DE30: Bulls surrender on grim data and geopolitics

• European stock market sink at the start of a new week

• DE30 tests key support at 10,500 pts

• ThyssenKrupp (TKA.DE) secured €1 billion in German state aid

European stock markets launched new week with big bearish gaps. Note that most of the stock exchanges in Europe were shut on Friday, when markets that were open dropped. Having said that, part of today's declines can be seen as "catching up" with developments on Friday.

While today's sell-off seems to be triggered mostly by rise in the Sino-US tensions, grim data completes the picture. Manufacturing PMIs from Europe for April were revised slightly lower while first releases from Spain or Poland showed massive drops. Hong Kong GDP report for Q1 2020 was expected to show a 1.8% QoQ contraction. Instead, data came in at -5.3% QoQ, the biggest contraction on the record! Eurozone Sentix investor confidence index for May was seen jumping from -42.8 pts to -28 pts but recovered only to -41.8 pts. US factory orders data will be in spotlight in the afternoon (3:00 pm BST) as it may show a double-digit month-over-month drop.

Source: xStation5

It looks like the recovery rally on DE30 is at risk. The market has dipped below the lower limit of the Overbalance structure in today's overnight trading but managed to jump back above it. However, things get tricky here. DE30 halted upward move at the 200-hour moving average (purple line) and is attempting to break below the support zone at 10,500 pts, which is also a limit of the Overbalance structure. Direction of the next bigger price impulse will likely depend on which of these two technical hurdles is broken first - moving average or 10,500 pts handle. Should we see a break higher, 10,750 pts would be the next resistance to watch. In case of a break lower, attention will shift to the support zone at 10,200 pts - 38.2% Fibo retracement of February-March sell-off. However, keep in mind that according to the Overbalance methodology, breaking below the lower limit (10,500 pts) would hint a short-term trend shifting downward.

DAX members at 9:51 am BST. Source: Bloomberg

Every DAX member is trading lower today. Utilities, like RWE (RWE.DE) and E.ON (EOAN.DE), outperform but they also trade below the flat line. Cyclical stocks like carmakers or industrial are among top losers today.

MTU Aero Engines (MTX.DE) reported 11.6% YoY decline in net profit in Q1 2020 to €111.8 million. EPS stood at €2.1 and was 13.2% YoY lower. Revenue was 13% YoY higher and reached €1.27 billion. Company said that its order backlog at the end of Q1 was €19.4 billion (€0.4 billion decline against end-2019). Company withdrew its forecast for 2020 and said it will not issue a new one. MTU trades 55% lower year-to-date.

According to a Reuters report, Thyssenkrupp (TKA.DE) secured €1 billion in German stare aid. The funding is aimed at helping the company stay afloat until it receives money from the sale of the elevator unit. Thyssenkrupp sold the unit for €17.2 billion and expects to receive money in June.

Carsten Spohr, CEO of Lufthansa (LHA.DE), said that the company is in intense and constructive talks with the German government representatives and that he expects the German state-aid deal to be reached soon. The company is also in talks with governments of Switzerland, Austria and Belgium. In other news, Lufthansa pilots offered to waive 45% of salaries for 2 years in exchange for job security.

MTU Aero Engines (MTX.DE) has been range trading since DAX bottom-out in mid-March. Investors are not buying decent quarterly results as the aviation industry and aviation orders are widely expected to remain suppressed for an extended period of time. Reaction to the lower limit of the range at €110 may be an important short-term driver. Source: xStation5