DE30: European stocks erase yesterday's downward momentum; TUI and Continental results!

• TUI (TUI.DE) and Continental (CON.DE) quarterly results.

• Italian government imposes limits on application of 40% windfall profits tax; banks make up for yesterday's losses

• Citi modifies its analyst coverage for European automotive companies

Today's trading session brings a marked improvement in sentiment on European markets. The D30 alone is currently gaining nearly 0.6%. Sentiment in the banking sector has improved significantly after the Italian government softened the tone of the 40% windfall profits tax by introducing a cap on the new provision. The macro calendar for today's session is relatively empty.

Sentiment in Europe improved markedly during Wednesday's trading session, with most individual sectors posting gains on a daily basis. Source: xStation 5

Futures based on the German DE30 are rebounding from the limits set by the 100-day exponential moving average (purple curve) and are currently gaining close to 0.6% on a daily basis.  Source: xStation 5

News:

Continental (CON.DE) shares are gaining close to 1.6% as analysts say a cut in sales forecasts was mostly factored into the consensus after the tyre and auto parts maker's profit forecast less than a month ago.

FORECAST FOR THE YEAR

Sales are expected to be between €41.5bn and €44.5bn, previously expected to be between €42bn and €45bn, analysts estimated €42.56bn.

 SECOND QUARTER RESULTS

• Sales revenue: EUR 10.43 billion, +10% y/y, estimated EUR 10.38 billion

• Automotive revenue €5.1 billion, +19% y/y, estimated €4.66 billion

• Tyre revenue: EUR 3.50 billion, +2.9% y/y, estimated EUR 3.54 billion

• ContiTech division revenue: EUR 1.70 billion, +6.3% y/y, estimated EUR 1.7 billion

• Adjusted Ebit: EUR 497.2 million, +24% y/y, estimated EUR 581.3 million

• Adjusted EBIT margin 4.8% vs. 4.3% y/y, estimated 5.54%

Comments on results

• Continental expects higher material costs, wages and energy and logistics prices in fiscal 2023, which the company expects to impact earnings by around €1.4bn (previous: €1.7bn).

• Production of passenger cars and light commercial vehicles is expected to increase by 3-5% this year (previously: 2-4%). 

• In the global tyre replacement market, sales growth is expected to be between the range (-2% to 0%), previously +1% to 3%. 

Company share price chart, W1 interval. Source: xStation 5

TUI (TUI.DE) shares are losing 2.3% in today's session after the tour operator reported that the recent fires will generate an estimated loss of €25 million (UBS previously estimated it could be as much as €50 million), and that the sheer uncertainty surrounding the natural tragedy will only affect tour bookings. 

Dividends "remain a distant prospect" given that the company "still has a lot of debt", writes investment director Russ Mould in an emailed commentary.

THIRD QUARTER RESULTS

 Ebit: €169.4m vs. loss of €27m y-o-y, estimated €145m

Revenues: €5.29bn, +19% y/y, estimated €4.94bn

TUI expects bookings for summer 2023 to be close to summer 2019 booking levels (bookings +6% y/y; average prices +7% y/y). 

Company share price chart, D1 interval. Source: xStation 5

Citi is modifying its recommendations for representatives of European car manufacturers. The shares of Renault (RNO.FR) and Volkswagen (VOW1.DE) have been upgraded to a 'buy' rating, while on the other hand BMW shares have been downgraded to 'sell'. The shares of Porsche (P911.DE), Mercedes-Benz (MBG.DE) and Stellantis (STLAM.IT) were rated "neutral". 

The largest percentage changes in the individual companies of the DAX index. Source: Bloomberg Finance L.P.

Information from individual companies in the DAX index. Source: Bloomberg Finance L.P.