Summary:
- Merkel calls for supporting European companies
- DAX (DE30 on xStation5) keeps swinging in the vicinity of the downtrend line
- Bayer (BAYN.DE) surges as full-year EBITDA beats estimates
While gains were spotted in Australia, China and Japan during the Asian trading hours, moods at the beginning of the European session are strikingly different. Most of the blue chips indices from the Old Continent launched today’s trading lower with Dutch and UK equities opening with the biggest downward price gaps. Miners, refiners and real estate companies managed to stay afloat at the beginning of the session while all the other Euro Stoxx 600 sector subindices underperformed.
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DE30 (DAX futures underlying) keeps swinging in the vicinity of the recently broken downward sloping trendline. Just as bulls managed to push higher yesterday, bears erased this gain today. The index is trading close to the 3-month high around 11565 pts and may need a stronger price impulse to break above given current lacklustre performance. The aforementioned trendline should continue to support the benchmark for in the nearby future. Source: xStation5
Presence of the Asian, especially Chinese, companies on the Old Continent is a vivid topic in Europe. There is nothing wrong in companies from China being present on the European market but governments grew concerned over their position on the EU market. European leaders call for speeding up efforts to bolster European companies and allow them to compete with US or Asian behemoths. Angela Merkel, the German Chancellor, addressed the issue during the Asia-Pacific forum in Berlin yesterday. Merkel said that Asian companies have advantage over European peers as they are subject to different kind of relation between politics and industry and that Asian firms benefit from planning that “goes beyond one legislative period”. She said that European governments should try to do the same. Recent failures to create European champions through mergers and outrage of French and German authorities resulting from them hint that the EU antitrust rules may be the first to see major change. Germany and France advocates that EU antitrust authorities should take more global approach rather than assessing what would be the impact of merger on competition on the Old Continent alone. Those two countries reason their stance by saying that preventing company from growing to big on the EU market automatically closes path for them to become leaders on the global scale.
Major European stock market indices after the first hour and a half of trade:
- DAX (DE30): -0.53%
- FTSE 100 (UK100): -0.52%
- CAC40 (FRA40): -0.24%
- IBEX (SPA35): -0.42%
- FTSE MIB (ITA40): +0.12%
Bayer (BAYN.DE) surges on EBITDA beat while Beiersdorf (BEI.DE) underperforms after downgrade. Source: Bloomberg
Company News
Bayer (BAYN.DE) can be found among the best performing DAX members today. Chemical company reported earnings for the fourth quarter of 2018. The company managed to generate €2.07 billion of EBITDA against expected €2 billion. Acquisition of Monsanto had positive impact on business as Bayer reported that new entity contributed significantly to the over rise in core earnings. Full-year EBITDA reached €9.547 billion (1.56% above median estimate) and full-year revenue was more or less in line with expectations at €39.586 billion.
Cerberus Capital Management, the US private equity firm, changed its stance towards the German banks it owns. Asset manager now backs merger of the Deutsche Bank (DBK.DE) and Commerzbank (CBK.DE) in the nearby future. Such a shift is said to be result of declining stock prices of both lenders and concern whether Deutsche Bank can make a turnaround on its own. News come from Handelsblatt report and so far neither Cerberus, nor representatives of the German banks confirmed it.
Beiersdorf (BEI.DE), the German personal goods manufacturer, reported 2018 earnings today. The company managed to beat revenue forecast of €7.21 billion with sales of €7.23 billion. However, other metrics did not look so rosy. EPS of €3.17 was 6.3% lower than median estimate provided by Bloomberg. Somewhat disappointing earnings cause MainFirst analysts to react. The Bank downgraded Beiersdorf from “outperform” to “neutral” and lowered the one-year price target from €115 to €95.
Munich Re (MUV2.DE) received a downgrade over the night. Goldman Sachs lowered recommendation for the stock from “buy” to “neutral”. One-year price target was set at €215, implying a 3.3% rise against Tuesday’s close.
