DE30: German Ifo index plunges to record lows

• European stock market pullback

• DE30 attempts to break above 10,400 pts

• Lufthansa (LHA.DE) may run out of cash within weeks

Stocks in Europe are pulling back today following a set of downbeat reports. Namely, Gilead's drug reportedly flopped in the first phase of trials while European leaders failed to reach consensus on a recovery fund. Meanwhile. Ifo indices plunged to a record low. Moods are sour but indices made an attempt to recover over the past hour.

Ifo business confidence plunges to record low

The Ifo Institute released a set of indices for German economy today. Business confidence index plunged from 86.1 to 74.3 pts in April (exp. 79.3 pts). This is a new record low as the previous one reached in the financial crisis was near 80 pts. Expectations sub-index dropped from 79.7 to 69.4 pts (exp. 75 pts). Current assessment sub-index dropped 93 to 79.5 pts (exp. 80.5 pts). To make things worse, Klaus Wohlrabe, Ifo economist, said that it is unlikely that we will see a V-shaped recovery. In his opinion the German economy is going through the hardest time since reunification and that any signs of economic rebound are unlikely to surface before mid-year.

Source: xStation5

DE30 continues to trade within a range limited by 38.2 and 50% Fibo levels of the February-March drop. However, as one can see on the chart above, the German index is actually painting lower highs, hinting that the lower limit may remain the centre of action. The index attempts to recover at press time but has run into resistance at 33-period EMA (green line, H4 interval) in the 10,400 pts area. This moving average was quite good at limiting upward moves of the index yesterday therefore bulls should keep on guard. The lower limit of the range is a part of the big support zone (10,000-10,200 pts). Breaking below it could lead to a bigger drop and a test of the next big support at 23.6% Fibo (9,500 pts area).

DAX members at 10:04 am BST. Source: Bloomberg

According to a Bloomberg report, Lufthansa (LHA.DE) may run out of cash within a few weeks. Company tries to secure help from several governments as lack of state aid may cause Lufthansa's liquidity to drop significantly. Germany, Switzerland, Austria and Belgium are among countries the company is speaking to. €10 billion rescue package is being discussed and it includes guarantees, loans and forms of equity investment. Lufthansa said it estimates it had €1.2 billion EBIT loss in Q1 2020.

S&P announced new ratings for German lenders - Commerzbank (CBK.DE) and Deutsche Bank (DBK.DE). Credit agency cut rating for Commerzbank to BBB+ with an outlook negative. Deutsche Bank remained at BBB+ but its outlook has been changed to negative. S&P said that it expects earnings and assets quality to deteriorate significantly through end-2020 and into 2021.

Linde (LIN.DE) reached an agreement Indian Oil Corp, the largest refiner in India. Linde will supply the Indian company with oxygen and nitrogen to a refinery in east India. One of Linde's subsidiaries will build an air separation unit near the refinery and completion of the unit is expected in October 2021. Financial details of the deal were not disclosed.

Linde (LIN.DE) has halted recovery recently. The stock is trading sideways between €165 and €174. Note that the stock often swings near the midpoint of the range that is additionally being marked by the 50% Fibo retracement and 50-hour moving average (green line). Having said that, closing the daily candlestick above it would encourage another test of the upper limit of the range. Source: xStation5