Summary:
- German and French leaders to pressure Irish PM and no-deal plans
- DAX (DE30 on xStation5) rally eases after reaching 200-session moving average
- Salzgitter (SZG.DE) expressed interest in divestited assets from ThyssenKrupp-Tata Steel merger
Rally on the Asian stock markets eased today with Japanese Nikkei (JAP225) finishing more or less flat and some Chinese indices declining. Elsewhere, minor gains were spotted. Despite this mixed sentiment, most of the European stock markets opened with small upward gaps on Tuesday. The biggest gains were seen on the Spanish and Polish exchanges in the first minutes of trade. Chemical stocks led advance while retailers and healthcare companies underperformed.
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DE30 (DAX futures underlying) surged fiercely yesterday but bulls remain muted today. The index found itself in quite an important region - combination of the 11700 pts handle and 200-session moving average (purple line on the chart above). In case buyers fail to regain control a pull back towards the early-March swing level at 11480 pts handle cannot be ruled out. Source: xStation5
When it comes to Brexit the picture we get is pretty simple - the European Union is doing its best to deliver as soft Brexit as it can be while the UK lawmakers struggle to express what they really want. However, there is an issue that one EU member state struggles with and decision on the matter may have serious consequences for the future of a country. This country is Ireland and the problem is, of course, the border with Northern Ireland. In case of no-deal Brexit some kind of border controls should be imposed. Authorities of Ireland fear that erecting hard border could have an adverse impact on the peace process on the island. On the other hand, failure to do so could effectively bar Ireland from the European single market. The real problem, however, is that the Irish government does not have a plan for the border in case of no-deal exit. Such stance seems to annoy some of the other EU leaders, mainly Angela Merkel and Emmanuel Macron. The Irish Prime Minister, Leo Varadkar, is expected to meet with the French President today and with the German Chancellor on Thursday. Both leaders will try to get some kind of assurance that the Ireland is prepared for the no-deal exit of the United Kingdom.
Major European stock market indices after the first hour of trade:
- DAX (DE30): +0.07%
- FTSE 100 (UK100): +0.56%
- CAC 40 (FRA40): +0.15%
- IBEX (SPA35): +0.16%
- FTSE MIB (ITA40): -0.16%
DAX members after the first hour of trade. Source: Bloomberg
Company News
List of advisers to the Deutsche Bank-Commerzbank merger is getting longer and longer. Just recently the Deutsche Bank (DBK.DE) announced that Morgan Stanley has joined the team of its advisers to the deal. Apart from Morgan Stanley, institutions like Citigroup, Goldman Sachs or Bank of America Merrill Lynch will be advisors to German lenders. Elsewhere, Olaf Scholz, the German Finance Minister, once again made an indirect, upbeat comment on the merger. Scholz said that Germany is more than happy to host big foreign banks but also needs to have its own big bank. While no company names were cited, conclusions are quite obvious.
According to the Handelsblatt report, ThyssenKrupp (TKA.DE) and Tata Steel provided regulators with a list of assets they are ready to divest in order to get regulatory approval for planned merger. However, rumours were not confirmed by officials of either company. Meanwhile, Salzgitter (SZG.DE), the German steel producer, expressed initial interest in assets offered.
Deutsche Post (DPW.DE) can be found among the biggest DAX laggards today following a downgrade at Citi. The Bank reasoned its decision saying that the rally on company’s shares eased and its cash flow conversion rate remains weak. The recommendation for the stock was lowered from “buy” to “hold” and one-year price target to €30.
Following a break out of a long-term descending triangle pattern but later on failed to break above the resistance zone ranging €25.50-26.50. In the aftermath price pulled back to the key, long-term support zone €12.60-13.50 and is trying to push higher this week. Note that the chart above is presented on a monthly frame (MN interval). Source: xStation5
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