DE30 jumps above 13,700 pts

• European markets trade higher

• DAX jumps above resistance at 13,700 pts

• Cyclicals lead in Europe, tech stocks pull back

European stocks are trading higher in spite of coronavirus restrictions being either extended or tightened in different countries, like for example Germany. Expectations of Democrat win in Georgia Senate run-off that would give them control over Senate is driving rotation towards cyclical stocks

German authorities decided to extend coronavirus restrictions until the end of January. Moreover, the country has also decided to impose additional limitations. Citizens in areas with a high number of cases will be allowed to make non-essential travels no further than 15 kilometers from home. Employers were urged to implement work-from-home schemes while private gatherings can now include only one person from another household (children no longer exempt from the limit). Authorities will meet on January 25 to decide on next steps.

Source: xStation5

DE30 dropped at the start of the European cash session but has found support at 200-hour moving average (purple line) in the 13,600 pts area. Index started to regain ground and has managed to jump above the resistance zone at 13,700 pts. The index is testing yesterday's high at 13,758 pts at press time. US jobs data at 1:15 pm GMT could be a trigger for a bigger move. Should we see a bigger break above the aforementioned 13,758 pts swing level, the index may look towards recent all-time high in the 13,900 pts area. Democrats are seen winning the US Senate run-off in Georgia and such an outcome will favor cyclical stocks due to rising chances for bigger infrastructure spending. As cyclical stocks make up a big share of the DAX index, it could also be beneficial for the German benchmark.

Company News

Rising odds of Democrats taking control over the Senate in the aftermath of run-off elections in Georgia are boosting chances of bigger stimulus and infrastructure spending while at the same time risk of antitrust actions against Big Tech companies is increasing. Situation is triggering a rotation towards cyclical stocks and out of tech in Europe. In turn, banks, construction companies and miners can be found among top performing stocks today.

A big increase in trading activity in shares of Wirecard (WDI.DE) can be spotted at the beginning of 2021. Stock is trading around 250% higher year-to-date with yesterday's trading volume exceeding 15-day average fivefold. No news surfaced that could justify such a price jump and it looks to be a purely speculative play. Traders should keep in mind that Wirecard is a collapsed company that is currently being sold in pieces to other entities as there looks to be no way for the company to continue operating. Having said that, there is a high chance of a price dump following such a big jump.

Analyst actions

• Siemens Healthineers (SHL.DE) upgraded to "buy" at Stifel. Price target set at €51

• Hannover Re (HNR1.DE) upgraded to "buy" at Deutsche Bank. Price target unchanged at €160

• ElringKlinger (ZIL2.DE) downgraded to "sell" at MM Warburg. Price target set at €12.50

• Munich Re (MUV2.DE) confirmed at "hold" at Deutsche Bank. Price target boosted to €240

DAX members at 10:25 am GMT. Source: Bloomberg