Summary:

• German DAX (DE30 on xStation5) has begun the day with gains as Germans are back after a day-off
• German equities have already marked their new all-time high at the opening before closing the gap
• Spanish IBEX (SPA35) drops off dramatically amid mounting political pressures
• Volkswagen (VOW.DE) and other German auto stocks could get a boost from the US

German investors are already back after a day-off due to Unification Day and the DE30 is gaining the most among major European indices. Notice, all major stock markets beyond the DE30 gained yesterday, hence the German index may want to catch up with them. It’s worth also recalling that today’s session may become more volatile afternoon when the ADP report is released. At first, let’s have a look at a technical landscape.

The DE30 has opened higher marking a bullish gap but the price has backed away since then. Source: xStation5

On the surface, one could notice that the price has marked its new all-time peak at the opening as German investors’ enthusiasm has poured into the stock market. Afterwards, we’ve seen a retreat and the price is already a touch from closing the bullish gap. Nevertheless, even as the DE30 closes today’s gap, an extended leg lower could be likely, for one towards the nearest support area placed at 12820 points.

This area has served as an important level from a technical standpoint, hence we could assume that buyers could lurk there once again. On the flip side, the short-term future of the German DE30 might depend on the EURUSD which in turn could be subject to elevated volatility in the upcoming hours mainly on the back of appearances of Yellen and Draghi as well as the jobs data from the US economy.

The Spanish SPA35 is plunging in the wake of a Carles Puigdemont’s announcement. Source: xStation5

Beside the DE30, one needs to take note of the Spanish stock exchange which is plunging over 2% following an announcement from the region’s secessionist leader Carles Puigdemont. He proclaimed that Catalonia would declare independence in a matter of days. When asked by the BBC what Puigdemont would do if the Spanish government were to intervene and take control of Catalonia’s government, he said it would be “an error which changes everything”. On the other hand, Spain’s economy minister ensured that business has nothing to fear from a Catalan crisis.

Taking a look at the chart above we could spot that the price has already smashed its noteworthy support, hence an extended move lower could be on the cards amid simmering uncertainties. If so, sellers could aim for 9870 points which is underpinned by a 50% retracement of an upward move from November last year.

Shares of German automakers are among the best performers in early trading. Source: Bloomberg

Before we move on to the European stock markets, let’s whip through Asian equities which had a bit confusing session. On the one hand, the Hang Seng (HKComp) booked a profit close to 1%, on the other one the Australian S&P/ASX200 lost 0.9% following a surge in the Australian dollar seen overnight. In turn, the Japanese NIKKEI (JAP225) added a mere 0.05%. Bear in mind that the Chinese onshore stock market is closed through the whole week owing to the Golden Week.

Looking through the European stock markets one may conclude that the DE30 is the best one and is gaining 0.2%. Elsewhere, optimism seems to be petering out to some extent as the CAC40 (FRA40) is sliding 0.15%, the EuroStoxx50 (EU50) is moving down 0.2% while the FTSE100 (UK100) is trading almost flat. Once again, the Spanish IBEX (SPA35) is the worst performing index in the old continent among developed markets which could be a slightly belated ramification of the Catalan referendum which took place over the weekend.

Company news

Volkswagen (VOW.DE) is up already 2% after splendid results coming from US automakers. Moreover, Volkswagen’s sales in the US soared 33.2% in September. Finally, the German automaker informed yesterday that it would launch an electric medium-duty truck in the North America market by late 2019.