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European markets trade mostly higher
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DE30 tests upper limit of trading range
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Continental lowers full-year outlook
European stock markets are trading mostly higher at the beginning of a new week. Indices from Western Europe trade 0.2-0.5% higher with German DAX (DE30) and Italian FTSE MIB (ITA40) being the outperformers. French CAC40 (FRA40) lags behind, trading around 0.1% lower at press time.
German Ifo indices for October were released at 9:00 am BST. Current conditions index dropped from 100.4 to 100.1 (exp. 99.4) while expectations subindex dropped from 97.3 to 95.4 (exp. 96.4). As a result, the headline business climate index dropped from 98.8 to 97.7 (exp. 97.9) - the lowest reading since April 2021. Ifo Institute economists said that the German economy has a very uncomfortable autumn due to supply bottlenecks and rising costs, and that GDP is expected to grow by mere 0.5% in Q4 2021.
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Source: xStation5
DE30 moved to the upper limit of a recent trading range at the end of the last week and continues to test 15,550 pts area at the start of a new week. A quick drop at the start of today's European cash session was halted at the 50-hour moving average (green line) and the index quickly recovered to the 15,550 pts area, marked with 61.8% retracement of the downward correction started in August. Should bulls remain in control, a break above the trading range may be on the cards and a textbook range of a such a breakout suggests an around 180-points move. An upside breakout could therefore lead to a test of the 78.6% retracement in 15,760 pts area.
Company News
Continental (CON.DE) cut its 2021 forecast and now expects full-year operating margin to reach 5.2-5.6%, down from a previous forecast of 6.5-7.0%. Continental expects global car production to be 1% higher this year, down from a 8-10% growth expected in August. Company expects full-year revenue to reach €32.5-33.5 billion, down €1 billion from August estimate. Raw materials cost is expected to be €550 million higher.
Ola Kallenius, CEO of Daimler (DAI.DE), said that his company attempts to mitigate the impact of semiconductor shortages by trying to employ more advanced chips. Kallenius said that current shortage mostly relates to the most basic and cheapest chips while there is more capacity for more advanced semiconductors. Executive also said that relief in the broad semiconductor market is not expected until 2023.
Continental (CON.DE) halted recent recovery in the €100.00 area and started to shed recent gains. Note that €100 resistance zone is marked with the 23.6% retracement of recent correction as well as the upper limit of market geometry. Failure to break above this area creates a risk of a drop towards recent lows in the €90 zone. Source: xStation5
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