- European equity markets have started the new trading week higher
- German DAX (DE30 on xStation5) has opened up with a bullish gap
- RWE (RWE.DE) jumps higher as the full year earnings outlook improves
The European stock markets did not have the successful last week as all riskier assets were overshadowed by mounting geopolitical risks related to North Korea. Nonetheless, a risk-off mode seems to be receding at the beginning of the new week what it’s reflected in a sell-off of the JPY as well as the Swiss franc. Moreover, even sub-par Chinese prints have not been sufficient to daunt investors.
The DE30 has opened up with a bullish gap. If it’s able to close above 12080 points, it could herald an extended corrective move to the upside. Source: xStation5
Taking a look at the chart above one could notice that the German DE30 was able to defend a crucial support in the shape of a lower boundary of a channel. For that reason, the index has opened up higher in the morning drawing a bullish gap at a daily interval. The price has already broken through 12080 points – a relevant support line before a breakout, if an upward move turns out to be sustained, an increase towards 12300 points cannot be ruled out.
Having said that, one should not forget about a broader technical view as a weekly time frame drew an ominous candlestick last week suggesting that this week’s rebounds could prove to be just temporary. Keep in mind that a possible resumption of a clash between the US and North Korea could carry some reverberations across risk-correlated assets. In addition, from a weekly interval 12300 points looks to be a pivotal resistance.
The German index has risen sharply at the opening as all stocks are trading above the Friday’s close. Source: Bloomberg
The Asian session brought stellar spirits almost across the board. Solely the NIKKEI (JAP225) lost close to 1%, however the Japanese bourse was closed on Friday, hence it could have been just a belated response to Trump’s remarks delivered late Thursday. Otherwise, the Shanghai Composite (CHNComp) increased 0.9%, the Hang Seng (HKComp) rose as much as 1.3%, whereas the Australian S&P/ASX 200 added 0.65%. It’s worth noticing that the Chinese indices played down sub-par macroeconomic figures which we knew overnight.
As far as the European equity markets are concerned, those are thriving in early trading. The DE30 is edging up more than 1.1%, the CAC40 (FRA40) is rising 0.9%, the EuroStoxx50 (EU50) is increasing 1% while the FTSE100 (UK100) is adding 0.5%. Additionally, emerging markets indices are beefing up as well, hence it’s a strong sign of a risk-on mode – that’s exactly the case we wrote about on Friday (geopolitical-related risks often tend to be temporary).
In terms of specific stocks RWE (RWE.DE) is among the firmest within the DE30 following the news coming from the company. The board said that full-year profit would be at the upper end of its forecast range as probability improved at the utility’s gas generation business. Moreover, Commerzbank (CBK.DE) is gaining as well as the company said that the group’s CET1 ratio would rise by about 160bps to 14.6% while non-core assets division and all associated risk-weighted assets to be removed.
Commerzbank’s risk-weighted assets in non-core division. Source: Bloomberg
As we’ve mentioned above, all stocks listed on the DE30 are over the breakeven line albeit Lufthansa (LHA.DE) is struggling to stay above the flat line after a recommendation from Redburn. The company was downgraded from buy to neutral. The air carrier’s consensus price target is at 20.39 EUR. As for Friday the firm had 10 buy calls, 9 holds and 8 sells.