Summary:
- Emmanuel Macron outlined proposal of EU reform
- DAX (DE30 on xStation5) pulls back but defends breakout level
- Evonik Industries (EVK.DE) gains on methacrylates business sale announcement
Yesterday’s downbeat performance of the US indices was followed by somewhat lacklustre trading during the Asian session. Stocks in Australia and Japan moved lower while indices from China finished mixed. The beginning of the European trading was not too optimistic as most of the stock market benchmarks from the Old Continent moved lower in the first minutes of the session. Telecom led higher while car makers lagged the most.
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DE30 experienced some weakness yesterday. In turn, the German index pulled back to the vicinity of a breakout level at 11560 pts handle. Bulls may use this level to regroup ahead of an attack on the 11680 pts handle, local high from early-November. This level can be seen as the first relevant resistance. Source: xStation5
Emmanuel Macron, the President of France, outlined a vision of the European renaissance in a column that will be published in newspapers throughout all EU member countries today. Macron has been trying to push for a fundamental reform of the European Union for some time already but he doubled his efforts once he realized populists may score big in the upcoming European elections. In a column Macron proposed numerous solutions in order to enhance performance of the bloc in various areas. Among proposals one can find an idea to set up agency that will safeguard elections in member countries as well as a plan to ban foreign entities from financing political parties on the Old Continent. Moreover, he seeks a revamp of the European trade, competition and digital policies as well as a review of the Schengen system and creation of the common border police. Macron’s plan seems to be a mix of different approaches as calls for EU reform has been heard from the liberal West while nationalists pushed for changes to migration policy. Last but not least, Macron seems to be heading Chinese or US path when it comes to presence of the foreign businesses in Europe as he suggested banning foreign entities that pose threat to the European strategic interests. While the column may be some kind of foundation for the future EU reform, it should be noted that numerous calls from Macron to reform the bloc were largely ignored and no action was taken.
Major European stock market indices after the first hour of trade:
- DAX (DE30): +0.21%
- FTSE 100 (UK100): +0.31%
- CAC40 (FRA40): +0.15%
- IBEX (SPA35): +0.32%
- FTSE MIB (ITA40): +0.31%
Fresenius Medical Care (FME.DE) tries to recoup part of yesterday’s losses while EON (EOAN.DE) manages to stay afloat despite downgraded at JPMorgan. Source: Bloomberg
Company News
The Deutsche Boerse is to announce changes to the DAX index family tonight. Composition of the main DAX index should not change but some shuffles in small- (SDAX) and medium-cap (MDAX) indices may occur. It is expected that Salzgitter (SZG.DE) and Schaeffler (SHA.DE) will be moved from MDAX to SDAX while Knorr-Bremse and Dialog Semi should be promoted to MDAX. Changes will become effective on 18 March. Note that index rebalancing may result in major price swing on shares of affected companies as ETFs and index funds will need to adjust their portfolios.
Evonik Industries (EVK.DE), the German chemical company, opened significantly higher today. Financial Times reported yesterday that Advent International, the US private equity firm, will buy methacrylates business from Ebonik for €3 billion. The news were confirmed by the German company today. A move is part of company’s overhaul aimed at divesting slow-growth segments and favouring fast-growth businesses.
Herbert Diess, CEO of Volkswagen (VOW.DE), said during an interview that the German carmaker will review its brand portfolio. Diess said that Volkswagen’s portfolio is strong but review is needed amid emergence of new business segments related to EV and autonomous cars. Executive said that the company is in talks with the US administration over tariffs on imported EU cars. However, Diess warned that in case no deal is reached and tariffs will be levied Volkswagen may need a major review of operations.
EON (EOAN.DE) is experiencing lacklustre performance today following a downgrade at JPMorgan. The Bank lowered recommendation for the stock from “overweight” to “neutral”. One-year price target was lowered from €11.50 to €10.20.
Evonik (EVK.DE) saw its share price decline over 30% during the final quarter of 2018. However, as moods on the global stock markets improved Evonik followed higher at the beginning of 2019. In case the euphoria is set to last the stock may test the resistance zone ranging €27.65-28.00 in the nearby future. Note that the 200-session moving average (purple line on the chart above) is also running there. Source: xStation5
