DE30: Infineon pulls back along with other Apple suppliers

Summary:

• Jens Weidmann said to remain Bundesbank chief for the second term

• DAX (DE30 on xStation5) maintains previous trading range

• BaFin and ECB said they would prefer Deutsche Bank (DBK.DE) to merge with foreign competitor

Stocks in Europe underperformed at the beginning of Thursday’s session following downbeat trading in China and Japan. Almost every blue chips index from the Old Continent traded beneath yesterday’s closing price in the first minutes of the session with German and British shares taking the biggest dive. Food companies were the only sector from the Euro Stoxx 600 index to trade higher today.

DE30 (DAX futures underlying) price moves seem locked within a triangle pattern. Ascending 50-period moving average serves as a lower limit of the trading range while bulls are being hampered by the resistance zone ranging around 11000 pts mark. The German benchmark opened lower today and tested the aforementioned moving average before recovering. An upward movement towards the 10925 handle and closing the price gap may be the first goal for buyers. Source: xStation5

Jens Weidmann, the President of the Bundesbank, is likely to remain on his post for the second term. According to Bloomberg report, German authorities are delighted with Weidmann’s performance as country’s top central banker. Bundesbank confirmed that contract extension was proposed. The proposal now needs an approval from the German President, Frank-Walter Steinmeier. Weidmann was expected to succeed Mario Draghi as the European Central Bank President. However, the European People’s Party already proposed Manfred Weber for the post of the European Commission president and Weber receives nomination it is unlikely that European governments will allow another German to hold one of the EU top jobs. Nevertheless, rumours surfaced recently saying that the French President, Emmanuel Macron, is likely to be the kingmaker in distributing senior EU jobs after the European elections. If this turns out to be true and France secures the EC President post, chances of Weidmann becoming new ECB chief would skyrocket.

The final European CPI inflation reading for December was released at 10:00 am GMT. Data turned out to be no surprise as all the metrics came inline with estimates. The headline gauge showed price growth of 1.6% YoY while the core measure remained at 1% YoY.

Major European stock market indices after the first two hours of trade:

• DAX (DE30): -0.56%

• FTSE 100 (UK100): -0.55%

• CAC40 (FRA40): -0.37%

• IBEX (SPA35): +0.11%

• FTSE MIB (ITA40): -0.17%

Infineon Technologies (IFX.US) underperforms on the back of warning from one of the Apple’s top suppliers. One the other hand, Wirecard (WDI.DE) surges today leaving DAX peers way behind. Source: Bloomberg

Company News

Infineon Technologies (IFX.DE) is one of the worst performing DAX members today. Sentiment towards the company was undermined by downbeat guidance issued by one of the Apple’s top suppliers. Namely, Taiwan Semiconductor released a downbeat revenue guidance for the quarter saying that demand remains weakish. The demand issues are likely to be industry-wide rather than company-specific and this is the reason why Infineon underperforms today.

Topic of the potential Deutsche Bank (DBK.DE) merger with Commerzbank (CBK.DE) has been vividly discuss in the past few months. While executives of the two companies stay reluctant from making clear comments on the issue, the German government was said to be trying to exert pressure on the companies in order to form a global banking champion. However, two key institution overseeing the German banks - European Central Bank and BaFin - have a bit different view. Both watchdogs prefer Deutsche Bank to merge with a foreign competitor. ECB reasons his stance by saying that such move would promote integrity within regional financial markets while BaFin said that Deutsche and Commerzbank are too weak to sufficiently benefit from the merger. The latter view was also expressed a few times by the Deutsche Bank CEO, Christian Sewing.