Summary:

  • European stock markets have kicked off the day higher on the back of new highs seen on Dow Jones, they’ve lost steam since then
  • German IFO beats estimates across the board being a support for the euro, not necessarily for the DAX (DE30 on xStation5)
  • DE30 tries to stay above a key short-term trend line
  • Lufthansa (LHA.DE) declines despite a surge seen in profit in the third quarter

The European stock markets have started off the day on a right foot but have handed back some of their gains since then. There is a possibility that the looming ECB meeting could weigh on risk sentiment thereby it could be detrimental to riskier assets. On the other hand, the ECB governor was equipped with a confirmation of the bright economic outlook yesterday following a bunch of solid PMIs. Moreover, stellar moods across Europe were confirmed earlier today as IFO reported better than expected numbers in October. Having said that, robust readings related to the economic backdrop could be conducive to the single currency as it may act in favor of trimming monetary stimulus which in turn would be negative for the stock market.

link do file download linkGerman IFO illustrated that the domestic economic climate kept increasing in October. Source: Macrobond, XTB Research

On the flip side, the European equity markets could be benefiting from fresh highs seen on the Down Jones (US30). The US index soared on Tuesday thanks to upbeat earnings from Caterpillar and 3M. Besides, the US indices were buoyed by PMIs which climbed in October. Now let’s move to a technical analysis which seems to be definitely worth looking at.

link do file download linkThe DE30 is trying to stay above a pivotal short-term support in form of a trend line. Source: xStation5

The German index has tried several times to break through a short-term trend line to the downside but has failed to do so as of yet. As a result, there is a possibility that the DE30 will strive to make a bounce to the upside which could eye 13085 points. Nevertheless, needless to say that the latest spikes have been quite quickly faded , hence strong momentum is needed in order to allow the price to climb higher. In turn once bears are able to move below an ascending trend line, a decrease towards 12955 points could be expected. Finally investors may also want to wait for the ECB verdict which could drive their investment decisions. If so, it would mean that volatility on the DE30 may be contained in the upcoming hours.

link do file download linkLufthansa (LHA.DE) undercuts the DE30 performance the most while BASF (BAS.DE) tries to counterbalance. Source: Bloomberg

Looking at the Asian session there were quite hopeful spirits. Firstly, the Hang Seng (HKComp) closed up as much as 0.8% however the Communist Party congress is already done which could rise some concerns that possible corrective moves across Chinese assets could occur. On top of this, the Shanghai Composite (CHNComp) moved up 0.25%, the Australian S&P/ASX 200 headed higher 0.15% while the Japanese NIKKEI (JAP225) ended up with a 0.45% loss.

A scorecard of the European equity markets looks less encouragingly as it’s been at the beginning. The FTSE100 (UK100) is the largest laggard being down 0.4% despite a subtly better than expected reading of a q/q GDP growth in the third quarter, a y/y basis was unchanged at 1.5% though. Otherwise, the DE30 is grinding lower 0.1%, the CAC40 (FRA40) is trading flat whereas the EuroStoxx50 (EU50) is treading water. Notice that the Spanish IBEX (SPA35) has been the most standout performer thus far being up ca. 0.3%.

Company news

Lufthansa (LHA.DE) is losing steam in early trading in spite of the fact that the company showed continued positive momentum earnings as profit beat analysts’ expectations in the Q3 as the collapse of German rival Air Berlin allowed the carrier to tighten its grip on their home market. Notice that EBIT jumped as much as 32% to 1.52 billion EUR.