DE30: Stocks in Europe extend recovery on Wednesday

Summary:

• Financier may succeed Merkel as CDU leader

• DAX (DE30 on xStation5) approaches the 11500 pts area

• Siemens (SIE.DE) to make big investment in Berlin

After significant gains were spotted on the stock exchanges during the Asian trading hours investors from the Old Continent launched session on Wednesday in similarly upbeat moods. Equities were surging all across the continent with biggest gains being seen on the French bourses in the first minutes of trade. On the other hand, Polish and Italian shares were lagging the most. All 19 sector subindices from the Euro Stoxx 600 index were trading higher at the beginning of the session with miners and refiners leading the way.

DE30 continues its recovery after bouncing off the long term support zone in the vicinity of 11000 pts handle. The index broke above the 61.8% Fibo level of the upward movement started after the US presidential elections. Note that the German benchmark is approaching the 11500 pts area that saw some price action in the early 2017 therefore bulls may find it harder to crack. Source: xStation5

Angela Merkel’s announcement of resigning from running for re-election as the CDU party leader this December and as the German Chancellor once her tenure ends turned out to be a small shock for markets. However, her decision seems to be irrevocable and now the question remains who will take over. One interesting figure named as potential successor to Angela Merkel as CDU leader is Friedrich Merz. Merz is a German lawyer that was a member of the Bundestag in the 1994-2009 period. Moreover, between in 2000-2002 he was chairman of CDU/CSU parliamentary group. However, there is more than that. Merz is a member of the BlackRock Germany supervisory board. Why does it matter? There is a common belief that CDU leader is also party’s candidate for the post of the Chancellor. Having said that, potential victory in a party leadership vote and later in a Chancellor ballot would result in a leader of the Europe’s biggest economy that comes from the world of finance. Such a development would be more than welcome for the markets, especially as it would be the first such Chancellor in history. Nevertheless, it should be highlighted that there is three year timespan between CDU leadership and Chancellor votes. As Merz is viewed as way more rightist than Merkel, current Chancellor may face some opposition from her own party when it comes to migration policy in case he is elected.

Major European stock indices after the first hour of trade:

• DAX (DE30): +1.70%

• FTSE 100 (UK100): +1.65%

• CAC40 (FRA40): +2.20%

• IBEX (SPA35): +1.72%

• FTSE MIB (ITA40): +1.05%

German blue chips companies are experiencing stellar beginning of the trading session on Wednesday. Source: Bloomberg

Company News

Siemens (SIE.DE) announced in a statement that it will make a big investment in Berlin. Namely, the company will build a technology park and incubator in the capital of Germany. The project is said to cost as much as €600 million and is scheduled to be finished by the end of 2030.

Deutsche Telekom (DTE.DE) issued a approval for T-Mobile US, one of it subsidiaries, to merger with the Sprint Corp. Deutsche Telekom holds a 63.5% stake in T-Mobile US. Nevertheless, whether the merger will be concluded or not is still subject to regulators’ decisions.

A planned joint venture of Thyssenkrupp (TKA.DE) and Tata Steel is facing some hurdles in Europe. Namely, the European Commission said that initial probe into the merger highlighted issues that could reduce competitivity in the European steel industry. In turn an in-depth investigation will be launched. Commission set the 19 March 2019 deadline for the final ruling on the case.