Summary:
- European stock market sink on Mexico tariffs
- DAX (DE30) pulls back towards 50% Fibo level of last year’s downward move
- Wirecard (WDI.DE) drops off a cliff as prosecutors link company to fraudulent FX broker
Yesterday’s gains on the European stock markets were short-lived as Donald Trump opened new trade front over the night and put global stock markets back into freefall mode. Declines can be spotted all across the Old Continent with the German DAX being the biggest underperformer. Carmakers are the worst performing group of stocks as they are particularly exposed to the US-Mexico trade.
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The German DAX (DE30) failed to defend the support zone ranging 11850-11900 pts. Strong downward move that we are observing this morning brought price to the 50% Fibo level of last year’s downward move. As moods remain sour, one cannot rule out further weakness. In such a scenario the 200-session moving average (purple line) should watched closely. Source: xStation5
Watch carmakers as Trump opens new trade front
Trump’s decision to impose tariffs on the Mexican goods is especially downbeat for the US carmakers. This is because Mexico is a major production hub for the US carmakers, including General Motors (GM.US). Tariffs are likely to be reflected in higher prices of parts manufactured in Mexico. In turn, US carmakers will face higher input costs what will bite into their profits unless they transfer these cost increases onto consumers. Whatever their response will be, one may expect carmakers’ shares to be more volatile today.
DAX members at 9:10 am BST. Source: xStation5
Other company news
Wirecard (WDI.DE) is one of the worst performing DAX members on Friday morning. Apart from increase in risk aversion, the stock seems to be also pressured by the Handelsblatt report. The German business newspaper that company is seen by prosecutors as payment processor for scandal-involved FX broker, Option888. Wirecard responded saying that it performs due diligence to all of its clients and terminates all relationships that do not conform to legal, regulatory or internal rules.
It is not a secret that Allianz (ALV.DE) seeks to expand through M&A. However, The German insurer struggles to find major deals. Nevertheless, the company is quite active when it comes to smaller deals. Just recently news surfaced saying that Allianz will buy general insurance business from Legal & General Group (LGEN.UK) for around €305 millions. Moreover, the German company will also buy remaining stake of 51% in LV General Insurance Group.
Wirecard (WDI.DE) took a dive below the 200-session moving average (purple line) this morning following release of Handelsblatt report. In case the pullback is to deepend, next support level in line could be €128 area where the upper limit of support zone and 50-session moving average is localized. Source: xStation5
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