DE30: Bayer and BASF limit DAX advance

• European indices start week higher but pullback after session launch

• DE30 tests the upper limit of the long-term upward channel

• Bayer (BAYN.DE) and BASF (BAS.DE) drop as US court sides with plaintiff

European stock market launched a new week higher as they benefited from the upbeat moods spotted on Chinese stock exchanges today. However, the scale of gains is much smaller as European indices moved lower after the session opened. Equities from Portugal and Hungary are top performers while shares from France are the biggest laggards. Automotive stocks can be found in the lead today.

Source: xStation5

The German DE30 managed to break above previous all-time high at the start of today’s session. The index painted a fresh intraday all-time high at 13796 pts. However, the index started  to move lower after the opening of today’s session and a look at a chart on weekly interval may offer an explanation. The German DAX is trading in an upward channel since the turn of 2018 and 2019 and has reached the upper limit of the channel at the end of the previous week. Moreover, the area near 13800 pts handle is being marked with the 127.2% exterior retracement of the correction from the second half of January 2020. Should the index break higher and distance away from the channel, bulls’ attention will shift to the nearest resistance - 14040 pts handle marked by 161.8% exterior retracement.

DAX members at 10:05 am GMT. Source: Bloomberg

Stocks from the automotive sector are trading higher today. Sentiment improved after China’s President, Xi Jinping, encouraged purchases of cars. President Xi signalled that areas with auto purchases limits to soften restrictions in order to stimulate Chinese car market.

Bayer (BAYN.DE) is facing numerous lawsuits over Roundup herbicide manufactured by its recent acquisition - Monsanto. The deal is already being labelled as one of the worst in history of corporate actions but may become even worse as another herbicide from Monsanto - Dicamba - is being investigated in the United States. Court in Missouri awarded $265 million in punitive damages to a farmer who claims that Dicamba has damaged his peach orchards. BASF (BASUS) is also involved in the case. Both companies trade lower on the news.

Wirecard (WDI.DE) finds it hard to move past allegations of accounting misconducts. Two minority shareholders of the Indian travel company, Hermes I-Tickets Private, said that the German payments company failed to conduct proper due diligence when acquiring the company. To back their claims they said that fund from Mauritius bought their shares for around €480 per share and sold them to the Wirecard for €4150 per share just few weeks later. The German company did not investigate significant increase in share price of acquisition target and could have potentially acted to detriment of shareholders.

Wirecard (WDI.DE) pulled back from the 50% Fibo level at the end of the previous week. The company took another dive lower today as more stories emerged on questionable practices of the company. However, drop was halted at the 200-session moving average (purple line). Note that previous attacks on this moving average were often followed by a quick bounce higher (orange circles). Source: xStation5