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European stock markets trade lower
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DE30 invalidates inverse head and shoulders pattern
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Commerzbank CEO warns of higher credit provisions
European stock market indices launched today's cash session slightly lower but the drop deepened later on. Blue chips indices from Germany, France and the Netherlands are trading around 1% lower. However, it is Polish WIG20 (W20) that is European top laggard today, with a drop of almost 2%. Big event of the day is the release of the US NFP report for April at 1:30 pm BST. However, as the Fed already provided a rather clear guidance for coming meetings, NFP may not have as much impact on the markets.
Source: xStation5
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Open account Try demo Download mobile app Download mobile appDE30 bulls failed to sustain a break above the neckline of an inverse head and shoulders pattern in the 14,180 pts area. Technical, bullish setup was therefore invalidated. Index began to freefall yesterday and the drop continues today. As such a risk arose that DE30 may pull back and retest late-April lows in the 15,600 pts area. However, actual drop may run deeper - by breaking below 13,900 pts support DE30 broke below the lower limit of recent trading range and a textbook range of downside breakout from this range is around 450 points. Nevertheless, a downside breakout occurred in late-April as well and back then it was halted at the aforementioned 15,600 pts.
Company News
Adidas (ADS.DE) reported mixed Q1 results. Revenue was 0.6% YoY higher at €5.30 billion but short of median estimate (€5.21 billion). Operating profit dropped 38% YoY to €437 million (exp. €391.9 million) while net income from continuing operations came in at €310 million, also 38% year-over-year lower. Sales in the Greater China region were top laggard with a 28% YoY drop while sales in the Asia-Pacific region were 16% YoY lower. In response to Covid lockdown in China, Adidas said that it now expects revenue growth to come in at the lower end of 11-13% guidance range. Company also said that 25% of its stores in China are currently closed.
Rheinmetall (RHM.DE) reported a 0.2% YoY drop in Q1 sales, to €1.27 billion (exp. €1.28 billion). Drop was led by a 6.7% YoY decline in Sensors and Actuators segment sales, to €347 million. On the other hand, sales in the Weapon and Ammunition segment jumped 17% YoY, to €258 million). Rheinmetall's operating profit jumped 9.5% YoY to €92 million (exp. €84.8 million). Company said that it expects organic sales growth of 15-20% this year, assuming that the German government plans to boost military spending materialize.
Manfred Knof, CEO of Commerzbank (CBK.DE), warned that credit provisions at the bank are likely to increase amid expected increase in the number of solvencies among Commerzbank's clients. Insolvencies are expected because of a spike in energy and other resources prices.
Commerzbank (CBK.DE) is trading a touch lower today. A recent bounce was halted at the upper limit of the local market geometry in the €6.50 area. Note that this zone is additionally strengthened by the short-term downward trendline. As such, downtrend has been saved and a move towards recent local low in the €5.82 area could be on the cards. Source: xStation5
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