Summary: 

• Delay of vote on a tax bill proposal in the US Senate and stronger EUR deteriorated sentiment in Europe despite stellar manufacturing PMIs
• DAX (DE30 on xStation5) pulls back to the crucial support zone
• Lufthansa (LHA.DE) resists downward pressure after upgrade from Deutsche Bank

Rally on European stocks has significantly slowed down of late. Although they are still far from proper correction, bulls have run out of stem somewhat and benchmarks from the old continent look quite depressed compared to the US indices. Moreover, the sentiment at the start of the last trading session this week was soft as investors were disappointed that the US Senate delayed a vote on the tax bill. Moreover, the released PMIs from Europe were stellar but it has not translated into better moods on equity markets. 

DE30 once again pulled back to the crucial support zone. Will bulls manage to defend it one more time? Source: xStation5

The strong bullish momentum form the third quarter has faded away and it moves sideways. Buyers were not able to break above the resistance of 13,190 pts and in turn, benchmark dropped smashing the upward trend line. Now DE30 is testing a crucial support zone located at below 12,950 pts. It’s the third time when bears are trying to move below this obstacle. If it finally breaks, DE30 could rush towards 12,500 pts where lies another important support. A more in-depth analysis could be found here.

 Although European stocks have lagged behind their US peers of late, the ratio between DE30 and S&P500 remains close to its mid-range for the current decade. Source: Bloomberg, XTB Research

Asian stocks did quite well as most of the indices managed to post modest gains after the initial drop. China’s Caixin manufacturing PMI slid to 50.8 for November from 51, which might reflect credit curbs. Still, reading above 50-mark means that a recovery is taking place. However, the key story was the US tax reform. The vote in Senate was delayed at 5 pm BST on Friday. Passing this legislation should prop up the sentiment on global stock markets. Nikkei (JAP255) led gains adding 0.41%, and the Australian S&P/ASX200 (AUS200) came second advancing by 0.33%. On the flipside, Hang Seng CE (CHNComp) closed 0.23% lower.

The US indices have outperformed their European peers of late. However, the ratio between German DE30 and the US500 remains close to its mid-range for the current decade. It could suggest that the US benchmark is able to extend its gains in comparison to the German one. Stronger EUR might be on of the reasons for feebler performance of indices from the old continent. However, it’s worth mentioning that PMI readings for November showed a brisk picture of the European economy. German DAX (DE30) was down by 1% as well as French CAC40 (FRA40). The UK FTSE100 (UK100) did a little better but it also declined by 0.23%.

 Deutsche Lufthansa resists downward pressure as it was upgraded by Deutsche Bank. Source: Bloomberg

Company news

Deutsche Lufthansa (LHA.DE) was one of few companies which resisted a downward pressure at the opening. The carrier was upgraded by Deutsche Bank from ’hold’ to ’buy’. The bank sees a positive outlook for European transport sector based on supply and demand expectations.