DE30 pulls back from 14,575 pts resistance

• European stock markets indices trade lower

• DE30 pulls back after failed attempt of breaking above 14,575 pts resistance

• Lanxess rallies after M&A announcement

European stock market indices trade lower on Tuesday, following a mixed Asian session. A pick-up in oil prices resulting from the EU reaching a consensus on Russian oil embargo as well as continued pick-up in inflation is denting the outlook for equities. European CPI inflation accelerated from 7.4 to 8.1% YoY while the market expected an acceleration to 7.7% YoY. This further strengthens the case for ECB to begin rate hikes by mid-year.

Source: xStation5

While DE30 managed to break above the neckline of an inverse head and shoulders pattern at the end of the previous week, a 14,575 pts resistance zone has managed to halt advance later on. Index attempted to break above this zone yesterday but failed and a pullback was launched today. In case a pullback deepens, the first support zone to watch can be found at the neckline of a aforementioned pattern in the 14,240 pts area. In case bulls fail to hold this support, a downward move may deepen towards a key 14,000 pts support area. Apart from being a psychological support, this area is also marked with a 38.2% retracement and the lower limit of a local market geometry. On the other hand, should bulls regain control and manage to push DE30 above the 14,575 pts resistance, continuation of the upward move will be the base case scenario.

Company News

Lanxess (LXS.DE) is the best performing MDAX member today, gaining 10%. Stock jumped following an announcement of a major acquisition. Lanxess will buy the engineering materials business from Royal DSM for around €3.7 billion. Deal will be financed by Advent, a private equity group. Following the acquisition, Lanxess will transfer its high-performance engineering business to a joint venture with Advent, in which it will hold a 40% stake. 

Adler Group (ADJ.DE), a troubled German real estate company, released Q1 earnings report yesterday after the close of the session. Company reported an 8% YoY drop in funds from operations, to €29.7 million. This corresponds to FFO per share of €0.25, down from €0.28 a year ago. EBITDA was 10% YoY lower at €48.6 million while rental income dropped 16% YoY to €71.1 million. The company, however, decided to maintain its full-year forecast and still expects net rental income to reach €203-212 million and FFO to reach €73-76 million.

Analysts' actions

• Volkswagen (VOW1.DE) was upgraded to "buy" at HSBC. Price target set at €234.00

• Siemens Healthineers (SHL.DE) was upgraded to "overweight" at Barclays. Price target set at €67.00

• Aurubis was rated "buy" at Bankhaus Metzler. Price target set at €116.00

Share price of Lanxess (LXS.DE) leaped higher at the start of today's session. News of a major M&A provided fuel for an over-10% jump. However, the advance stalled following a failed attempt of breaking above the resistance zone in the €43 area. This resistance zone is marked with a 38.2% retracement of this year's downward move as well as the upper limit of the Overbalance structure (from the downward move started in March 2021. Breaking above would, at least in theory, signal a trend reversal and a potential for a bigger upward move. Source: xStation5