- European stocks have started the day in upbeat spirits
- German DAX (DE30 on xStation5) is at the crossroads
- Deutsche Telekom gains on resumed merger talks
The end of the past week could not have been better for bulls on the European equity markets. Another solid employment report coming from the US economy undoubtedly reassured investors even as it could lead to higher market rates going forward as the FED might be getting more convinced to purse rate hikes. Moods across the old continent seem to cool down slightly after the opening though as the DE30 hovers around an important technical level.
Looking at the technical analysis one could notice an exceptional upward move on the index which took place on Friday. A tide of upbeat moods came in following another sturdy employment report from the US. Even as it could have strengthened the case for a rate hike in the upcoming meetings this year, it did not daunt investors from riskier assets. A better performance of the German index at the last trading day in the prior week could have stemmed from the negative correlation with the euro which, in turn, became in a retreat against the US dollar.
Although, the price has been able to move upward, it has not broken out a crucial resistance placed at 12300 points. We have mentioned that level several times until now, and once again it has turned out to be a point where bulls have lost their momentum. Until that resistance is broken, bulls could stay cautious which could result in a withdrawal from current levels toward the nearest support located at 12200 points.
At the beginning, let’s whip through Asian markets which enjoyed across the board. The Australian S&P/ASX 200 (AUS200) was by far the best performing index adding as much as 0.93%. Remaining three major indices such as the NIKKEI (JAP225), Shanghai Composite (CHNComp) and Hang Seng (HKComp) gained around 0.5%. Rises could have come in the aftermath of an excellent close in the old continent on Friday along with another record close seen in the Dow Jones (US30).
Having looked at the European markets we could see fading strength of bulls almost across the board. Even as bulls have managed to gain a foothold at the opening, they have been overshadowed to some extent thereafter. As for now, the DE30 is losing a mere 0.07%, the CAC40 (FRA4) is creeping higher 0.15%, the EuroStoxx50 (EU50) is gaining marginally 0.06% while the British FTSE100 (UK100) is going up 0.22%.
Let’s begin with Deutsche Telekom (DTE.DE), the owner of T-Mobile. The stock is rising following the report that Spirit, a provider of Superfast Internet, cloud solutions and telephony services, has resumed preliminary talks about a potential merger with T-Mobile (US entity). Spirit’s CEO Marcelo Claure said last week that a decision on a possible merger is close at hand. Moreover, German telecom giant Deutsche Telekom posted quarterly results showing core profits up 9% thanks to strength in the United States and modest increases in its home market. The company moved up its 2017 outlook for core profit to around 22.3 billion EUR from a previous 22.2 billion EUR.
Furthermore, Fresenius Medical Care (FME.DE) is among the worst performers in early trading after the news the company allegedly agreed to buy NxStage Medical for about $2 billion. Declines could stem from the fact that Fresenius Medical Care, the world’s biggest dialysis provider, will buy NxStage Medical (the Massachusetts-based company) with a 30% premium compared with a close on August 4. In addition, the German firm will fund the transaction with cash and debt.