DE30: Deutsche Bank surges on surprise Q1 profit

• European stocks open higher but struggle later on

• DE30 breaks 10,600 pts but fails to hold above

• Adidas (ADS.DE), Deutsche Bank (DBK.DE) and Bayer (BAYN.DE) announced earnings

European stock markets opened higher as investors were delighted to see more easing from the Bank of Japan as well as coronavirus restrictions in some countries being lifted. However, selling pressure appeared in the first hours of trading. Some German large-caps released earnings or preliminary earnings over the weekend and they are in the spotlight during today's session.

Source: xStation5

DE30 launched another upward impulse on Friday afternoon and continued it throughout today's Asian session. In turn, the index was trading around 10,600 pts ahead of the European cash session open. However, bears began to take over from there. The index pulled back around 100 points and threatened to attack the support zone at 10,500 pts. There are not any big macro releases scheduled for today therefore traders may need to focus on newsflow and technicals. When it comes to the latter, the key support is the already mentioned zone at 10,500 pts. Hurdle for the bulls is the 10,570-10,600 pts area as price reversed from there a few times over the past 3 weeks. Break of any of those could see a move in that direction accelerate but keep in mind that the index continues to trade within the large Overbalance structure (red shaded box) with upper limit at 10,810 and lower limit at 10,000 pts. As always, elevated volatility is expected near the US session open (2:30 pm BST).

DAX members  9:34 am BST. Source: Bloomberg

Bayer (BAYN.DE) reported a 20% YoY jump in net profit in Q1 2020. Earnings increased from €1.24 billion in Q1 2019 to €1.49 billion in Q1 2020. EBITDA increased 10.2% YoY to €4.39 billion. Revenue increased from €12.25 billion in Q1 2019 to €12.85 billion in Q1 2020. The company explained that the coronavirus pandemic led to higher demand, through inventory build-ups and in turn the company saw higher sales. Company backed full-year outlook but said it does not include coronavirus effects. Results were better than expected.

Adidas (ADS.DE) announced that its net income dropped 95% YoY to just €31 million in Q1 2020. Revenue dropped 19% YoY to €4.753 billion. Gross margin dropped to 49.3%. The company said that it is unable to issue a forecast for the year due to coronavirus disruptions. These are preliminary results.

Deutsche Bank (DBK.DE) released preliminary Q1 2020 results on Sunday. The German bank said net profit will stand at €66 million in the quarter against a loss expected by analysts. Bank;s Common Equity Tier 1 ratio deteriorated from 13.6% at end-2019 to 12.8% at end-Q1 2020. The Bank said it took around €0.5 billion in provisions for loan losses in the quarter. Detailed quarterly report will be released on April 29.

German ruling coalition disagrees over state-aid for Lufthansa (LHA.DE). Recent media reports suggest that SPD party calls for taking an equity stake as "the government should have a say when it gives companies billions from taxpayers' money". On the other hand, CDU members said that Lufthansa should have freedom to make structural adjustments in order to remain competitive abroad. Reuters reported last week that Lufthansa seeks up to €10 billion in state help.

Adidas (ADS.DE) started the new week below Friday's closing price but surged later on. The stock tested resistance zone at €215 but failed to break high on the first attempt. The not-so-bad Q1 2020 earnings provide fuel for today's rally. However, in case the stock fails to close above the aforementioned resistance at €215, the future of the rally may be put under question. In such a scenario, €200 is the near-term support to watch. Source: xStation5