Summary:

  • European equity markets march higher after the FED’s decision
  • DAX (DE30 on xStation5) breaks a crucial resistance line
  • German banks lead the gains within the DE30

The decision made by the Federal Reserve yesterday could be favorable both for the US dollar and stock markets worldwide. Even as the FED chose to stick its plan to hike rates once again this year (December) it lowered its projected neutral rate which means that the whole path of monetary tightening is going to be shallower. Keep in mind, the lower discount rate, the higher present value of stocks. For that reason the US indices quite quickly erased their losses which occurred immediately after the FED’s statement.

link do file download linkThe German index has broken out of a local resistance line which may bode well for buyers going forward. Source: xStation5

A technical view suggests that bulls could have taken an important step towards a continuation of the ongoing movement. The price smashed easily a resistance placed at 12600 points thus the further upside could be on the cards. On the other hand, today we got a lower opening suggesting that investors remain quite cautious. However, even as a knee-jerk move to the upside was wiped off fairly rapidly, bulls appear to have still a bargaining chip given the rosy outlook for economic growth illustrated by Chair Yellen.

Moving on, any upside on the German DE30 might be contained due to a pivotal resistance area which stretches at around 12670 points. Having said that, that level needs to be broken in order to enable buyers to proceed. In turn, when we look for a support, that can be found at 12520 points as this level has turned out to be relevant as of yet.

link do file download linkGerman lenders are by far the best performers within the DE30. Source: Bloomberg

Getting back to the Asian session one could say that those traders did not beam with broad-based happiness. To be candid, the Asian stock markets ended the day mixed with the Australian S&P/ASX 200 being the worst one and losing almost 1%. That a sell-off goes in tandem with underperformance of the AUD which is already down 0.95% against the greenback (notice, the US dollar index is down as well, hence there is no an effect of the FED at all). Moreover, the Shanghai Composite (CHNComp) lost 0.25%, the Hang Seng (HKComp) moved up 0.2% while the NIKKEI (JAP225) closed higher 0.2%.

In Europe, we have three leaders when it comes to the equity market: CAC40 (FRA40), EuroStoxx50 (EU50) and FTSE MIB (ITA40) – all of them are rising 0.6%. On top of that, the DE30 is going up 0.35% while the FTSE100 (UK100) is a sub-par one and is edging higher just 0.15%.

Company news

On the surface, the German lender are among top performers in the DE30 in the morning. Commerzbank (CBK.DE) is already up 5% after revelations that the German govt has reportedly favored a Commerzbank-BNP Paribas merger. Let’s add that the German govt owns a 15% stake in Commerzbank after rescuing it during the financial meltdown.

In turn, Deutsche Bank (DBK.DE) is on the rise following the recommendation from HSBC. The German lender was upgraded to hold from reduce while the price target was raised to 14 EUR which means that the spot price has fully discounted that call.