DE30 drops below 14,000 pts on US-China developments

• European markets trade lower

• DE30 pulls back below 14,000 pts

• Commerbank to boost provisions for bad loans

European markets are trading lower today as deterioration in the US-China relations is causing investors to trim risk bets. However, indices from the Old Continent managed to bounce off the daily lows. Joe Biden is set to present its economic package on Thursday while big US banks will start reporting Q4 2020 earnings on Friday. These two factors may be drivers of the performance of equity markets this week.

Source: xStation5

DE30 has pulled back from the all-time high reached on Friday as the latest US actions risk an escalation of the US-China stand-off. Risk-off moods can be spotted on the equity and commodity markets today with cryptos also taking a hit. Decline on DE30 has been halted slightly above the support zone ranging around 13,880 pts and the index has managed to recover slightly since. Nevertheless, index continues to trade below the psychological 14,000 pts mark. The near-term resistance zone to watch should the recovery continue can be found at around 13,975 pts and is marked with previous price reactions as well as the lower limit of the recently broken Overbalance structure (yellow box). Breaking above it could put an index on track to test recent ATH. However, if the test fails to produce a break higher, bearish bias would be strengthened and DE30 could see more short-term weakness.

DAX members at 10:04 am GMT. Source: Bloomberg

Company News

According to a Financieele Dagblad report, Deutsche Telekom (DTE.DE) is exploring options for a sale of its subsidiary, T-Mobile Netherlands. German telecom company is reportedly looking for a private equity buyer and proceeds from the sale could range from €4-5 billion. Deutsche Telekom cannot approached two Dutch telecom companies - KPN and VodafoneZiggo - as sale would be likely blocked on the back of antitrust concerns.

Commerzbank (CBK.DE) will write-off €1.5 billion in goodwill in Q4 2020 as well as make an additional €630 reserve for bad loans. Move is related to the negative impact coronavirus pandemic has had on the bank.

Airbus (AIR.DE) delivered 566 airplanes in full-2020, marking a 34% drop from 2019 deliveries. However, the result comes slightly above Airbus internal target that was set at 560. A steep year-over-year drop is a result of the coronavirus pandemic that has significantly limited demand for air travel.

Commerzbank (CBK.DE) pulled back after a failed test of the resistance zone ranging around €5.85. However, share price is rebounding from the €5.50 swing area today and may be set to retest the aforementioned resistance in the later part of the week. Source: xStation5