Energy Companies RWE and Eon Recovering From Yesterday’s DAX 30 Losses
The DAX 30 started the week with some of last week’s momentum still carrying through, to finish 0.24% higher, closing at 10,693.69 points. The resistance level of 10,800 hasn’t been breached since August and high profile analyst and market observer Jens Klatt expects it to hold firm with the DAX finishing the current week below that level.
**RWE Misses Expectation as Profits Decline**
Yesterday, utilities giant RWE lost 3.5% to continue its 11% slump of the previous week. It reported a 13% drop in profits over the year’s first 9 months. Along with Eon, the two traditional German energy powerhouses are beginning to suffer from the growing competition from subsidized renewables. The company is also facing a significant financial burden, around 6.8bn euro, to meet the German government’s demand that it accepts a share of the expense for storage and disposal of the country’s nuclear waste. The government is insisting that the country’s main utilities companies split the 23.6bn euro cost between them. RWE is seeing something of a recovery so far today, reclaiming 2.6% of yesterday’s 3.5% fall so far. E.ON is also doing well, today’s biggest riser with a 3.5% gain.
**Property Companies Suffer**
The prospect of rising interest rates is making investors skittish when it comes to residential property-focused companies. Vonovia yesterday lost 2% on fears that U.S interest rates will soon rise, impacting on global demand for residential mortgages. Today, however, Vonovia has already reclaimed some 1.6% of yesterday’s loss.
**Banks on the Up**
Yesterday’s big winner was the banking and finance sector, a trend that was mirrored across global equities markets. Inversely to property companies, higher interest rates will help boost banks’ bottom lines. Commerzbank was up 6.64% yesterday and Deutsche Bank 3.76%. However, both banks are seeing gains pared today, with Deutsche Bank slipping close to 2% and Commerzbank down slightly with a 0.3% slip.
**DAX Starts Brightly and Fades**
Today the DAX 30 started off on the front foot before quickly running out of breath. The index is currently slightly down, just beneath breakeven, having lost 0.04% since the open. German economic growth figures reported this morning were disappointing with a more intense slowdown than expected in the 3rd quarter.
**Lufthansa Flying and Adidas Running**
Other companies that have shown a positive start to the day on the DAX are Lufthansa, which is up almost 1.5% and Adidas at 1.2%. Adidas has had a very strong year, up almost 60%, but has seen losses over the past few weeks, partly as a result of fears the U.S. may adopt a more protectionist stance towards foreign imports.