The sentiment on European equities is very cautious, but the main indices remain slightly above zero today. The Dax made an attempt in the morning to shake off its recent weakness, but upward move faded within one hour. It is still that the German bonds attract more demand now, given the political risks in Europe brought to the spotlight recently. That said we no longer see a divergence in the moves of French and German yields as was the case yesterday on news that anti-EU Marine Le Pen was strengthening her lead in the presidential election polls.
Demand for French bonds has returned, Bunds also seem to be preferred over equity. source: Bloomberg
The most important piece of data we got from the EMU in the morning was the German trade data for December, coming even a bit ahead of the spike on DAX.
The December trade balance (red line) was a downside surprise (green line is the market consensus) - is that a trend already? source: Bloomberg
The headlines seemed negative at first with exports down 3.3% MoM while the market was expecting to see -1.1% and trade balance declining from 22.7 EUR bn to 18.7 bn, the weakest since Feb-2016, but import was actually stronger than expected at 0% MoM instead of a 1.1% drop, and in YoY terms Germany still seems to be in an expansion phase when it comes to foreign trade.
No need to panic on German trade data, but the headlines helped the DAX to stay within the bearish channel; source: Macrobond, XTB Research
From a technical point of view the morning spike seems to be making the case stronger that Dax entered a bearish channel, which would place even more focus now on levels like 11440 and the support zone at 11420-11400.
A failed attempt in the morning to break out of the forming bearish channel; source: xStation5
Bayer AG (BAY.DE on xStation): leads the DE30 pack thanks to a positive decision by FDA announced today on one of the company’s researched products, granting it the orphan drug status which means a 7-year market exclusivity.
Infineon (IFX.DE): US committee on foreign investment, a US national security advisory panel, flagged issues over a prepared 850 m USD deal to purchase Wolfspeed; the committee did not inidicated any path by which the national security issues could be mitigated and a green light could be issued.