DE30: Bayer announces refunds to European farmers

Summary:

• Italian immunity committee to decide on Salvini’s case

• DAX (DE30 on xStation5) tests trendline and moving average

• Bayer (BAYN.DE) to refund farmers adversely affected by GMO-contaminated seeds

Stocks in Europe launched Thursday’s trading on a weaker footing. German equities can be found among the biggest underperformers following a lacklustre industrial production data release. On the other hand, reasonable gains could be spotted on the Portuguese stock market. Food companies were the only group to stay afloat while car makers and media companies took the biggest step back in the first minutes of trade.

Yesterday’s pullback caused DE30 (DAX futures underlying) to find itself in a quite interesting spot. The German benchmark is testing the upward trendline and the 33-period moving average on the H4 interval at press time. The aforementioned moving average managed to fend off bears a few times in January and a break below could be seen as a downbeat signal. Source: xStation5

The International Monetary Fund is not satisfied with efforts of the Italian government aimed at revamping struggling economy. IMF thinks that League-Five Star government is to slow in implementing required reforms. In turn, the Fund decided to lower Italian growth forecasts for years 2018-2023. Now the Fund expects the Italian economy to expand annually at the pace slower than 1% in each of the next five years. IMF expects Italian growth to reach 0.6% in 2019 before briefly bouncing higher in 2020. Slower growth would make it harder for the Italian government to meet budget deficit targets agreed with the European Union at the end of 2018.

Meanwhile, the Italian immunity committee will look today into the case of Matteo Salvini, deputy prime minister and leader of League. The case relates to Salvini’s order no to allow over 170 migrants rescued by the Italian coast guard disembark onto the Italian land. Back in August 2018 Salvini denied access to the Italian land to these migrants and in turn they were kept on board of the Italian coast guard ship for six days. The committee will look whether this move was Salvini’s unilateral decision and should be treated as kidnapping and illegal detention. However, lawmakers from the Five Star Movement are likely to back the proposal of not depriving Salvini of his immunity. However, if the situation was to be played out differently, dropping Salvini’s immunity and launching a probe could risk the collapse of the government and in turn early elections. Such an outcome is unlikely as in the latest polls Five Star performed much worse than League and is sets to lose more on snap elections than its coalition partner.

Major European stock market indices after the first hour of trade:

• DAX (DE30): -0.53%

• FTSE 100 (UK100): +0.03%

• CAC40 (FRA40): -0.26%

• IBEX (SPA35): -0.33%

• FTSE MIB (ITA40): -0.24%

Most of the DAX members is trading lower at the beginning of Thursday’s session. Source: Bloomberg

Company News

Bayer (BAYN.DE) announced that it will be recalling from the market rapeseed seeds it produces in Argentina and markets in Europe. This is due to the fact that the French and German authorities found minor quantities of GMO seeds in seed packs sold by Bayer. However, some of those seeds were already planted and as the French law prohibits farmers from cultivating modified food growers had to dug them up. Bayer said that it will refund each farmer with €2000 per hectare of fields he had to dug up. Apart from that, the German company will investigate how seeds became contaminated in the Argentinian GMO-free production facility.

Daimler (DAI.DE) is one of the biggest DAX laggards today. The German carmaker is underperforming even despite an upgrade received at Commerzbank. The Bank changed recommendation for the stock from “reduce” to “hold” and increased one-year price target from €48 to €52.

Munich Re (MUV2.DE) received a downgrade at DZ Bank. Reinsurer’s recommendation was lowered from “buy” to “hold”. The one-year price target was lowered from €210 to €204. Nevertheless, the company is one of the best performing DAX members today.