DE30 erases morning jump as virus concerns persist

• European stocks erase early jump, DAX trades lower on the day

• DE30 tests support zone at 13150 pts

• SAP (SAP.DE) declines after reporting Q4 earnings

Stocks in Europe launched today’s session with quite significant bullish price gaps. However, optimism did not last long as headlines on offshore transmission of coronavirus in Japan and travel suspension in Hong Kong pushed equities below the flat line. Markets have recovered slightly but still trade below yesterday’s closing prices. 

Source: xStation5

In spite of an early bounce, DE30 trades near the closing price of yesterday’s cash session. The index is testing support zone ranging above the 13150 pts handle, that acted as a lower limit of the consolidation range in the final 2 months of 2019. The zone saw numerous price reactions over the period therefore its significance should not be ignored. However, should the index break lower, the final resistance can be found near YTD lows at 12960 pts. This area is marked with the lower limit of the Overbalance structure (equal to the size of early-October 2019 correction). The nearest resistance zone to watch ranges below the 13300 pts handle and was tested in today’s pre-session trading.

DAX members at 10:32 am GMT. Source: Bloomberg

SAP (SAP.DE) released earnings report for Q4 2019. The German software company generated revenue of €8.05 billion, 8.3% YoY and in-line with forecasts. Net income of €2.19 billion was slightly higher than expected €2.05 billion. Cloud revenue reached €1.91 billion in the final quarter of 2019 and marked an increase of 35% YoY. SAP also updated forecasts for 2020. Company expects cloud revenue to fall in the €8.7-9 billion range while total revenue should reach €29.2-29.7 billion. SAP expects 2020 operating profit to fall in the €8.9-9.3 billion (€8.8-9.1 billion previously).

Airbus (AIR.DE) is trading higher today following news that the company has reached settlement with authorities. Settlement relates to long-running bribery investigations in the United Kingdom, the United States and France. It is said that settlement may cost Airbus as much as $3 billion.

Analyst actions

• Bayer (BAYN.DE) raised to “buy” at MainFirst. Price target set at €93

• Telefonica Deutschland (O2D.DE) raised to “overweight” at JPMorgan. Price target set at €3.60

• Deutsche Boerse (DB1.DE) reinstated at “equal-weight” at Barclays. Price target set at €150

• K+S (SDF.DE) maintains “hold” at Deutsche Bank. Price target reduced to €10 (€14 previously)

SAP (SAP.DE) moves lower following release of Q4 earnings report. The stock continues to pullback from an all-time high and nears the recent local low of €118. However, the first important support to watch can be found at €115 - mix of 200-session moving average (purple line) and price reactions from the first half of 2019. Source: xStation5