Summary:
- DAX (DE30) struggles to overcome mix of two moving averages
- Deutsche Bank (DBK.DE) with another turnaround plan?
- Lufthansa (LHA.DE) plummets on profit forecast cut
Upbeat moods dominate on the European stock markets at the beginning of a new week. Most of the blue chips indices from the Western Europe trade higher with Spanish IBEX (SPA35) being the laggard. Optimism is weaker in the eastern part of the continent as the Polish WIG20 (W20) and Russian RTS (RUS50) are both trading below Friday’s closing prices.
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Following Friday’s bounce higher the DE30 (DAX futures underlying) found it self just a notch below the 50- and 100-session moving average (green and red lines on the chart above). Note that the index attempted to break above these technical hurdles a few times in today’s pre-session trading. Having said that, 12120-12130 pts area can be seen as the first near-term resistance level to watch. The latest swing level at 12050 pts remains the first support to watch. Source: xStation5
Deutsche Bank with another turnaround plan?
According to the Financial Times reports, the Deutsche Bank is considering a major restructuring in another push to restore profitability. FT claims that the new plan may involve creating a “bad bank” that will hold toxic assets of the Deutsche Bank. New unit would take on up to €50 billion of assets, mainly long-term derivatives positions that were a drag on the company’s balance sheet. Moreover, the Bank plans a significant downscaling of its investment banking operations as it keeps struggling to compete with major US banks in this field. According to the reports, the Deutsche Bank is set to scale down or shrink its interest rates and equity trading divisions outside continental Europe. The cuts are speculated to be the most severe in the United Kingdom and the United States were the bank employs, respectively, 8.5k and 10k people. The information has not been confirmed by the Bank yet but seems to appeal to investors - the Deutsche Bank is the best performing DAX member at the beginning of Monday’s session.
Airbus and Air Lease Corp expected to announce major deal today
One may expect more news concerning Airbus (AIR.FR and AIR.DE) to surface this week as the Paris Air Show begins today. According to the latest reports, Airbus is set to win a major order from Air Lease Corporation. The order is said to be for a total of 100 jets, including A321 and A220 models. Deal value could reach around $11 billion in case the orders are split evenly between the two models. Official announcement of the deal is expected to be made later today during the Paris Air Show.
DAX members at 8:47 am BST. Source: Bloomberg
Other Company News
The Deutsche Lufthansa (LHA.DE) is the worst performing DAX member at the beginning of Monday’s session. The German carrier slashed profit forecast for this year citing falling prices in Europe, especially Germany and Austria. The company now expects full-year EBIT to fall in the €2-2.4 billion range and EBIT margin of 5.5-6.5%. The margin was earlier expected to reach 6.5-8%. A full-year loss is expected at the Eurowings unit, Lufthansa’s low-cost airline, as it struggled to compete efficiently with other low-cost carriers like Ryanair or EasyJet. Lufthansa is trading over 12% lower following the first hour of the European session.
According to the interview of Martin Brudermueller, CEO of BASF (BAS.DE), with FAZ newspaper, the company is going to reduce workforce this year. The company is going to increase headcount in production and digital technology areas while slashing administrative jobs. Moreover, Brudermueller said that BASF will now focus on organic growth and will make new acquisitions only occasionally.
Continental (CON.DE) is trading lower today following a downgrade at J.P. Morgan. The Bank lowered recommendation for the stock from “neutral” to “underweight”. The price target was also lowered from €137 to €119.
Airbus (AIR.DE) is trading almost 9% higher against last month’s close. The stock is testing all-time highs near the €124 handle. Recently, the European planemaker coped way better than its major rival - Boeing (BA.US, light blue overlay on the chart above) - as it did not took such a major PR hit as Boeing. Airbus may jump to new highs as soon as today in case the deal with Air Lease Corp is confirmed. Source: xStation5
