DE30 struggles near key resistance zone

• European investors launch new week in gloomy moods

• DE30 pulls back from the resistance zone ranging above 12450 pts

• Rheinmetall (RHM.DE) dips after Germany halts arms sales to Turkey

In spite of an upbeat moods during the Asian trading hours, the European stock markets opened lower on Monday. Spanish IBEX (SPA35) and Swiss SMI (SUI20) saw the biggest declines at the opening while Russian equities were the most resilient. Polish WIG20 (W20) opened flat following parliamentary elections.

Source: xStation5

Following an impressive surge on Friday, the German DE30 index is once again trading near the resistance zone ranging above the 12450 pts handle. This zone looks to be the key resistance as it has limited upward moves several times over the past year. Note that the index sits less than 2% below the YTD high at around 12650 pts. However, one should keep in mind that the United States are expected to levy retaliatory tariffs on EU goods in response to illegal Airbus subsidies. In case the situation develops in such a manner, pressure on the European indices may arise. Prices zones ranging near 12300 and 11900 pts handles should be the first support to watch in case things start to look ugly. The 12300 pts zone is additionally underpinned by the 100-session moving average (red line). The World Trade Organization authorized the US today to impose tariffs starting from Friday so the decision should be made shortly.

DAX members at 8:41 am BST. Source: Bloomberg

Volkswagen (VOW3.DE) denied Bloomberg’s report in an emailed statement. Bloomberg reported on Friday that the German carmaker is planning an overhaul of Volkswagen, Porsche and Audi brands while also mulling an IPO of Lamborghini. Volkswagen said it is not considering public offering, nor sale of Lamborghini. 

The German Foreign Minister, Heiko Maas, said that his country will not authorize any more weapons shipments to Turkey because of Turkish offensive in Syria. Turkey was the biggest importer of German arms and accounted for around a third of German arms exports in 2018. Rheinmetall (RHM.DE), the European defense company, is declining on the news on Monday.

According to the Financial Times report, Deutsche Bank (DBK.DE) is planning to sell a 7% stake in Turquoise, the equity trading platform. The platform is owned by the London Stock Exchange (LSE.UK). The move is a part of Deutsche Bank’s retreat from equities business. Apart from that, the German lender announced that it will end money transfers to banks in Malta at the end of this year and withdraw from the country.

Fauricia, the French car parts manufacturer, announced it will buy the remaining 50% stake in SAS joint venture from Continental (CON.DE). The stake is valued at €225 million. SAS joint venture is a key player in the complex interior module business. Continental opened higher on the news but gave back all the gains during the first hour of the session.

Rheinmetall (RHM.DE) extends a pullback from the YTD high to above 10%. The company may remain under pressure as lack of German arms sales to Turkey could significantly impact its business. In case the downward move continues there are two support zones to watch - the first ranges €103-104 while the second can be found near the 61.8% Fibo level of last year’s downward move (€100 area). Source: xStation5