Summary:
- Germany to start 5G auctions this week, 4 companies among bidders
- DAX (DE30 on xStation5) at highest levels since mid-October 2018
- Deutsche Bank (DBK.DE) and Commerzbank (CBK.DE) launched formal tie-up talks
Upbeat moods seen on the global stock markets prior to the weekend extended into a new week. Australian and Japanese indices pushed moderately higher while equities in China surged being the best among region peers. However, most of the stock market benchmarks from the Western Europe launched Monday’s trading in close vicinity of Friday’s closing prices. Stocks from Poland outperformed in the first minutes of trade while shares from Belgium lagged the most. Miners led gains while carmakers and builders underperformed.
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DE30 broke above the resistance level at 11680 pts handle at the end of the previous week. In turn, the German benchmark is trading at the highest levels since mid-October. Further recovery may be put under question as the index is approaching a relevant resistance zone rangin 11800-11900 pts. This area is additionally strengthened by the 200-session moving average (purple line) that can be found near its lower limit at press time. Source: xStation5
Germany is trying to catch up with the rest of developed world when it comes wireless technology. Europe’s biggest economy will hold auctions this week during which it will offer frequencies for the development of 5G technology. It should be noted that Germany ranked 43 in February when it comes to wireless Internet speed, trailing countries like Lebanon or Romania. Moreover, what one may find even more surprising is the fact that there are still places on the German countryside where Internet is unavailable. Upgrading wireless infrastructure and removing those “dead zones” from the German map was one of goals of the Chancellor Angela Merkel. Deutsche Telekom (DTE.DE), Telefonica (O2D.DE), Vodafone (VOD.UK) and United Internet are among operators invited to the auctions and will bid for a total of 41 blocks of frequencies. Note that speeding up efforts in this field may be crucial for rebound of the German telecom sector as Verizon (VZ.US) and AT&T (T.US) already started offering 5G services in the United States. A thing of concern, however, is that 5G auctions held in the United Kingdom and Italy caused telecoms to overpay for frequencies and caused whole project to be seen as less profitable than previously thought.
Major European stock market indices after the first hour of trade:
- DAX (DE30): +0.09%
- FTSE 100 (UK100): +0.62%
- CAC40 (FRA40): +0.16%
- IBEX (SPA35): +0.53%
- FTSE MIB (ITA40): +0.69%
Deutsche Bank (DBK.DE) surges on merger talks confirmation. Source: Bloomberg
Company News
What was rumoured and reported unofficially last week was confirmed past weekend. Deutsche Bank (DBK.DE) and Commerzbank (CBK.DE) will start formal talks over the potential merger. Germany holds noticeable stake at Commerzbank and is one of the most vivid advocates of the combination. Having such an ally is more than desired as the government may try to ease public outrage that is likely to result from significant job cuts. One can expect more media coverage on the two banks in the nearby future. Both stocks are surging today.
Merger of the Deutsche Bank and Commerzbank is an opportunity for other companies as well. There is a rumour that Deutsche Bank may need to divest stake in its asset management division, DWS Group, in order to finance a tie-up. Allianz (ALV.DE) already expressed interest in buying the asset manager. In the aftermath of a purchase Allianz would jump from #7 to #5 spot on the list of world’s biggest asset managers by AUM. However, the Deutsche Bank stayed reluctant towards selling DWS group earlier and may hold this line unless forced to do so.
The Deutsche Post (DPW.DE) can be found among DAX leaders today. The company was upgraded at Jefferies, the US investment bank. The German logistics firm was upgraded from “hold” to “buy”. Analysts reasoned their decision with a rebound in earnings and good outlook for 2019.
Allianz (ALV.DE) added almost 20% during the past 3 months. The company is trading at 14-month high and may be set to test peaks from late-2017 and early-2018 around €204-206 in case good sentiment prevails. However, the stock is still quoted way below its ATH from early-2000 (around €420). Source: xStation5
