its highest declines in today's session. Source: Bloomberg Finance L.P. 

The DAX (DE40) contract yesterday bounced off a resistance point near 18842 points, marked by local peaks from March this year. Thus, the bulls failed to outweigh the supply side and push the contract towards the year's highs. The potential scope of a correction, which might become more probable with the current sentiment, could even go below 18150 points, looking at the local geometry. At present, the key support for the quotes still remains the moving averages, including the SMA50 at 18576 points. Source: xStation

Company news:

• Hugo Boss (BOSS.DE) lowered its full-year 2024 revenue forecast in the face of increasing macroeconomic pressures and geopolitical challenges. The company highlighted signs of weakness in the Chinese and British markets. Hugo Boss estimates the new sales forecast at €4.2-4.35 billion (vs. the previous prediction of €4.3-4.45 billion). In that case, even the company's best-case scenario is below analysts' consensus forecast of €4.37 billion. The company is losing more than 8% today. 
• Salzgitter (SZG.DE) is losing almost 7% on a wave of negative iron ore price data and worse readings from China. Negative sentiment related to weaker economic conditions in China is weighing on European steelmakers. SSAB (SSABA.DE) is also losing more than 4% today. The companies' declines, in addition to the weaker steel market outlook, are further reinforced by the negative outlook of JPMorgan analysts, who have placed the companies on their list of "negative catalysts." 
• Airbus (AIR.DE) has embarked on a turnaround program to improve the operational performance and efficiency of its core business. According to Monday's reports by The Telegraph, the company will freeze hiring processes and eliminate some jobs to prepare for increased