DE30: Sluggish start of the European trading session

Summary:

• The German Finance Ministry blames Trump’s tax overhaul for trade surplus with the US

• DAX (DE30 on xStation5) retreats a notch below 12900 pts handle

• BMW (BMW.DE) raised suggested retail price for its cars in China

Asian investors launched new trading week in rather downbeat moods. The biggest declines were seen in Japan where Nikkei (JAP225) moved 0.74% lower. In Sydney S&P/ASX 200 (AUS200) declined 0.35% while in China Hang Seng (CHNComp) is trading 0.1% lower.

Major stock benchmarks from Western Europe drifted lower in the first minutes of trade. However, it should be noted that both Spanish and Italian equities are outperforming their region peers. All 19 sector subindices of the Euro Stoxx 600 index launched new week lower with biggest declines being seen among miners and food companies.

While the trade tensions between the United States and the European Union eased after Trump-Juncker meeting the German Finance Ministry made some interesting remarks concerning the origin of the dispute - trade balance. The German authorities stated that there are no particular German policies that could lead to increasing trade surplus with the US. On the other hand, he claimed that the US may be the one to blame actually. According to the Finance Ministry expansionary fiscal policy in the US (i.e. tax reform) led to the situation where US citizens and companies have more spare money to buy the German goods. Ministry concluded that both the German and the European current account balances result from the market-driven supply and demand decisions of individuals and corporate entities rather than from fiscal measures used in Germany or in the European Union.

Major European stock indices after the first hour of trade:

• DAX (DE30): -0.25%

• FTSE 100 (UK100): -0.35%

• CAC 40 (FRA40): -0.38%

• IBEX 35 (SPA35): +0.09%

• FTSE MIB (ITA40): +0.07%

DE30 might be trading within the short-term upward channel. Source: xStation5

DE30 continued an upward move at the end of the previous week. However, after climbing towards the 12880 pts the bulls have run out of stem and in turn we saw benchmark retreating 12800 pts handle. Following a lower opening the stock index rushed higher today. An upward price channel can be painted in respect to the local lows and highs and benchmark’s movement within it may be a base case scenario for now. In case the market makes a U-turn and the downward pressure will resurface the 12740 pts handle may serve as the first target for bulls.

Good condition of Deutsche Bank (DBK.DE) and Lufthansa (LHA.DE) is not enough to offset declines of most DAX components. Source: Bloomberg

Company News

Trump-Juncker meeting may have put the trade dispute between US and EU on hold but one should remember that the US-China trade war is still on the roll. BMW (BMW.DE) is another company after Daimler (DAI.DE) and Tesla (TSLA.US) that has decided to lift car prices in China. BMW announced that it will raise suggested retail prices for its X5 and X6 models produced in its US factory in South California. Around 70% of all the cars produced at BMW’s US plant is exported and around a fourth of that is exported to China. After the first hour of trade has moved 0.6% lower.