Summary:
- Merkel’s successor pours cold water atop Macron’s head, industrial production disappoints
- DAX (DE30 on xStation5) erases pre-session bounce
- Deutsche Bank’s (DBK.DE) Board said to approve merger talks with Commerzbank (CBK.DE)
Spare for Australian equities, most of the Asian stocks managed to push higher during the first trading session of the week. Chinese indices produced meaningful gains following steep declines on Friday while Nikkei (JAP225) also managed to erase a part of last week’s drop. In the aftermath of upbeat moods in Asia, stocks from the Old Continent launched Monday higher. UK equities outperformed thanks to weaker GBP while Russian shares were among those to see declines. All 19 Euro Stoxx 600 sector subindices opened higher on Monday with miners and media companies leading gains.
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DE30 (DAX futures underlying) pushed higher during the Asian session but began to struggle following cash open in Europe. The German index is pulling back from the vicinity of 33-period moving average (green line, H4 interval) and may be set to retest previous swing level around 11400 pts handle. However, short-term upward sloping trendline runs earlier and bears may find some kind of buyers’ resistance there. Source: xStation5
Not long ago we wrote about a column wrote by the French President, in which Macron calls for significantly deeper economic and political integration between the EU member states. However, a major hurdle towards such integration just arose. Namely, Annegret Kramp-Karrenbauer, current leader of the German CDU party and successor to Angela Merkel, said that introducing uniform European social system, minimum wage or issuance of joint bonds would be a wrong way for the European Union. The German politician said that creating new agencies to govern such systems would made European bureaucracy more complex and will transfer part of power away from national governments. Such a move would only strengthen position of nationalists in Europe. Instead, Kramp-Karrenbauer insisted that member countries must take wider approach and work closer together in order to make Europe stronger. However, CDU leader agreed with the French President that Europe needs a joint system for tracking immigration as well as creation of the common market for European banks, an idea echoed for years by various EU politicians. Kramp-Karrenbauer views’ may cool Macron’s reformist inclinations as Germany is certainly a power that cannot be ignored in Europe and a country that has a significant scope to influence decisions of the European institutions.
Meanwhile, this European powerhouse seems to be slowing further. The German industrial production figures for January were published at 7:00 am GMT and they are quite worrying. Namely, the production shrinked in January by 0.8% MoM while market consensus pointed to a 0.5% MoM advance. Note that out of 12 past German industrial production readings only 5 did not show a decline on the monthly basis. Moreover, just 1 out of those 12 prints was actually expected to show a drop. This shows that even as everyone is talking about a slowdown in Europe, pace of deceleration is way faster than economists predict. This may lead to downward revisions in short- and medium-term economic forecasts and in turn have impact on asset valuations.
Major European stock market indices after the first hour of trade:
- DAX (DE30): +0.19%
- FTSE 100 (UK100): +0.60%
- CAC40 (FRA40): +0.08%
- IBEX (SPA35): -0.07%
- FTSE MIB (ITA40): +0.01%
Deutsche Bank (DBK.DE) sugres on merger talks while Lufthansa (LHA.DE) gains following an upgraded at Goodbody. Source: Bloomberg
Company News
Both, Deutsche Bank (DBK.DE) and Commerzbank (CBK.DE), are trading reasonably higher today. News concerning longtime discussed merger surfaced and can be named as a reason behind the surge. According to Bloomberg report, Board of the Deutsche Bank gave company a green light for launching merger talks with Commerzbank. However, it should be noted that neither the German Finance Ministry, nor any of mentioned banks confirmed the report.
Deutsche Post (DPW.DE) is trading higher today thanks to FAZ report. The German newspaper reported that federal cabinet is likely to approve measures allowing the Deutsche Post to increase postage easier soon. FAZ claims that the German authorities may provide more details as soon as Wednesday.
Deutsche Lufthansa (LHA.DE) also can be found among DAX leaders today. The carrier received an upgrade at Goodbody, the UK investment bank. The Bank upgraded the stock from “hold” to “buy” Lufthansa has 15 “buy, 12 “hold” and 2 “sell” recommendations in the Bloomberg database.
On the other hand, the Deutsche Boerse (DPW.DE) is one of the worst performing DAX members today. No particular negative news concerning the company surfaced recently. Bloomberg reported today that the Deutsche Boerse invested in a joint venture that aims at developing means for custody of digital assets for financial services institutions. However, this news does not seem to justify today’s decline.
Deutsche Post (DPW.DE) bounced off the €23.40 support level and began to march higher. The stock opened above the €27.60 resistance level today and a break above the 200-session moving average (purple line on the chart above) cannot be ruled out. However, one should keep in mind that a structure of lower lows and lower highs is still in place therefore technical situation seems to bode well for bears. Source: xStation5
