DE30: Wirecard plunges on audit concerns, Lufthansa surges on state aid talk

• European stock markets trade higher on Tuesday

• DE30 tests highs from April 17 and April 20

• Big moves on shares of Wirecard (WDI.DE) and Lufthansa (LHA.DE)

European shares launched Tuesday's session higher and continue to gain. Gain can be seen all across the Old Continent with Spanish Ibex (SPA35) being the sole exception.  Wirecard and Lufthansa enjoy big moves on company-related news.

The Ifo Institute released an updated forecast for the German 2020 GDP. New forecast points to a 1.9% YoY contraction in the first quarter and 12.2% YoY contraction in the second quarter. German GDP should contract 6.6% in the full-2020.  A forecast released around 3 weeks ago pointed to a 4.2% contraction in 2020. That's quite a steep revision but still far off double-digits. On the other hand, the 12.2% contraction in the second quarter looks small compared to forecasts for the United States that show GDP contracting by 20 or even 30% in the April-June period. 

Source: xStation5

DE30 is once again slowly approaching the upper limit of the Overbalance structure. The index tested 10,750 pts area - highs from April 17 and April 20 - at the beginning of today's cash session. The first attempt failed but DE30 remains close. Breaking above would leave the index within a striking distance of the upper limit of the Overbalance structure at 10,810 pts. Clearing this hurdle could see the index make a bigger leap higher. On the other hand, failure to break above 10,750 pts could trigger a bigger pullback with the 10,500 pts area being the first major target. Traders should keep on guard ahead of the US open today as some big industrial companies, including Caterpillar and 3M, are scheduled to report earnings and those may have a big impact on market sentiment. US pre-market reports are usually released between 11:00 am BST and 1:00 pm BST.

DAX members at 9:38 am BST. Source: Bloomberg

We have been writing about the Deutsche Lufthansa (LHA.DE) and its calls for German state-aid for some time. Conflicting reports on the matter surfaced overnight. Business Insider reported that the carrier reached an agreement with the German government on a rescue package around €9 billion. The package is said to include equity stake in the company. On the other hand, Reuters reported that its sources within the German government do not confirm that any deal has been reached yet. Nevertheless, the market seems to give more credit to the first report as Lufthansa shares gain. Stock trades over 5% higher after surging as much as 12% earlier in the day.

Shares of Wirecard (WDI.DE) slumped at the start of today's session. KPMG said that it could not obtain all the data needed to prove revenue of Wirecard's business unit in Asia and it has raised some concerns. KPMG is conducting an audit at Wirecard after Financial Times reported that the German payments company inflated sales and earnings. Full report is expected to be published soon but it is said there were no substantial findings that indicate fraudulent activity.

Allianz (ALV.DE) reached an agreement with the Spanish BBVA (BBVA.ES). Under the agreement, two companies will create a bancassurance partnership with a goal of "jointly boosting non-life insurance business in Spain". BBVA will provide Allianz with its client knowledge and network distribution in Spain. Agreement is subject to regulatory approval.

Wirecard (WDI.DE) opened significantly lower today and continued to drop in the first hours of the cash session. Share price smashed support zone at 50% retracement of the February-March drop. Decline has been halted at 38.2% retracement that coincides with lows from December 2019 (orange circle). A big target for sellers is support at €100 while key resistance zone ranges around 50% retracement. Source: xStation5