DE30: European stocks sink on renewed trade pessimism

• European stocks pull back as trade deal gets more distant

• DE30 tests the lower limit of the Overbalance structure

• Wirecard (WDI.DE) sinks as auditor says access to files was restricted

Downbeat moods can be spotted on stock exchanges all over the world as Sino-US trade deal seems to get more and more distant. The US Senate passed Hong Kong bill, that China strongly opposed, causing investors to believe that escalation is coming. European indices are no exception and significant downward gaps could be spotted at the opening. German and French shares underperform the most while stocks from Poland and Switzerland seem to be the most resilient.

Source: xStation5

DE30 broke to new YTD highs yesterday but did not manage to stay there for a long time. Deterioration in moods caused the index to pull back into the range of the recent consolidation. However, the situation did not stabilize there as DE30 continue to move lower and lower. A point to note is that following opening of today’s cash session the index not only broke below the lower bound of the consolidation range but also moved below the lower limit of the Overbalance structure at 13138 pts. According to the Overbalance methodology, such a development hints at trend reversal. Nevertheless, for the signal to be confirmed we need to see candlestick close beneath 13138 pts handle. So far the downward move was halted by the 13115 pts handle - the lower limit of the short-term consolidation range from 4-6 November.

DAX members at 8:18 am GMT. Source: Bloomberg

Deterioration in relations between China and the United States is causing trade-sensitive stocks to pullback. Such a trend can be seen all across the Old Continent. Infineon Technologies (IFX.DE), carmakers and Continental (CON.DE) are among the most trade-sensitive stocks in the DAX index and we can observe substantial declines in their share prices today.

Wirecard (WDI.DE) can be found among DAX top laggards on Wednesday. The German payments company is once again underperforming on the back of accounting scandals. According to recent reports, auditor assigned to check the completeness and accuracy of financial statements of Wirecard’s Singapore branch was unable to complete an audit. Restrictions imposed by the Singapore investigation into Wirecard practices caused some of the documents to be unavailable for auditor. 

Goldman Sachs resumed coverage of the Deutsche Lufthansa (LHA.DE). The investment bank recommended selling the stock with a price target of €14.80. The German carrier trades lower at the beginning of Wednesday’s session. 

Following a failed attempt of breaking above the resistance zone ranging around the 38.2% retracement of the downward move started in January 2018, shares of Daimler (DAI.DE) launched a pullback. The stock is approaching the 200-session moving average (purple line) being pressured by deterioration in trade moods. A point to note is that slightly below this moving average one can find the support zone ranging around the 23.6% Fibo level, that has been tested several times this year. Source: xStation5