Summary:
- Daimler (DAI.DE) sinks after another profit warning
- DAX (DE30) looks towards the support zone
- Deutsche Bank (DBK.DE) CEO speaks on M&A in interview with Handelsblatt
A bulk of the European blue chips indices is trading higher on Friday with Swedish and Portuguese equities being the leaders. However, the German DAX struggles to push higher today and is either trading flat or slightly below yesterday’s close.
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Pullback on the DE30 market continues. The German index broke below the breakout level at 12400 pts handle and is testing the 12300 pts handle at press time. Bulls managed to defend this hurdle yesterday but will they be able to do so today too? A break below would pave the way towards the support zone ranging around the latest local low (12170 pts). Source: xStation5
Deutsche Bank CEO speaks on M&A in interview with Handelsblatt
According to the interview of Christian Sewing, CEO of the Deutsche Bank, with Handelsblatt, the German lender is unlikely to engage into any M&A anytime soon. Sewing said that there is no point in making third or fourth attempt to merger with Commerzbank and, in turn, Deutsche Bank decided to move on alone. Sewing also said that cross-border European banking mergers are more logical than national mergers. However, he also said that he does not see any major merger in European banking sector taking place over the next 3 years. Asked about major job cuts announced by the German lender, he said that substantial amount of lay-offs will be delivered in Germany. Meanwhile, analysts of the UBS provided a boost for the Deutsche Bank stock with an upgrade. The Swiss lender raised recommendation for the German bank from “sell” to “neutral”.
DAX members at 9:55 am BST. Source: Bloomberg
Other company news
UFO, the German cabin crew union is set to announce today when members of the union will vote on a strike. Strikes will impact two subsidiaries of Lufthansa (LHA.DE), Eurowings and Germanwings. There is a high chance that the vote will be held in July and a high chance that strike will be launched soon afterwards. Impact on Lufthansa’s valuation will depend on the scale and length of the strike. Cabin workers plan to go on strike after talks over better working conditions broke down a few weeks ago.
Daimler (DAI.DE) is sinking today after the German carmaker issued a fourth profit warning in slightly over a year. The company said that full-year earnings may come in lower than 2018’s results. Daimler blamed a recall for faulty airbags and building reserves for diesel-related cases for weaker performance. In the previous profit warning in June, Daimler hinted that this year’s earnings may match those from 2018. While outlook for other carmakers is deteriorating as well, Daimler is the only one to issue profit warnings so often.
Speaking of carmakers, Volkswagen (VOW.DE) is expanding its alliance with Ford Motor (F.US). The German carmaker will invest in autonomous car partner Argo AI, which is owned by Ford. Moreover, autonomous driving division of Audi, a subsidiary of Volkswagen, will be folded into Argo AI. The information has not been confirmed by any of the mentioned companies yet but executives of Volkswagen and Ford Motor are set to hold a briefing at 8:00 am New York time today (3:00 pm BST). The expanded alliance may be officially announced during a briefing.
Lufthansa (LHA.DE) stock failed to see a recovery following a significant plunge in mid-June. Share price struggles to distance itself away from a long-term price support zone ranging €14.65-14.90. The potential cabin crew strike should be the major near-term catalyst for the stock prices moves. Source: xStation5
