DE30: Henkel sinks after slashing earnings forecast

Summary:

• UK Labour Party reluctant to hold talks with May unless she rules out no-deal scenario

• DAX (DE30 on xStation5) pulls back after reaching downward sloping trendline

• LG will develop motion-detection system for Daimler (DAI.DE)

Mixed performance of the European assets was spotted at the beginning of the new week. Blue chips indices from the Old Continent opened generally lower but a few exceptions could be spotted. Namely, stocks in Spain and Russia were somewhat resistant to the widespread downward pressure. Nevertheless, scale of gains was minor therefore it is possible that those shares will turn lower later on as well. Real estate companies were the only ones to post minor gains at the beginning of the session while telecoms and retailers underperformed the most.

The German DE30 (DAX futures underlying) managed to climb above the 11200 pts mark on Friday where the downward sloping trendline can be found. Bears’ resistance fend off the bulls and pushed the benchmark lower. In case the downward move is to extend one may expect a test of the recently broken price zone ranging 10970-11040 pts. Source: xStation5

The UK Prime Minister is about to outline the Brexit “plan B” today. Nevertheless, as Theresa May had little time to make any major shifts to the agreement it is likely that she will suffer another defeat during the vote scheduled for 29 January. One solution to the impasse would be to hold cross-party talks and attempt to forge an agreement that looks convincing to everyone. However, the main opposition party - Labour - led by Jeremy Corbyn seems to be an obstacle. While Corbyn said he is open for talks, he also reiterated his previous message that in order for this to happen Theresa May would need to completely rule out no-deal scenario. Theresa May ruled out such option earlier saying she cannot make such promises. Meanwhile, Labour party Brexit spokesman, Keir Starmer, said that the second referendum or close post-Brexit ties with the EU are the only viable options for the United Kingdom. He also said that he would personally would back the idea of extending Article 50 if it was the only way to avoid no-deal Brexit. Nevertheless, given the scale of defeat last week it seems unlikely that any agreement would make it through the divided parliament right now.

Major European stock market indices after the first hour and a half of trade:

• DAX (DE30): -0.42%

• FTSE 100 (UK100): +0.07%

• CAC40 (FRA40): -0.19%

• IBEX (SPA35): -0.19%

• FTSE MIB (ITA40): -0.66%

Henkel (HEN3.DE) underperforms after lowering EPS estimate. Wirecard (WDI.DE) leads gains after partnering with Chinese company. Source: Bloomberg

Company News

Henkel (HEN3.DE) is the worst performing DAX component on Monday morning. The company announced that its 2019 earnings will likely be smaller than previously expected. Henkel said that EPS will slide by a “mid-single digit percentage” at constant FX basis. Apart from that, the organic sales growth should be somewhere between 2% and 4% while Ebit margin should reach 16-17%.

LG Electronics, the South Korean electronics company, partnered with Daimler (DAI.DE). The cooperation will feature development of motion-detection systems for Mercedes-Benz cars. Once developed the system will allow driver to adjust music volume or shift gears with a single hand gesture. This will not be the first device developed by the Korean company for Mercedes-Benz cars, earlier LG constructed the camera that can recognize whether the driver is drowsy or not.

Wirecard (WDI.DE) leads DAX gains today. The company announced that it has began issuing cross-currency Visa cards for United Money. United Money is one of China’s biggest currency exchange companies with offices in the business districts of major cities as well as airports.

Deutsche Telekom (DTE.DE) can be found among the worst performing DAX members today. The company was downgraded at Berenberg from “hold” to “sell”. The one-year price target was cut from €14 to €13.20.