Summary:

  • Major European stock markets have begun the new week on the right foot
  • German DAX (DE30 on xStation5) may see just a shallow correction within its uptrend
  • Spanish IBEX (SPA35) surges immediately after the beginning of trading on a fading risk of a unilateral declaration of independence
  • A huge French-German acquisition could take place but it seems to be unlikely for the time being

There is no doubt that geopolitics has had a major impact on financial markets of late. Even as we got the excellent jobs report on Friday, upbeat moods were spoiled to some extent in the aftermath of reports related to North Korea regarding possible missile tests which were to take place during the past weekend but they didn’t. As a result, all European equity markets have started the new week slightly higher while the DE30 may be poised to register its new all-time record. On top of that, the Spanish SPA35 soared over 1% at the opening following myriad protests which took place on the streets of Barcelona on Sunday.

link do file download linkThe German index could pave the way for 13200 points which may be another more important resistance for buyers. Source: xStation5

A technical view appears to be still supportive of buyers and they could be capable of carving out space for further gains eyeing as much as 13200 points. The ongoing bullish trend is undoubtedly powerful as sellers have been unable to take the price down in a more spectacular manner, thus just very shallow corrective moves have taken place so far. Notice that a candlestick drawn on Friday marked a shadow suggesting that bulls managed to close the day a touch above 12950 points being a crucial support in spite of risks surrounding North Korea. On the flip side, a possible correction below the above-mentioned support line could give a rise to a pullback towards 12820 where a significant zone is placed.

link do file download linkThe DE30 has begun the day relatively calmly with just a few stocks being below the flat line. Source: Bloomberg

Meanwhile, the Spanish index (SPA35) has opened substantially higher, however the Catalan thread remains blurry. First and foremost, one needs to mention numerous protests which emerged in the Catalan capital Barcelona on Sunday and were meted out against declaring independence from Spain. It illustrates how the region is divided and how hard an announcement of unilateral independence could be. Some calculations made by local police suggest that up to 350,000 people waved Spanish and Catalan flags chanting “Catalonia is Spain” and “Together we are stronger”. Political unease has already forced several companies based in Catalonia to uproot beyond the region, the move which could intensify pressures on Catalan leader Carles Puidgemont to back away from declaring independence during his speech scheduled on Tuesday. Let us also remind that the Constitutional Court suspended last week a Catalan parliamentary session which was to take place today, as a result the Spanish stocks rebounded markedly while the risk premium seen in the bond market subsided to some extent. To sum up, even as a unilateral declaration of independence isn’t doomed to failure, it’s unlikely to be proclaimed given rising divisions seen in the heart of Catalonia, so both sides may resort to peaceful negotiations. This could be a reason why investors decided to pour their money into Spanish stocks at the beginning of the week.

link do file download linkThe SPA35 has jerked higher immediately after the open, albeit bulls have lost some of steam since then. Source: xStation5

Technically the Spanish index might be poised to continue rising towards a critical resistance area located at around 10400 points. Nevertheless, needless to say the major uncertainties are still being felt given that Puidgemont is expected to deliver his possibly groundbreaking speech tomorrow. However, assuming that a declaration of independence seems to be less probable to be announced, the Spanish SPA35 could try to test its crucial resistance unless the price slips below 10100 yet again.

Company news

Commerzbank (CBK.DE) is trading flat in the morning but an interesting announcement has been made by Credit Agricole’s CEO Philippe Brassac. Namely, he expressed interest in German lender if it was to be up for sale according to an interview with the Handelsblatt newspaper.

In turn, Deutsche Boerse (DB1.DE) is rising as the clearinghouse considers starting a revenue-sharing plan with its biggest members in a bid to lure business from London after Brexit.