DE30: Mixed picture across European stock markets

Summary:

• German lawmakers discuss law allowing banks to fire more easily

• DAX (DE30 on xStation5) holds firm above the 11400 pts handle

• Deutsche Boerse (DB1.DE) starts publishing more information on ETF transaction costs

Stocks in Europe launched today’s trading higher. However, a mixed picture presented by PMI indices deteriorated moods. Most of the European blue chips indices trade lower today but there are a few exceptions. The German DAX is one of them. Insurers and media companies are today’s outperformers while banks and miners lag.

DE30 (DAX futures underlying) continues to trade above the breakout level of 11375 pts. The index sits at levels last seen at the turn of November and December and may be set to test the 11535 pts handle in the days to come. However, one should keep in mind that developments in the car tariffs case may seriously dent moods on the German stock market. Source: xStation5

A somewhat pleasing legislation for the German banking sector is being discussed in the Bundestag this week. The regulation may also help lure financial institutions departing from London amid Brexit uncertainty. Namely, the German government proposes to ease restriction on firing so-called “risk takers” at banks. Those are individuals whose actions may solely have a significantly adverse impact on company’s overall condition, for example traders with significant trading limits. The deal is likely to be passed thanks to CDU/CSU and SPD having majority in the Bundestag. However, some labour unions and lobby groups already expressed their concerns over proposed relaxing of the employees’ protection. Authors of the draft argue that it should not affect more than 5000 people working in the German banking sector. The draft is a part of a broader financial law overhaul aimed at protecting domestic banks from potential damage caused by Brexit as well as incentivizing foreign companies to move their assets to Germany. Earlier, the German lawmakers passed bills protecting existing derivatives contracts with the UK banks which is said to mitigate potential price swings on the money market.

Major European stock market indices at 9:40 am GMT:

• DAX (DE30): +0.24%

• FTSE 100 (UK100): -0.69%

• CAC40 (FRA40): -0.08%

• IBEX (SPA35): 0.00%

• FTSE MIB (ITA40): -0.32%

DAX member breakdown. Wirecard (WDI.DE) keeps swinging wildly amid book-padding allegations. Source: Bloomberg

Company news

Topic of the potential US tariffs on foreign vehicles is especially vivid in Germany, Europe’s biggest car manufacturer. Herbert Diess, CEO of Volkswagen (VOW.DE), was asked about the matter by Financial Times. The executive said the situation upsets him as the issue cannot by resolve by the car industry alone but is a part of the bigger political game between the United States and the European Union. Asked about estimates of London’s Evercore saying that tariffs could cost Volkswagen as much as €2.5 billion a year, Diess said that in worst case scenario cost of this scale could be real.

Deutsche Boerse (DB1.DE) starts providing investors with ETF transaction costs data. Source: Bloomberg, Deutsche Boerse

Deutsche Boerse (DB1.DE) began to publish enhanced ETF liquidity data today. From today on company’s website one can find information on when is the best time to trade various categories of ETFs on the stock exchange in Frankfurt. According to the chart above provided by Bloomberg and the Deutsche Boerse the best time to trade ETFs is from 9:30 am CET to 12:30 pm CET based on the average level of spread. Unsurprisingly, the lowest spreads on the Xetra exchange are on European and German equity ETFs. One may notice that there is a decent pick-up in the transactions costs for the broader category of ETFs and equity ETFs between 1:00 pm CET and 3:30 pm CET. Around €13 billion worth of ETFs are being traded on the exchange in Frankfurt each month, the biggest such venue in Europe.

Telefonica Deutschland (O2D.DE) was upgraded at DZ Bank. The Bank raised the recommendation for this stock from “sell” to “hold”. One-year price target was set at €3.