DE30: Equities gain on upward PMI revisions

• European equities with small gains

• DE30 tests upper limit of trading range

• Siemens Healthineers (SHL.DE) acquires US medical company

Bulls dominate at the beginning of a new week on the European stock exchanges. DAX is the leader among western indices as it gains 1%. Other indices are posting moderate gains as well. However, equities from the UK, Spain and Italy are laggards. Sentiment received a small boost after a set of final manufacturing PMI indices for July was released and in most cases upward revision were made.

Source: xStation5

DE30 continues to trade within a narrow 12,300-12,500 pts range. The index made a false break below the lower limit of the range on Friday but quickly climbed back above it. At this point, it looks like the index will continue to trade within this range until a catalyst for a bigger move surfaces. ISM manufacturing print at 3:00 pm BST today could be such a catalyst. Should a break lower occur, 12,150 pts swing level could be the next target for sellers. On the other hand, breaking above the 50-hour moving average (green line) that coincides with the upper limit of the range would pave the way for a test of 12,650 pts area. Traders should also keep in mind that any China-US news or hints on progress of US stimulus talks could trigger abrupt moves.

DAX members at 10:22 am BST. Source: Bloomberg

Siemens Healthineers (SHL.DE) agreed to take over Varian Medical Systems, the US company focused on radiation oncology treatment. Siemens Healthineers offered $177.5 per share of Varian, marking a 24% premium over Friday's closing price. Total deal value is $16.4 and it will be financed with debt and equity. This is the biggest medical sector acquisition this year.

MTU Aero Engines (MTX.DE) is one of the worst performing DAX members today. The German industrial company reported a Q2 net income of just €13.2 million (€102.8 million last year). EPS dropped from €1.92 to €0.20 while revenue came in at €776.1 million against €1.11 billion last year. Adjusted EBIT margin declined from 16% to 5.5%. MTU expects full-year revenue in €4.0-4.4 billion range (€4.6 billion in 2019).

European banks, including Commerzbank (CBK.DE) and Deutsche Bank (DBK.DE), are on watch today following lacklustre earnings release from Societe Generale. French lender booked an unexpected €1.2 billion loss in Q2 2020 after reporting a big surge in coronavirus-related costs. Gains in fixed-income trading were offset by poor performance of equities desk. Societe General set aside €1.28 billion for bad loan losses, up from €820 million in Q1 2020.

Share price of Siemens Healthineers (SHL.DE) took a steep dive today (orange circle) after the company announced major acquisition over the weekend. Stock trades around 5% lower and is testing a long-term price zone ranging around €41.65. Source: xStation5