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The banking and automobile sectors are proving to be the primary laggards today as European indices take a downward turn, with the DAX 30 taking a 0.65% loss into the afternoon having opened down. Today’s main catalysts are the British Conservative government’s policy seemingly heading towards ‘hard’ Brexit, a position expected to be intimated by Prime Minister Theresa May tomorrow, and fresh woes for Italy’s finances. Ratings agency DBRS has cut its rating for Italy’s sovereign credit, a fresh vote of waning confidence in the country’s ability to stabilise its struggling banking sector.
In economic news, national statistics bureau Destatis released data on Germany’s manufacturing employment. The sector showed November figures of year-on-year improvement of 0.7%, amounting to 40,000 jobs.
Deutsche Bank and Commerzbank, the DAX’s two banking sector constituents have taken significant losses today on exposure to Italy. The former is down 2.18% and the latter 2.22%, while elsewhere in the financial sector insurer Allianz has fallen by 0.93%.
The automotive sector is the other where companies are all sustaining a heavy hit to begin the week. BMW is down 1.87%, Daimler, the maker of Mercedes Benz, 1.86% and Volkswagen 1.97%. Trump has made comments threatening BMW with additional tariffs on vehicles to be sold in the U.S.A but produced in Mexico, with the company set to open a factory in Mexico in 2019. All three big German car manufacturers have invested significantly in Mexican manufacturing facilities in recent years with a view to exploiting the cheaper costs base for the production of smaller, cheaper models for sale in the U.S., a major market for them.
Pharmaceuticals company Merck, from another industry Trump has threatened to crack down on in the run up to his inauguration as President later this week, is down 0.97% and chemicals and industrial gases giant Linde has registered a loss of 1.16%.
Today’s strongest riser on the DAX 30 so far has been electric utility RWE with a 1.69% gain. Peer Eon is also up, by 0.86%. Fresenius SE, which suffered significant losses last week after the U.S. unit of Fresenius Medical Care, of which it owns 35%, was subpoenaed in the States, has also seen a gain today, up 1.11%.
