DE30: Lufthansa remained to be the European top carrier in 2018

Summary:

• Luigi Di Maio presented details of citizen’s income on Monday

• DAX (DE30 on xStation5) surges heading towards 11300 pts handle

• Infineon (IFX.DE) moves significantly higher after beating earnings estimates

Trading during Asian hours remained to be lacklustre as stock markets in countries like China will remain shut for the whole week on the back of Lunar New Year holiday. Stocks in Europe launched Tuesday’s trading broadly higher. Austrian and UK equities led gains while shares in Belgium underperformed the most. Refiners and miners could be found among outperformers while real estate and food companies took the biggest step back in the first minutes of the European session.

DE30 (DAX futures underlying) finally managed to generate a bigger upward impulse. The index is surging today and is heading towards the higher end of the latest trading range near 11300 pts. However, it should be noted that the German benchmark pulled back twice from this area recently therefore nothing should be taken for granted. Source: xStation5

Giuseppe Conte, the Italian Prime Minister, and Luigi di Maio, the deputy PM and Five Star leader, presented details of the citizen’s income project on Monday in Rome. New measure will be aimed at helping citizens living “below the absolute poverty level”. Among recipients eligible for subsidy one can find pensioners and unemployed people. However, when it comes to the latter group financial help will be granted to them only if they are willing to take on job and they are already looking for one. It is estimated that as much as 5 million Italians could successfully apply for subsidy. According to di Maio, Italy will spend €8 billion each year on the idea. Lawmakers claim that this money will be later on injected back into the economy allowing in to prosper. On the other hand, businesses warn that citizen’s income of €780 per month may effectively discourage young people from seeking jobs and in turn making it harder for the economy to turn around. Applications for subsidy will start at the beginning of March and first funds will be paid out in April.

A range of the services PMI indices from the euro area countries was published in the morning. As these were revisions of initial readings no major deviations were expected. However, the Italian gauge disappointed as it was revised lower from 50.5 pts to 49.7 pts. Nevertheless, due to upward revisions in other countries services PMI for the whole bloc ticked higher from 50.8 pts to 51.2 pts.

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

• DAX (DE30): +0.87%

• FTSE 100 (UK100): +0.88%

• CAC40 (FRA40): +0.68%

• IBEX (SPA35): +0.64%

• FTSE MIB (ITA40): +0.73%

Infineon (IFX.DE) gains after strong earnings report. Wirecard (WDI.DE) continues to recover from the latest slump. Source: Bloomberg

Company News

Infineon Technologies (IFX.DE) published earnings report for the fourth quarter of 2018 today. The company managed to beat median revenue estimate of €1.915 billion by showing sales of €1.97 billion. EPS came in at €0.24 against expected €0.223. Executives of the tech stock also made some remarks on the upcoming financial year. The company expects 2019 revenue to reach lower end of forecasted range and to grow at the pace of 9% YoY under the assumption of stable EURUSD exchange rate of 1.15. Moreover, the company plans to lower investments in 2019 to around €1.5 billion from €1.6-1.7 billion forecasted range. However, it remains committed to building a new part of the production plan in Villach.

On the other side of the table we have Deutsche Bank (DBK.DE). Sentiment towards the lender was spoiled at the end of the previous week when the Bank published results showing 8th consecutive quarter of revenue declines. Company’s Chief Financial Officer, James von Moltke, said on Monday that the Bank may decide to slash bonuses in case revenue continues to fail to grow. Nevertheless, even such an announcement did little to ease concerns.

Lufthansa (LHA.DE) is also gaining today. Among reasons behind carriers good performance one can name report released by CAPA. According to the research, Lufthansa remained to be the European top airline by passenger staying ahead of Ryanair.