DE30: European equities push higher on Tuesday morning

Summary:

• Intense week for the European politics

• DAX (DE30 on xStation5) adds to previous gains and distances further from the 11500 pts handle

• Linde shareholders that did not agree to a tender offer in Linde-Praxair merger will get 188.24 euros per share

Following a mixed Asian session the European equity markets saw mixed opening on Tuesday. Gains were seen in Germany, Spain and Italy during the opening while shares in the UK and France underperformed. Apart from that, stocks in the Eastern Europe experienced pleasant start to today’s trading. Most of the sector subindices from the Euro Stoxx 600 index opened higher on Tuesday with utilities and telecoms leading gains. Car makers and chemical companies were among the biggest laggards.

DE30 managed to defend and distance from the support level at 11500 pts. The benchmark has been steadily pushing higher this week and in case this tendency is to prevail we may see a test of the resistance zone ranging 11870-11970 pts in the near term. However, it is worth to keep in mind that the 33-period moving average (green line) lies ahead of the aforementioned zone therefore some resistance may surface there too. Source: xStation5

When it comes to the European politics one may expect a busy week as numerous of issues mount to be discussed. The European countries were required to submit their budget proposals by midnight yesterday and now the documents will be reviewed by the European lawmakers. The focus will be dragged to the Italian budget draft after the country’s government reinforced its message that it will not back down on its planned deficit of 2.4%. Apart from that, EU foreign affairs ministers will meet today to discuss topics ranging from the Brexit, through triggering of the Article 7 for Hungary, to next EU multi-year budget. Investors should pay attention to remarks concerning Brexit as heads of the EU state will gather for a summit tomorrow with Brexit being one the main topics on the agenda. However, the EU and the UK did not agree on any draft proposals ahead of the summit therefore it is unlikely that it will result in a major breakthrough but reports saying that the UK PM Theresa May and the French President Emmanuel Macron struck conciliatory tone are promising.

Major European stock indices after the first hour of trade:

• DAX (DE30): +0.31%

• FTSE 100 (UK100): -0.24%

• CAC40 (FRA40): +0.22%

• IBEX (SPA35): +0.83%

• FTSE MIB (ITA40): +1.17%

Linde (LIN.DE) pulls back a little today after yesterday’s strong gains. Source: Bloomberg

Company News

The topic of Linde-Praxair merger is still vivid. The companies wait for the regulatory clearance from the US Free Trade Commission. FTC is said to be reviewing previous mergers that required divestiture and struggled to assess whether it will not be a problem in this case. However, while we may have to wait to see whether the clearance will be granted or not it is worth to mention yesterday’s announcement from Linde (LIN.DE). The company reported that each shareholder that did not agree to get a stake in the joint entity following the merger will get €188.24 per share. Around 8% of shares did not agree on tender offer. Note that shares being subject to tender offer trade at around €205 while those that do not around €183.

Handelsblatt reported that majority of the job cuts the Deutsche Boerse (DB1.DE) is planning will take place in Germany. According to the report 218 jobs will be cut in the Deutsche Boerse German branches with most of that in the IT and post-trade businesses. Let us recall that the company announced its plan to cut 350 jobs including 50 managerial positions. The rest of the pool is said to be cut in Luxembourg branch. The move is aimed at reducing costs and boosting profitability.

Linde (LIN.DE) share price managed to bounce higher off the upward trend line. The stock reached a long term price zone that may turn to be a hurdle for bulls. Note that shares that are not being subject to tender offer trade around €5 below the price offered by the company (€188.24). Source: xStation5