DE30: Stocks move lower as China retaliates against US levies

Summary:

• European stock markets open higher, but move lower afterwards following the China’s announcement
• DAX (DE30) tests its outstandingly important resistance, then falls back
• Thyssenkrupp (TKA.DE) gains in the aftermath of the CEO’s ousting

European stock markets have opened higher, but those gains have not lasted too long. Moods have deteriorated following the Chinese announcement with regard to tariffs. Namely, according to the China’s foreign ministry levies on goods imported from the US have been implemented, but not details have been given so far. It was highly anticipated, and earlier gains seen across Chines stocks, driven mostly by hopes that China would back away from retaliatory tariffs, looked fragile. Therefore, one may expect that a tit-for-tat approach will be continued (now the baton has been passed to the US again - $16 billion new duties are already in the pipeline to be released within the oncoming two weeks as per Trump’s remarks) aggravating stocks’ performance all around the world with particular emphasis on those stocks having a meaningful sales exposure to the China’s market.

The DE30 has failed to retain its gains in the vicinity of 12550 points when the Chinese tariffs announcement hit the wires. Source: xStation5

Looking at the chart above one may notice that the price has fallen back from its resistance placed at 12550 points testing its local support again. Nevertheless, one cannot miss that on Thursday the DE30 got back toward its crucial support area in the neighbourhood of 12380 points - the scenario we had been writing about in the morning. It’s obvious that optimism shared prior to the China’s report was relied on the weak foundation, hence a pullback should not be particularly surprising. On the other hand, a resistance line at 12550 points could prove to be a really hard nut to crack for buyers given its importance in the past. Do not forget that it’s being underpinned by a 38.2% retracement of the latest leg lower which could constitute an additional hurdle for bulls (look, a 23.6% retracement was also tested several times until a major breakout occurred.

Thyssenkrupp (TKA.DE) together with Deutsche Bank (DBK.DE) are the best performing stocks in the morning. Source: Bloomberg

In the wake of the Chinese announcement local shares pared some of their gains made on the back of China’s ’silence’. As a result, the Shanghai Composite closed just 0.5% while the Hang Seng (CHNComp) made a modest 0.14% gain. Stocks in Europe have slightly recovered after a quick decline which came immediately after the Chinese foreign ministry had announced its decision. As for 10:20 am BST the DE30 is rising 0.05%, the French CAC40 (FRA40) is adding 0.2%, the EuroStoxx50 (EU50) is moving up 0.1% while the FTSE100 (UK100) is trading relatively flat.

As we have already pointed out, Thyssenkrupp (TKA.DE) is among the best performing stocks within the whole German market following the CEO ousting. Heinrich Hiesinger resigned after seven years at the helm of one of Germany’s top industrial giants in the aftermath of shareholders’ anger over due to the company’s declining revenue and share price. In turn, an impressive increase in the Deutsche Bank’s shares stems from the surprising announcement that JP Morgan is to consider a possible investment along with Industrial and Commercial Bank of China. Notice that the German lender has declined to comment.