DE30: European equities recover from morning slump

• EC expected to unveil details of European Green Deal this week

• DE30 recovers from morning slump

• RWE (RWE.DE) and Beiersdorf (BEI.DE) trade under pressure after downgrades

Trading on the European stock exchanges at the beginning of Tuesday’s session was quite volatile. DAX plunged around 80 points before it started to recover. The German trades slightly above the flat line at press time. Majority of other indices from the region bounced above yesterday’s closing prices as well.

EU to unveil financial details of green shift

European Union member countries agreed on a transformation deal that would slash net carbon dioxide emissions to zero by 2050. European Commission is expected to unveil financial details of the transformation this week. Some reports say that presentation will take place today. It is known that investments worth €1 trillion will be conducted over 10 years to support the project and that there will be a fund set up to help the most coal-dependent countries transform. However, details on specific allocation of funds were not revealed yet and it is hoped that they will be today. It is expected that there will be a significant spending bias towards countries with the biggest dependency on coal and lignite. The document is also expected to show sources of financing. Four countries - Germany, Italy, France and Poland - accounted for over a half of total EU greenhouse gas emissions in 2017. 

Source: xStation5

DE30 launched a downward move after reaching the highest level in 2 years. The index took a major dive at the beginning of today’s cash session and tested support at 13375 pts, that is marked with previous price reactions. However, the drop was completely erased by the end of the first trading hour and now the index is posting decent gain. The resistance to watch during today’s session can be found in 13480 pts area, where downward sloping trendline coincides with the 50-session moving average (green line). The first major support to watch can be found at 13300 pts while the final key support lies at the lower limit of the Overbalance structure (12860 pts). EU-US trade talks in Washington are a risk event to watch this week.

DAX members at 9:44 am GMT. Source: Bloomberg

RWE (RWE.DE) can be found among DAX top laggards today. The company is trading lower following a downgrade it has received at RBC. Analysts slashed rating for the stock from “top pick” to “outperform” and lowered price target to €30. RBC said that RWE remains its prefered stock in the sector but recent strength caused the company to look fully valued. The Bank remains positive on the company due to its renewables portfolio growth and pending visibility on lignite.

Evonik Industries (EVK.DE), the German specialty chemicals company, confirmed full-year outlook for 2019. Christian Kullmann, CEO of Evonik, said that despite weakness in the global economy, he expects company’s adjusted EBITDA to come in at least at the previous year’s level. Adjusted Ebitda stood at €2.15 billion in 2018.

According to the Sueddeutsche Zeitung, as many as 10000 jobs may be at risk in case Metro (B4B.DE) goes forward with a plan of selling its hypermarket chain to German-Russian consortium. The company decided to sell hypermarket chain as it struggled to show profits.

Analyst actions

• Beiersdorf (BEI.DE) was cut from “hold” to “sell” at Societe Generale. Price target was set at €99

• E.ON (EOAN.DE) was rated “buy” at Citi. Price target was set at €9.80

Metro (B4B.DE) is slipping lower following a failed attempt of breaking above the 50-, 100- and 200-session moving average (green, red and purple lines respectively). The stock managed to dip below the price zone marked by 38.2% Fibo level of the upward move started in mid-2018. Currently, share price tests 50% Fibo level (€13.20), that has stopped declines in the previous week. Source: xStation5