- European equity markets get underway slightly higher
- DAX (DE30 on xStation5) could be prone to an increase
- Infineon (IFX.DE) and EON (EOAN.DE) are among top movers within the DE30
The European stock markets have started the day slightly higher in anticipation of flash inflation from the Eurozone. The prior week was not good for European stocks which decreased their value as the euro surged, however the DE30 managed to defend a crucial support level, hence it could be prone to a corrective move to the upside in the nearest future.
First and foremost, it has to be said that the German index was mainly down last week due to the higher euro. The stronger euro is, the less profitable German companies are as most of their sales are exported. For that reason there is predominantly a negative correlation between the DE30 and the euro exchange-rate. We wrote more about such a relationship a few days ago outlining the medium-term outlook for the German index.
Taking a look at the technical view, it is likely that the index is going to rebound in the nearest future as the price defended a key support on Friday. If so, bulls could aim for the nearest resistance located in the vicinity of 12300 points. If that level is broken as well, an extended move to the upside cannot be ruled out. In such scenario, an upper limit of the descending wedge could constitute a more notable resistance.
Let’s get back to the Asian session where spirits were mostly upbeat despite slightly sub-par Chinese PMIs revealed overnight. The Shanghai Composite (CHNComp) added 0.61%, the Hang Seng (HKComp) moved up almost 0.7%, the Australian S&P/ASX200 (AUS200) edged up 0.31% while the Japanese NIKKEI (JAP225) closed lower 0.17%.
In Europe, the beginning of Monday’s trading has not been so impressive, things have changed since then as gains have been extended. The DE30 is rising 0.11%, the CAC40 (FRA40) and EuroStoxx50 (EU50) are increasing 0.2%. The standout index in the morning is the FTSE100 (UK100) which is up as much as 0.5%. Let us remind that the Bank of England meeting is scheduled for Thursday, hence volatility on assets related to UK could pick up.
Having looked into the breakdown of the German DE30 there is EON (EOAN.DE) gaining more than 1%. The reason is not so obvious though as Nordea analysts chose to lower the price target for the stock from 10.7 EUR to 9.20 EUR maintaining a buy recommendation. As for Friday, the company had 13 buy calls, 6 holds and 4 sells, whereas the average price target was at 8.97 EUR.
On the other hand, a favorable recommendation has not helped Infineon as the stock is losing more than 1% in early trading. Deutsche Bank AG reaffirmed their buy rating on share of Infineon Technologies in a report released late Friday. Moreover, UBS lowered its call for the stock from 20.93 EUR to 18 EUR, while Oddo Securities quite significantly revised down its outlook for the stock price from 20.35 EUR to 17.5 EUR.