03 July 2020

Daimler Zooms Ahead on its "Ambition 2039" Goal

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News shaping
the markets today

     

What’s happening: Daimler AG announced plans to expand its strategic partnership with the Chinese battery cell manufacturer Farasis Energy (Ganzhou) Co., Ltd, by acquiring an equity stake in the company.

What happened: The maker of the Mercedes-Benz is taking another major step towards its “Ambition 2039” CO2-neutral mobility goal by acquiring a stake of about 3% in the Chinese company to manufacture highly advanced cell technologies for reducing charging time and increasing vehicle range.

The latest announcement comes on the heels of the German luxury carmaker’s CEO warning of painful cutbacks through the coronavirus-led economic crisis.

Why it matters: Daimler’s CEO Ola Kallenius said on Wednesday that the pandemic, which has forced various companies to close their manufacturing units and showrooms across the world, will require more restructuring than previously planned.

The German auto maker, along with its peers Volkswagen and BMW, are on course to reporting losses for the second quarter.

Although the German auto industry has improved slightly, with a rebound in demand in countries like China and France, various firms still consider the present situation as “very pessimistic,” according to the Munich-based economic research organisation Ifo Institute. The group also reported a decline of 4 points of its employment indicator to a reading of -54.4 in June.

As part of the partnership with Daimler, Farasis Energy will build a battery cells plant to meet the projected rise in demand for Mercedes-Benz vehicles, which will also create around 2,000 new jobs.

Daimler Greater China announced plans to invest millions of euros for the IPO of Farasis, which will give the German company an option of nominating its member for a seat on the Chinese firm’s supervisory board.

Board member of Daimler AG Markus Schäfer said, “We are very pleased to further expand our partnership with Farasis in taking a decisive step within the implementation of our electric strategy ‘Electric first’. By strategically expanding our business relationship, we are pushing the electrification of our model portfolio ahead.”

What to watch: By expanding its partnership with the Chinese company, Daimler expects to achieve its ambitious goal of CO2-neutral mobility in less than 20 years. While this may excite investors, there are concerns around the company’s near-term prospects amid the pandemic, and all eyes will be on the upcoming second-quarter results.

The Markets Today

     

The Australian dollar will be in focus today, as investor sentiment improves on upbeat economic reports from the country.

Context: The Aussie gained against the US dollar this morning, extending gains for the fourth day in a row, as investors cheered news of a record surge in the country’s retail sales and of the composite PMI returning to the expansion zone.

Details: Australia recorded its strongest retail sales growth in history, of 16.9% in May, versus a preliminary rise of 16.3% and a 17.7% decline in the previous month.

The country’s composite PMI returned to the expansion zone of above 50 points after five months. The Commonwealth Bank composite PMI rose to 52.7 in June, surging from May’s reading of 28.1. The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) also climbed to 35.5 in June, from a reading of 24.9 in May.

Market sentiment was also supported by the Caixin China general services PMI recording the highest growth in over 10 years and the US nonfarm payrolls rising by a record 4.8 million jobs in June.

The Aussie rose 0.25% to 0.69387 versus the greenback in the European session today, after closing at $0.6925 in the previous forex trading session.

What to watch: With no major data due from Australia and the US markets closed for the Independence Day extended weekend, investors expect the Aussie to remain elevated today. Traders will also look out for the services PMI and the Reserve Bank of Australia’s interest rate decision next week, which will determine the direction of the AUD/USD forex pair.

Other Markets: European indices were trading higher at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index up by 0.4%, 0.2% and 0.3%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

India’s deposit growth, foreign exchange reserves and bank loan growth.

 

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