DE30: Deutsche Bank expects German economy to fall into recession

Summary:

• Germany’s biggest lender issued a downbeat report on the domestic economy

• DAX (DE30 on xStation5) takes a break on a march towards the resistance zone

• Daimler (DAI.DE) falls after lowering dividend payout

Stocks in Europe launched Wednesday’s trading with moderate losses. Downbeat moods can be spotted all across the Old Continent with just a few major stock market indices posting minor gains in the first minutes of the session. The biggest declines could be seen in Russia and France while Dutch and Belgian equities ticked higher. IT stocks surged while healthcare and personal goods companies lagged.

DE30 managed to paint a sequence of higher highs after plunging to the lowest level in two years at the end of 2018. The benchmark is slowly marching higher and may run into the first major obstacle fairly soon. The resistance zone ranging 11570-11660 pts limited upward moves during the final quarter of the previous year and breaching it is crucial for maintaining recovery. Source: xStation5

More and more voices heralding recession in Germany can be heard lately. The Deutsche Bank released a report on the outlook for the German economy yesterday. The Bank painted a grim picture and said that the Europe’s biggest economy is likely to contract in the first quarter of 2019. Economists reasoned their stance by saying that survey data deteriorated greatly and expectations of new orders worsened. Such view is shared by the Bundesbank President, Jens Weidmann. Central bankers said a few days ago that the economic weakness of 2018 extended into 2019 and the growth will be much lower than predicted at the end of the previous year. The official government growth forecast was also cut in a half. Deutsche Bank, however, denied to revise its forecast and opt to wait with such move until the German statistics office releases growth data for the fourth quarter of 2018. Nevertheless, the German factory orders data for December was released today and it doesn’t bode well for the growth figures in Q4 2018. Namely, factory orders declined 7% throughout 2018 against expected drop of 6.7%.

Major European stock market indices after 50 minutes of trade:

• DAX (DE30): -0.45%

• FTSe 100 (UK100): -0.31%

• CAC40 (FRA40): -0.38%

• IBEX (SPA35): -0.18%

• FTSE MIB (ITA40): -0.23%

Munich Re (MUV2.RE) outperforms while Daimler (DAI.DE) lags after reporting earnings. Source: Bloomberg

Company News

Daimler (DAI.DE) released better-than-expected earnings report today. The German carmaker managed to generate €46.61 billion revenue, 2.5% above median estimate, and EPS of €1.681, 4.9% higher than expected. However, the company still suffered a severe drop in profits on the annual basis. A 28% decline in net profit caused company to lower its dividend payout. Daimler executives said that a number of risks persisted into 2019 but they stayed rather optimistic and expect minor earnings increase this year.

Munich Re (MUV2.DE) is one of the best performing DAX stocks today. The company submitted its earnings report for the fourth quarter of 2018 today. The reinsurance company generated net profit of €2.3 billion against expected €2.2 billion and up from €0.735 billion a year ago. In the aftermath of a good results the company decided to raise dividend payout to €9.25 per share from €8.60 per share.

Tui (TUI.DE or TUI.UK) is underperforming severely today. The company was downgraded at HSBC from “buy” to “hold”. The one-year price target was lowered from 17.20 GBP to 13.20 GBP.