- DAX gains more than 7.5% from August low
- Weaker sales of Chinese electric cars in Europe support German car manufacturers
- Bayer gains more than 11% after positive state court ruling
Today's European market sentiment remains positive. Most of the major indexes are posting gains, led by Italy's IT40, which is up more than 1.8%. France's CAC40 is also gaining, up 0.2%. Germany's DAX is up 0.6%, supported by quotes from automakers and the health care sector, with Bayer posting a record one-day gain after a positive court ruling on a lawsuit over the carcinogenic effects of the weedkiller Roundup.
Tariffs imposed by the European Union on Chinese electric cars are beginning to have an effect. According to Bloomberg data, sales of Chinese electric vehicle manufacturers in Europe fell 45% in July compared to June. These figures do not fully capture the correct magnitude of the impact of the tariffs, as it is highly likely that Chinese manufacturers dramatically increased shipments to Europe in June in order to get in time before the July tariffs, hence the base effect remains overstated. Going forward, however, the values are a positive signal for European manufacturers, with the Stoxx Europe 600 Automobiles & Parts index leading the European sectors in gains today.
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Companies included in the DAX index. Source: Bloomberg Finance L.P.
Breakdown of the DAX index by sector. Source: Bloomberg Finance L.P.
Listings of the DAX index contract (DE40) have continued their rapid gains, gaining more than 7% since the August bottom. The contract is attempting today to break through resistance at around 18400 points, set by local peaks from April. For now, the contract remains in bullish momentum after breaking through the 50-session exponential moving average (EMA50, yellow line on the chart). If the contract manages to close above 18400 points, a move in the next sessions to the area of 18680 points, where the next key resistance is located, is not out of the question. Investors should keep a close eye on the data coming into the market from the US regarding the economic situation, as this is what will most likely shape the European market quotations in the coming weeks. Source: xStation
Company news:
- Bayer (BAYN.DE) is up more than 11% today after securing a favorable appellate court ruling in a lawsuit over the carcinogenicity of the herbicide Roundup. The court's ruling indicates that one of the major claims against the company may be unsuccessful for the plaintiffs, thus reducing the likelihood of one of the biggest risks currently weighing on the company's performance. It is worth remembering, however, that the ruling does not yet mean that Bayer's problems are completely over, with the U.S. Supreme Court expected to make a final decision on the matter. Bayer has set aside reserves of more than $16 billion to resolve more than 100,000 lawsuits over the Roundup agent.
- Mercedes-Benz (MBG.DE) i Volkswagen (VW.DE) are up nearly 1% today after positive data on the overall sector of European electric car manufacturers. As long as China does not issue stronger positions on the tariff war with the EU, the impact of the Union's tariffs on Chinese manufacturers is a positive catalyst for auto makers' stock prices.
- BMW (BMW.DE) will have to recall more than 1.4 million vehicles from China due to airbag problems. The vehicles with the defect date from 2003 to 2017. According to Bloomberg reports, the number of locally produced cars is about 600,000, and imported cars are about 760,000. If the defects are confirmed, BMW is required to replace the airbag at no additional charge. The airbag problems affect vehicles using technology from the Japanese Takata Corporation.
