Summary:
- European stock markets start Wednesday’s trading positively despite noticeable declines in Asia and the US
- German industrial production for March surprised to the upside suggesting a decent rate of GDP growth in Q1
- Siemens (SIE.DE) shares rise 4% following upbeat earnings
In spite of the fact that we saw notable falls in the US and Asian equity markets, the beginning of trading in Europe has been quite promising. A solid reading of German industrial production could have helped buttress sentiment to some extent overshadowing concerns with regard to a threat of higher tariffs. Moreover, the trade data from China showed an improvement in imports in April suggesting that a set of measures Beijing has rolled out recently is beginning to support domestic demand. Before we start analyzing the German industrial production data, let us focus on a technical analysis.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile app
Although market sentiment seems to have improved in early trading in Europe, a technical outlook for the German DE30 does not look well. This is due to a breakdown we saw yesterday as the price plunged and came back to the upward channel. From this perspective one may suppose that bulls may currently struggle to climb above the upper end of the channel anew. If so, some profit-taking could occur and then bears may attempt to take control. Such a scenario has been sketched out by us lately and if we are right a pullback toward the lower end of the linear pattern could be on the cards. Source: xStation5
Now, let us come back to the German industrial production for March which could stand in part behind better performance of European equities. The release showed a 0.5% increase in monthly terms, easily beating the median estimate of a 0.5% decrease. On the other hand, a reading for February was revised down to 0.4% from 0.7%. However, the overall tone appears to be quite positive.
The German economy may have expanded at 0.4/0.5% QoQ during the first three months of the year. Source: Macrobond, XTB
Having at disposal of a set of industrial data for the first quarter we think that GDP may have grown around 0.4/0.5% in quarterly terms. If so, it would be quite solid value despite internal difficulties the German economy had to deal with over that period of time. Furthermore, let us also refer to the factory orders for March we were offered on Tuesday. It showed a noticeable increase in foreign orders (from the Euro Area) while domestic orders remained stagnant. It implies that we had a revival in foregin demand in March and if this trend keeps unfolding in the coming months, it could bode well for the overall improvement in European manufacturing.
Siemens (SIE.DE) shares are leading the gains this morning following solid earnings. Source: Bloomberg
Siemens shares are up 5% at the time of writing after the company showed positive earnings for its second fiscal quarter. Namely, adjusted EBIT from industrial business rose 7% in annual terms to 2.41 billion EUR, beating the median estimate of 2.23 billion EUR. Revenue was more or less in line of expectations and amounted to 20.9 billion EUR. At the same time the company confirmed its 2019 outlook seeing a profit margin from industrial business in a range between 11% and 12%. In turn, EPS is to be between 6.3 and 7 EUR.
