Summary:
- European aviation agency imposed EU-wide ban on Boeing 737 Max 8 flights
- DAX (DE30 on xStation5) respects short-term upward sloping trendline
- Guidance releases trigger wild swings across some DAX members
Disappointing data released during the Asian trading hours turned out to be a drag for equities from Antipodes and Japan. Even more grim picture was seen on the Chinese stock market as some indices from the country plunged over 2.5% today. In the aftermath bears dominated at the beginning of today’s European session. However, shares from Switzerland buck the trend as SMI index opened with over 0.5% upward price gap. Real estate companies outperformed while retailers lagged the most at the beginning of Wednesday’s trading in Europe.
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Yesterday’s pullback on the DE30 market was halted in the vicinity of the short-term upward sloping trendline. Note that the trading ranged market by the aforementioned trendline and the swing level around 11680 pts handle is narrowing therefore we cannot rule out a break in the nearby future. Note that while Brexit should mostly impact UK companies, pushing through with no-deal exit tonight may turn out to be a serious drag on stocks from other European countries. Source: xStation5
Outcome of the yesterday’s vote means that the least damaging Brexit option has been put off the table. While the United Kingdom is likely to be most impacted by Brexit, the European Union is not in a sweet spot either. However, what differs situation of the United Kingdom and EU is the fact that the former could actually prevent current situation from happening while the latter did all it could to prevent it. Voices of dissatisfaction could be heard all over the Old Continent in the aftermath of the vote with the German Europe minister begging UK to tell Europe what they really want and European Council’s Tusk to say that the United Kingdom now needs a credible reason to delay Brexit. Brexit delay is almost certain as there is little chance lawmakers would back crashing out of the EU without a deal today. Nevertheless, one may expect EU to take a bit bolder stance during the negotiations in case Brexit is delayed beyond 29 March and not offer as many concessions to the UK as it did during the past 2 years.
Meanwhile, major European aviation agencies followed into footsteps of their peers and decided to ban all Boeing 737 Max 8 flights. The ban was first issued in the UK, France and Germany but not long afterwards a EU-wide ban was issued by the European Aviation Safety Agency. While such a move has clear implications for Boeing it is also impacting European carriers. As it is still unknown whether the crash was caused by equipment malfunction or pilot’s failure, it remains unknown whether Boeing should be held responsible for the crash. Throwing all 737 flights off the schedule would result in significant costs for the European airlines and in case investigation shows no failure on behalf of Boeing, there is little scope those companies will receive any kind of compensation for lost revenue.
Major European stock market indices after the first hour of trade:
- DAX (DE30): -0.11%
- FTSE 100 (UK100): +0.06%
- CAC40 (FRA40): +0.36%
- IBEX (SPA35): -0.05%
- FTSE MIB (ITA40): +0.21%
Weakish guidance weighs down on Adidas (ADS.DE) share price while EON’s (EOAN.DE) dividend hike fails to ease growth concerns. Source: Bloomberg
Company News
Adidas (ADS.DE) can be found among the biggest DAX laggards today. The German apparel company issued a weakish guidance for 2019. Namely, the shoemaker said that sales growth is likely to ease this year and may drop from 8% in 2018 to 5% in 2018. As a reason behind such lacklustre forecast the company cited fading boom for retro lines of shoes on the Old Continent. Adidas also announced €3.35 dividend payout for 2018, higher than analysts expected.
EON (EOAN.DE) also published guidance for the current year and it also disappointed. The German utility company sees EBITDA in the range of €2.9-3.1 billion this year. Given that company reached EBITDA of €3 billion in 2018, today’s announcement in fact heralds flat earnings growth this year. However, it did not discourage executives from expecting higher dividend in 2019. EON decided to pay €0.43 dividend per share for 2018 and expects to pay €0.46 for 2019. Nevertheless, such an announcement failed to offset weakish guidance and the stock is trading lower today.
On the other hand, Volkswagen (VOW.DE) issued guidance that can actually be considered upbeat. The German carmaker expects revenue growth of up to 5% and operating profit margin of 4-5% this year. The company also plans to slash 5-7k jobs by 2023. However, Volkswagen said that headcount reduction will be implemented via early retirement programs and not filling vacant positions. Meanwhile, software and electronics units are likely to get 2k boost in workforce. However, announcement concerning investments can be seen as the most upbeat as the company said it will increase planned investment through 2023 by €8 billion (to a total of €19 billion).
Adidas (ADS.DE) managed to paint a new all-time high around €220 handle last week, what is quite unusual for the European companies right now. However, the German shoemaker began to underperform later on and today’s weakish guidance added to pressure. The stock is trading more or less 5% lower at press time and bulls are trying to defend the 200-session moving average. Daily close below it could dent moods and make pullback towards upward trendline more possible. Source: xStation5
