DE30: Deutsche Bank drops below €7 as revenue continues to contract

• European shares open mixed on FOMC day

• DE30 tries to break back above 50-hour moving average

• Earnings reports from Deutsche Bank (DBK.DE), Volkswagen (VOW3.DE) and Bayer (BAYN.DE)

European stock markets opened mixed with declines being seen in the Western Europe. However, scale of moves is minor and most of the European blue chips indices remain close to yesterday’s closing prices. Stocks from Spain and Portugal can be found among top laggards while the biggest gains can be spotted on stock exchanges in France and Italy. 

Source: xStation5

DE30 was rising slightly throughout yesterday’s European trading hours. Intraday downward moves were limited by the 50-hour moving average (green line). However, the index dipped below this moving average over the night and made a failed attempt of breaking back above it at the beginning of Tuesday’s cash session. Having said that, 50-hour moving average, currently at 12922 pts, could be an important level to watch in the first half of the European session. The key resistance to watch remains unchanged - 12980 pts handle marking the latest high and an upper limit of the Overbalance structure. When it comes to support level to watch, one should focus on recent swing level at 12895 pts handle and the support at 12875 pts handle, that is also marked with a 100-hour moving average (red line). The index may become more volatile around 12:30 pm GMT, when US GDP report is released, and at 6:00 pm GMT, when FOMC announces its rate decision.

DAX members at 8:19 am GMT. Source: xStation5

Deutsche Bank (DBK.DE) was one of the DAX members that released earnings reports today before the opening of a session. The German lender divested equities trading business and reduced workforce by around 20% but it did not help company stop shrinking. Revenue at its remaining businesses declined 4% in Q3, mainly due to lacklustre performance of investment banking unit. The Bank not only missed revenue expectations by 5% but also disappointed significantly with earnings as they dropped instead of rising.

Volkswagen (VOW3.DE) also reported third quarter earnings today. However, unlike the Deutsche Bank, the German carmaker delivered solid estimate-beating results. Adjusted EPS of €8.441 was 27.5% higher than median estimate provided by Bloomberg. Revenue of €61.42 billion was 6.6% higher than forecasted. Volkswagen increased its market share in Q3 2019 but said that now it expects demand to contract faster than previously estimated. In turn, full-year outlook for vehicle deliveries was lower.

Bayer (BAYN.DE) is another DAX member that have reported Q3 earnings ahead of the opening bell. Sales came in 0.8% above forecasts while adjusted EBITDA was 2.2% higher than median estimate. Core EPS of €1.16 was in-line with estimates. The company decided to confirm full-year outlook. However, Bayer also reported that number of Roundup plaintiffs grew to 42.7k as of October 11th. This marks a significant increase from 18.4k reported in July and could be a serious drag for the company.

Lufthansa (LHA.DE) is trading higher today, thanks to an upgrade the company has received at Bernstein. Recommendation for the stock was raised to “outperform”. Analysts reasoned their decision saying that they expected European sector to enjoy double-digit earnings growth in 2020.

Share price of Deutsche Bank (DBK.DE) managed to break above the 200-session moving average (purple line) in mid-November and began to struggle at the resistance zone ranging around €7.20 handle. The index is plummeting below its long-term moving average today being pressured by weakish earnings report. Bulls trying to halt the decline at the 50-session moving average (€6.91) but downward momentum is significant. The first support to watch is low from early-November at €6.30. Source: xStation5