DE40: Moderate sentiment before the US elections

• Markets uncertain ahead of US election 
• DHL reports disappointing results 
• Salzgitter gains more than 33% after news of potential acquisition 

The sentiment on European markets indicates a holding of breath ahead of this month's key event, the US presidential election. For now, investors in Europe are showing strong caution, and movements in the indices do not indicate increased volatility.

The German DAX is fluctuating around the closing prices of the previous session. The maximum movements of the index are within the range of -0.2% to +0.4%. The French CAC40 is gaining 0.2% today, while the Swiss SMI is losing about 0.1%.

So far, the earnings season for European companies appears quite positive. About 50% of the companies in the Stoxx Europe 600 index have already reported their Q3 results, and of those, 56% have exceeded market expectations. It is worth noting, however, that market expectations were lowered before the Q3 earnings season. Despite this, it seems that investors are looking more favorably than usual at companies that beat expectations, with their stocks rising about 1.8% more than the rest of the market on the day of the earnings publication. This is the highest value since the beginning of 2020.

Despite the generally positive picture of the earnings season, concerns about the economic situation in China affecting consumer demand remain one of the key issues weighing on the valuations of European companies. This is particularly evident in the segment of fashion and luxury goods companies, whose stock prices rose after the start of stimulus measures by Chinese authorities but remain significantly below mid-year values, and Q3 results are not sufficient to sustain positive trends.

The worst performing companies in DAX index are losing due to the lower than expected financial results. Source: Bloomberg Finance L.P. 

Consumer Discretionary is one of the worst sectors during today's session in DAX index. Source: Bloomberg Finance L.P. 

The DAX index contract (DE40) has rebounded slightly from the 19617-point level and currently remains in a slight consolidation at the 19200-point level, close to the support set by the local October lows (19162 points). In case of potential elevated post-election volatility, investors should pay attention to the 19617-point level as one of the main resistance levels, on the other hand, the 19162-point level supported by the exponential 50-day moving average (EMA50 - yellow line on the chart) is the first solid level before stronger support at 19000 points. Source: xStation

Company news: 

• Salzgitter (SZG.DE) is up more than 33% today after its second-largest shareholder, GP Günter Papenburg AG, along with TSR Recycling GmbH & Co. KG, are considering a takeover of the company. Salzgitter has had a very unsuccessful year, with the company's stock dropping by more than 50% at its peak since the beginning of the year. Such significant declines may increase the likelihood of a takeover due to lower valuations. However, one of the conditions of the transaction is that the consortium must obtain at least 45% of the votes plus one share. The value of the potential offer is still unknown.
• Hugo Boss (BOSS.DE) is down more than 5% today after publishing disappointing Q3 results. The company achieved only slight revenue growth up to 1.029 billion euros. The gross profit margin was 60.2%, which is a decrease of 0.5 percentage points. Costs, as a percentage of revenue, increased to 50.9% (+0.3 percentage points), which resulted in a decline in operating profit to 95 million euros (-7% year-on-year), and consequently, a decrease in the operating margin to 9.3% (-0.8 percentage points). At the same time, the company maintained cautious forecasts for the entire year, which, in the face of already poor sentiment towards the luxury goods segment, was received as a disappointment.
• Deutsche Post (DHL.DE) published its Q3 2024 results. The company achieved revenues of 20.6 billion euros (slightly above expectations of 20.2 billion euros). The parcel segment in Germany met expectations at 4.05 billion euros (+2.4% year-on-year), while the company positively surprised in the global delivery and freight segment, achieving a 14% year-on-year increase to 5.04 billion euros (8% above analysts' forecasts). Despite solid sales results, the company disappointed at the operating profit level, which amounted to 1.37 billion euros (flat year-on-year). Particularly poor were the results in the global delivery and freight segment, which, despite sales growth, recorded an operating decline of about 9.5% year-on-year. The company's results indicate a still weakened market environment in Europe, manifested by slower-than-expected recovery in the B2B segments.