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Home / World / European stocks trapped in the crossfire of Trump's Trade War

European stocks trapped in the crossfire of Trump's Trade War



European stocks are trapped in the close combat that broke out between the US and China over trade, and losses rise.

Since President Donald Trump revealed additional tariffs on Chinese imports two weeks ago and pledged additional investment restrictions that prompted an immediate plea of ​​retaliation from Beijing – the Stoxx Europe 600 has lost 4.1 percent and gains that driven by the dovish tone of the European Central Bank a day earlier, nullified.

So far, Trump has paid $ 250 billion of Chinese goods in the pipeline, with tariffs on allied products, including Canada, Mexico, and Japan, already in place. On 22 June, the European Union imposed its own tariffs on US $ 2.8 billion (US $ 3.2 billion) in response to US taxes on its steel and aluminum exports.

Even if the European market has not been spared in this market, the damage is most evident in the automotive, technology and mining industries.

"With fears of a trade war, investors increasingly question the validity of synchronized global growth, which is particularly damaging to the cyclical sectors," said Max Kettner. a strategic asset strategist at Commerzbank AG in London

Tough words become tariffs in the development of trade: Timeline

Assessment of damage

Europe's cars, technicians are the most hit, since the trading tensions in June 15

Source: Bloomberg


While the impact on the economy is hard to quantify, the prospect of an increase in impact is likely given the potential for second-round effects on business sentiment, prices and currencies, according to the Bank of America -Mrill Lynch strategists could reduce US tariffs on European cars by up to 25 percent annually, by at least 0.3 percent, in the euro area's gross domestic product.

Here are more details on the effects for the EU of three sectors:

AUTOMATES AND SUPPLIERS

  • The Stoxx 600 Autos & Parts Index has fallen by 11% within two weeks and has increased the market value of the sector by almost 40% Billions of dollars extinguished; The shares of BMW AG and Daimler AG have fallen by at least 16% since mid-May.
  • Daimler was the first major global corporation to rise above the US trade tensions as a threat to its profits. The warning came before Trump issued a minor threat on June 22 for a 20% tariff on German vehicles if the EU did not eliminate "tariffs and barriers" for US companies.
  • Osram Licht AG, The company that produces lighting for the auto industry, warned of a slowdown in the outlook for the auto industry and said that sales and profits would be lower than previously expected due to possible trade barriers. The gloomy forecast dropped more than 20% on Thursday and has increased its losses since the beginning of the year to more than 50%.
  • "Trade tensions are poison for the German export champions," said Bankhaus Metzler analyst Jürgen Pieper by e-mail.
    • Trump tariffs are likely to come, but – even at 20% – they should not cost German OEMs more than 4% – 6% of their operating income, mainly because of lower sales volumes than they will try to pass on tariffs to customers ; Suppliers will feel about half of it: Pieper
    • By far greater risk would be new tariffs for Europe / China, but these are unlikely: Pieper
  • Volvo Car Group The owner has warned consumers that they will suffer from rising costs if automakers in every market need to build factories to avoid tariffs; he said Volvo and its Chinese brand Geely would be hit when tensions escalate as both companies export and import cars between the US and China.
  • The US contributed 5.6% to Volkswagen AG's brand sales in the five months to May. compared with 14% for BMW, including the Mini Division, and 13% at Daimler's Mercedes-Benz brand.
  • Daimler and BMW, the world's two largest luxury car manufacturers, both have their largest sports utility vehicle factories in the US BMW is the largest US auto exporter by market value, with sales of $ 10 billion in 2017. [19659017] Many suppliers in the sector are also affected. Click here for the supply chain from Daimler and here for the supply chain from BMW.
  • Click here for a Bloomberg Intelligence analysis of the impact of potential tariffs on European car manufacturers.

MINERS & METALS [19659016] The US has set tariffs of 25% on steel and 10% on aluminum; European steel producers are concerned about indirect consequences, such as cheap Chinese metal, which was previously destined for the US and could possibly be diverted to Europe.

  • The CEO of ThyssenKrupp Acciai Speciali Terni said that about 10% of its revenue was risk-free measures taken by the EU to protect producers from a flood of such imports.
  • The EU has expanded its study on possible import restrictions on steel (19659037) by adding two product categories; EU Trade Minister Cecilia Malmstrom said that limits could be introduced by mid-July; Canada is also preparing new measures to prevent a possible flood of steel imports.
  • However, not all bad news for the European steel industry is loud Deutsche Bank:
    • "Should safeguards be implemented, this situation would be jeopardized, and the safeguards could lower the prices of one already high level and lead to further profit improvements, "it said in a report by the European steel industry companies could emerge as" net winners "from the frictions of trade.
  • Steelmakers are also in the limelight due to potential US tariffs on the automotive sector.
  • Overall, the prices of base metals are struggling with fears that a full-scale trade war would dampen demand, especially from China. Copper has fallen 7.8% in the past two weeks, while iron ore has fallen 3% and zinc 9.1%, pushing down global mining stocks, which were among the top performers by mid-June ,
  • ArcelorMittal and Thyssenkrupp AG have lost 13% of steel producers since June 14; Among the global miners, Rio Tinto has fallen 5%, BHP Billiton 3.5%, and Glencore 10%; The recent sell-off has brought the price-earnings ratio of the base resource sector to its lowest level in 12 months.
  • UBS analysts say they prefer the less-leveraged miners BHP Billiton and Rio Tinto Uncertain environment due to the trade dispute and economic issues between the US and China
  • TECHS

    • After the White House revealed a series of new tariffs on Chinese goods, plans this week to limit Chinese investment but chose a less confrontational approach than originally feared. That did not stop tech stocks from falling further.
    • A "trapdoor" has opened up under the sector, said Tom Essaye, a former Merrill Lynch dealer who founded the market newsletter "The Sevens Report"
      • The rhetoric of tariffs has now turned into a tech- He wrote in a letter discussing foreign investment in US technology companies: "The uncertainty surrounding this policy in conjunction with the recent weak gains is troubling investors."
    • The damage was mainly in the semiconductor industry on both sides of the Atlantic in the context of growing concern about supply chain disruption risks.
    • The Stoxx 600 Technology Index and the Philadelphia Semiconductor Index both fell more than 8% in the past two weeks Infineon Technologies AG and STMicroelectronics NV both down 17%
    • "The China tariff situation seems to be a wildcard ge Ruben Roy, Managing Director of MKM Partners, wrote in a memo, stating that there are rules that are expected to come into effect on July 6, and a broad range of experience for the semiconductor industry. "

    – With support from Tom Lavell, Ksenia Galouchko and Kasper Viita


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