Summary:
- European stock markets open well above their Friday’s close level as investors digest the G20 summit
- DAX breaks through this year’s high and seems to be en route to all-time highs
- Timmermans is expected to become a new Europen Commission president
The start to Monday’s trading across European markets has been remarkably successful as investors seem to have bought the upbeat news from Donald Trump and Xi Jinping. A trade truce announced over the weekend during the G20 summit in Osaka, Japan, is a prime reason behind the rally we are experiencing in Europe this morning. Nevertheless, it seems that investors may be too complacent given the details of the agreement. Let us recall that no specific date was set for the truce, hence in theory either the US or China may impose new tariffs all of a sudden if something goes wrong. Thus, the foundations of this deal seem to be fragile and positive sentiment may disappear as quickly as it occurred. On the other hand, looking at the FX market and what is happening with the US dollar (it’s rallying against its G10 peers) one may arrive at a conclusion that FX investors seem to be convinced that the Fed will not cut rats as quickly as they expected yet before the G20 summit. Bear in mind that Jerome Powell suggested during his latest press conference that a rate decrease decision would depend, inter alia, on what happened in terms of the US-China trade dispute. Although market participants are still confident when it comes to a rate cut in July, they may become less convinced as for further rate cuts if the US-China trade tussle eases.
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The DE30 is rallying on Monday in response to the trade truce reached between the US and China during the G20 summit in Japan. Technically bulls may hope to move toward to the all-time highs placed slightly above 13 500 points. However, they would have to deal with the local highs nearby 13 100 points. This is also a target stemming from the inverted head and shoulders pattern (although it is not perfect as the price moved below the neckline after breaking above it giving a false signal). Source: xStation5
In terms of news from companies it is worth mentioning a report from Deutsche Bank regarding a planned reduction of staff. The German lender plans to slash up to half of jobs in its global equity division. Shares of DB are rising 1.6% this morning being propped up by bullish sentiment elsewhere.
In turn, as far as politics is concerned, we have yet to be offered an agreement on who will become a new European Commission president. Although Frans Timmermans seems to be a frontrunner to get this post, the V4 countries oppose this scenario. However, the latest comments (unofficial) suggest that EU leaders are close to agreeing on him as the next EC president.
Last but not least, Amazon is being investigated by German authorities over possible minimum-wage violations, according to Welt am Sontag. As a report suggests, some evidence have been found that pay levels set by Amazon have been below the minimum level of 9.19 EUR per hour for drivers. However, it also adds that Amazon does not hire drivers, instead they collaborate with the company as subcontractors.
Almost all stocks listed in the DE30 are on the rise at the beginning of the new week. Source: Bloomberg
