Summary:
- European stocks kick off Tuesday’s trading slightly lower ahead of another round of trade talks in Washington
- DAX (DE30) keeps moving subtly below its important technical resistance
- Wirecard (WDI.DE) and HeidelbergCement (HEI.DE) on the rise leading the gains in the German index
The beginning of Tuesday’s trading has been quite mild with major European stock markets struggling to make larger gains. After the first 30 minutes the German DAX is the best performing market rising as much as 0.4%, while other markets are treading water. Note that the German stock market was weighed down on Monday following a threat of auto tariffs imposed by the United States. Let’s recall that the report prepared by the Department of Commerce and sent to the White House recommended a rise of tariff to 25% from 2% on vehicles and auto parts imported from the EU, according to AFP revelations. Donald Trump will take a decision whether or not act on these recommendations within 90 days. Therefore, one may expect that shares of German automakers could come under downward pressure until the final decision is taken. As a result, the German indes keeps struggling to make larger increases during morning’s trading. The price keeps hovering just below the important technical resistance at around 11360 points.
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The DE30 was unable to move through the crucial resistance line yesterday but it could attempt to do so today. Either way, having unfavourable circumstances in the background one may expect that the price will ultimately come back to falls. It needs to be also added that market volatility is relatively low, such conclusions can be drawn from the VIX index performance, while investors on the SP500 expect the index to rise over the upcoming 30 days with the put/call ratio moving close to its lows around 0.5. Source: xStation5
Wirecard (WDI.DE) and HeidelbergCement (HEI.DE) are pulling the German index higher. Source: Bloomberg
Looking into the DE30 breakdown one may spot that two stocks are pulling the index higher - Wirecard (WDI.DE) and HeidelbergCement (HEI.DE). On the other hand, automotive industry stocks keep slightly underperforming. What is standing behind such notable rises in the two stocks mentioned above? As far as Wirecard is concerned the price keeps soaring following the yesterday’s decision of the German regulator to ban short selling on the stock. Take a look at the chart below to see a tremendous increase of percent of shares outstanding being sold short. It is worth adding that it was the first time the regulator has banned short selling on a single stock. In response to this decision the stock surged 15% yesterday and this move keeps unfolding today.
Investors rushed to sell short Wirecard in response to a series of FT articles. Source: Bloomberg
The second stock of note this morning is HeidelbergCement (HEI.DE) being up more than 4% at the time of writing. The firm showed its Q4 revenue rising 10.3% to 7.4 billion EUR while profit before depreciation fell 5% from last year to 847 million EUR. In its report the company said that 2018 sale volumes are revenues were at new record levels. In describing the outlook for 2019 the German company expects a worldwide increase in cement demand and it plans to focus on accelerated portfolio optimization, efficiency programs and increasing cash flow. According to a Bankhaus Lampe analyst the stock valuation is “significantly below” its US peers, and this could serve as an argument for share buybacks. The price target set by the analyst is 80 EUR per share with the spot at 65.3 EUR.
