DE30: German auto stocks rally as risk-on returns

• Equities rally at the beginning of a new week

• DE30 tests 9,900 pts but fails

• Munich Re (MUV2.DE) said claims spiked in the first quarter

European stock markets opened with big bullish price gaps on Monday. Improvement in moods is ascribed to two factors. Firstly, the coronavirus pandemic looks to be more and more under control as case and death growth eases in some hot spots, like Italy or Spain. The second factor are reports saying that Russia and Saudi Arabia are getting closer to reaching a deal on output cuts. However, OPEC+ video meeting has been postponed from today to at least Thursday.

Source: xStation5

DE30 looks to be really unwilling to leave the 9,500-10,000 pts range. Every attempt to break one of the limits of the range is met with reversal. Index finished Friday's trading near the 9,500 pts mark but thanks to major improvement in moods, it has rallied above 9,900 pts on Monday morning. Following such a strong gain one should not be surprised by slight correction happening at the press time. The two major levels to watch are of course limits of the trading range - 9,500 (support) and 10,000 (resistance). Apart from that, the index may find some support in the 9,700 pts area or at 200-hour moving average (purple line, 9,590 pts) as price reactions occurred there in the past 2 weeks.

DAX members at 9:43 am BST. Source: Bloomberg

MTU Aero Engines (MTX.DE) is a top performing DAX member today. The company attempts to recover from recent declines, thanks to improvement in risk sentiment. The company has significant exposure to the aviation industry and is benefitting from slowing spread of the virus as it could mean that planes around the world will take-off sooner.

German automotive sector is also in the lead today. Continental (CON.DE) and carmakers - Daimler (DAI.DE), BMW (BMW.DE) and Volkswagen (VOW3.DE) - are enjoying gains ranging 5-7%. This should not come as a surprise as those stocks are vulnerable to changes in risk sentiment.  Meanwhile, BMW reported 20.6% YoY decline in deliveries in Q1 2020.

Munich Re (MUV2.RE) said that its property and casualty business experienced a big increase in claims in the first quarter. Claims are related to the coronavirus pandemic. The company decided to withdraw €2.8 billion profit guidance for the year and to suspend buybacks. Munich Re said that Q1 202- earnings are likely to drop to "low triple-digits" from €633 million in Q1 2019.

Shares of Munich Re (MUV2.RE) halted recovery after touching 38.2% Fibo level of February-March drop on March 25. The stock pulled back a bit later on and started to trade in a range with 23.6% Fibo (€174) serving as a floor. Share price struggles near the 50-hour moving average at press time (green line) and should it break above it, the upper limit of the range at €186 will be the next target. Source: xStation5