Summary:
- Chinese industrial production growth slows to the weakest pace since 2002
- DAX (DE30) dips below 50- and 100-hour moving averages
- Infineon (IFX.DE) plummets following downward revision in Broadcom’s sales forecast
Escalating tensions on the Middle East and still unresolved trade conflict between China and the US are a drag for the global equities as of late. Combining it with lacklustre data from China released today, one should not be surprised that bears are dominating at the beginning of the European session. Swedish and Belgian stocks are among the biggest underperformers on the Old Continent at press time.
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Chinese industrial data moderate further in May but retails sales surprised to the upside. Source: Bloomberg
Chinese industrial production growth slows to the weakest pace since 2002
One of the key points in today’s economic calendar was release of the Chinese data. The publication showed mixed picture overall. On one hand, industrial production slowed to 5% YoY, more than expected, and urban investments slowed to 5.6% YoY from 6.1% YoY. On the other, retails sales accelerated to 8.6% YoY from 7.2% YoY. It looks like the Chinese economy keeps struggling amid deterioration in the global outlook but somewhat strong domestic demand partially offsets it. Nevertheless, a point to note is that 5% YoY industrial output growth is the weakest print since early-2002 and it may exert some pressure on the equity markets, especially in the export-driven economies like Germany.
DE30 is pulling back following a failed attempt to break above the resistance zone ranging 12165-12185 pts. The index dipped below both 50- and 100-hour moving average (green and red lines). Weekly low around 12060 pts handle is a level to watch in case the decline deepens further. Source: xStation5
Infineon dips as Broadcom cuts sales forecast
Infineon Technologies (IFX.DE), as well as the other European semiconductor stocks, is trading lower at the beginning of Friday’s session. The sector is being pressured by yesterday’s action of Broadcom (AVGO.US), the US semiconductor manufacturer. The US company decided to cut its annual sales forecast from $24.5 billion to $22.5 billion citing an escalation in trade war as a reason. Broadcom has significant exposure to Huawei therefore it is severely impacted by the ongoing situation. Apart from that, the company said that broad weakness in the semiconductor market combined with trade tensions makes any rebound in the demand less likely.
DAX members at 8:39 am BST. Source: Bloomberg
Other Company News
According to the Handelsblatt report, the German government plans to impose higher fines for mobile network operators. Companies will be subject to penalty in case they fail to conform to their network expansion requirements. Fines will be raised from current €100k to €1 million or 2% of average annual sales in case company’s revenue exceeds €50 million. The parliament is expected to pass law on 27 June. Among companies that could be impacted by new regulation one can find the Deutsche Telekom (DTE.DE), Telefonica Deutschland (O2D.DE) or Vodafone Group (VOD.UK).
Volkswagen (VOW.DE), the German carmaker, said how much money it aims to raise through IPO of Traton, its truck business unit. The company said that it plans to raise up to €1.9 billion by floating a 10% stake in the subsidiary. Earlier reports suggested that the company many float anywhere from 10 to 20% stake in the company. The shares will start trading on 28 June.
Rheinmetall (RHM.DE) has received a downgrade at Oddo BHF. The financial services group lowered rating for the stock from “neutral” to “reduce”. Price target has been lowered from €105 to €89 per share.
Rheinmetall (RHM.DE) plummeted at today’s open as investors followed Oddo’s recommendation and rushed to sell the stock. Shares have been trading in a €94-104 range since the beginning of the second quarter. Note that the stock is trading above the medium-term upward sloping trendline and as long as the price stays above it situation seems to favor bulls. Source: xStation5
