DE30: European stocks give up early gains

• European stocks opened higher and pulled back later on

• DE30 tests zone at 13000 pts

• RWE to develop floating wind turbines with Spanish Saitec

Stocks in Europe opened higher today but quickly swung back below the flatline. Polish and Russian equities lag the most while Dutch stocks seem to be the most resilient. However, Dutch AEX (NED25) index still trades 0.3% lower. Media and real estate companies gain the most while carmakers and banks are top laggards.

German companies continue to cut investments

The Federal Statistics Office released a detailed report on the German GDP in Q4 2019. Let us recall that the German economy stagnated in the final quarter of 2019 (0.0% QoQ). Details of the report showed that capital investment had a negative 0.1% impact while equipment investments had a negative 2% impact on economic growth figure. This means that German company’s have cut investments for the third quarter in a row. As private consumption had no impact on the figure (0.0%), the German economy looks to be ill-prepared to receive a hit from the coronavirus outbreak in Q1 2020. It cannot be ruled out that German GDP will shrink in the first three months of the year.

Source: xStation5

The German DAX (DE30) plummeted yesterday and broke below the lower limit of the Overbalance structure. A recovery occurred overnight and the index launched a cash session near the 13150 pts handle. However, the index started to pull back shortly after and has once again broken below the Overbalance structure. Should DE30 break below 127.2% of the prior correction range (12860 pts), the whole Overbalance setup would be invalidated and trend would shift to downward. Nevertheless, in order to do this, bears have to break below the zone at 13000 pts, that has been limiting downward moves for the past 3 months. On the other hand, should a rebound occur, nearest resistance can be found at the aforementioned 13150 pts.

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

RWE (RWE.DE) announced yesterday that it is working with Spanish company, Saitec, to develop floating wind farm platforms. Development of such floating wind turbines would allow to harness wind power further away from the shore, where depths are greater.

Leoni (LEO.DE), the German cable manufacturer, is the worst performing stock in SDAX index today. The company released preliminary full-year results. Sales of €4.8 billion were slightly weaker than expected €4.89 billion. The company also showed a full-year adjusted EBIT loss of around €66 million. However, the main reason behind today’s drop is provision for expected losses of €80 million in Q4 2019. It is another such provision made by the company.

Analyst actions

• Fraport (FRA.DE) cut to “reduce” at Commerzbank. Price target set at €59

• Rheinmetall (RHM.DE) raised to “buy” at MainFirst. Price target set at €107

Rheinmetall (RHM.DE) fails to benefit from an upgrade at MainFirst. The German company is trading lower today and makes another test of the support zone at €87. Should a rebound or break lower occur, the nearest level to watch can be found at €95 (resistance) and €80 (support). Source: xStation5