Feb 03 ,2025
Synopsis:
European indices ended in negative territory but off the session's lows. Markets still digesting impact of President Trump imposing 25% tariffs on Mexico and Canada, and 10% tariffs on China even though - following a call with Trump in the afternoon - Mexico President Sheinbaum stated that tariffs will be delayed for a month. Analysts suggest US consumer prices could rise ~0.6% by year-end, with Fed having no reason to cut rates further. Situation remains fluid with Trump also repeating promise to hit EU and impose tariffs on products such as chips, industrial metals and energy. Yet, analysts see Europe raising military spending and ramping up US LNG imports to avoid trade-war spiral. In Europe, Citi sees broad 10% tariff reducing EU GDP by 0.3% over two years. Autos & Parts under intense pressure. JPMorgan in recent note said premium automakers may have an advantage in passing on costs to consumers. Automakers expected to shift production from Mexico and Canada to US. VOW3.GR considering US plant for Porsche and Audi, while STLAM.IM already announced plans for job creation and production changes. Staples also seen impacted. Spirits companies like DGE.LN and CPR.IM seen most impacted. In Food/HPC sector, BEI.GR seen facing highest risk due to heavy reliance on Mexican production for US consumer products. In steel, companies with US-based production like ACX.SM and SSAB.B.SS may benefit, while those exporting to US could be disadvantaged. MT.NA and OUT1V.FH seen negatively affected due to reliance on Mexico-USA and Canada-USA supply chains. However, analysts suggest Europe may avoid escalation through increased military spending and US LNG imports. Market concerns about EU-US trade expected to diminish after Q1 25, with European economic performance likely to be more influenced by domestic factors like ECB policy - with 100bps of easing seen by year-end - and internal competitiveness reforms and political developments in France and Germany rather than trade tensions with US
Focus also on French politics as lawmakers reach the final stage of negotiating a budget agreement. Budget draft will be debated in National Assembly, and Bayrou is likely to pass the bill without a majority using Art.49.3 risking no-confidence on Wednesday.
In macro-news, Eurozone inflation edged up to 2.5% in January from 2.4% in December, remaining above ECB's 2% target for a third consecutive month. While increase exceeded some analysts' expectations, it's seen unlikely to derail ECB's plans for further monetary easing. Core inflation held steady at 2.7% for the fifth consecutive month, with services inflation easing to 3.9%. ECB President Lagarde has indicated the uptick was anticipated and largely reflects base effects from energy prices a year ago. Following January's rate cut to 2.75%, markets expect at least three more cuts in 2025. However, potential US tariffs pose a key risk - while they could slow growth through reduced exports, any retaliatory measures might boost inflation via higher import costs. The dollar's strength could also push up energy costs, potentially complicating ECB's path to 2% target. Yet, analysts still expect slower inflation as Q1 progresses. Final release of manufacturing PMI for January also on the calendar.
On the reporting front, Julius Baer Group (BAER.SW) kicked off the session, posting its FY earnings and also announcing that its Chairman Romeo Lacher is stepping down; in Souhtern Europe, Galp Energia SGPS (GALP.PL) and IBE.SM (Iberdrola) reported their prelim Q4 numbers. In M&A news, Fresenius (FRE.GR) reached an agreement to exit Vamed's international project business in mid of 2025 instead of original schedule by 2026, Verallia (VRLA.FP) noted the BWGI's press release confirming that it is considering a potential tender offer for Verallia shares (without delisting) and Sanofi (SAN.FP) acquired 2.3% of its shares from L'Oréal (OR.FP). Elsewhere, Stellantis (STLA.IM) announced search for new new permanent CEO to be concluded within H1, Porsche (P911.GR) authorized its chairman to enter talks with CFO Lutz Meschke for and early termination of his appointment as member of company's executive board and Unilever (ULVR.LN) is weighing the listing of its ice cream unit on US exchange
Looking ahead to tomorrow's calendars, banks in focus, with UBS Group (UBSG.SW), Intesa Sanpaolo (ISP.IM), Raiffeisen Bank International (RBI.AV), BNP Paribas (BNP.FP) and Unicaja Banco (UNI.SM) posting their updates. Infineon Technologies (IFX.GR), OMV (OMV.AV), Publicis Groupe (PUB.FP), SCOR (SCR.FP), Dassault Systemes (DSY.FP), Amundi SA (AMUN.FP), TomTom (TOM2.NA), Coloplast (COLO.B.DC), DSV A/S (DSV.DC), Addtech (ADDT.B.SS), Billerud (BILL.SS), Kinnevik (KINV.B.SS), Nobia (NOBI.SS), Diageo (DGE.LN), NWF Group (NWF.LN) and Vodafone Group (VOD.LN) are among few other names to issue their most recent earnings reports
Digest:
Sectors - STOXX Europe 600:
Outperformers: Telecom +0.40%, Media +0.08%, Utilities (0.05%), Health Care (0.27%), Insurance (0.61%), Persnl & HHold Goods (0.66%), Food & Beverage (0.68%), Travel & Leisure (0.69%), Real Estate (0.76%),
Underperformers: Autos & Parts (2.39%), Banks (1.78%), Construct & Mtls (1.72%), Chemicals (1.62%), Retail (1.60%), Technology (1.59%), Ind Goods & Svcs (1.33%), Basic Resources (1.13%), Financial Svcs (1.10%), Oil & Gas (0.98%)
Macro:
EU tariffs 'pretty soon' but UK can be worked out - Trump (BBC)
Brussels lowers its expectations for Keir Starmer's Brexit reset (Politico)
Starmer has much to gain from cosying up to Donald Trump (Spectator)
As Germany braces for election, backing the far-right AfD no longer a taboo (Al Jazeera)
France's PM to risk confidence vote with second attempt to force through budget (Guardian)
Tesla sales plummet in France amid backlash against Musk (Telegraph)
Meloni's Albania deportation experiment has failed (EU Observer )
Company news:
Notable Gainers
+11.7% GKP.LN (Gulf Keystone Petroleum £1.88, +0.20) -- Iraq parliament approves compensation plan to resolve Kurdistan oil dispute -- Reuters; Sparebank 1 Markets upgrade
+7.0% SBX.NO (Seabird Exploration NOK6.30, +0.41) -- acquires Energy Drilling Pte Ltd
+6.3% GENL.LN (Genel Energy £0.70, +0.04) -- Iraq parliament approves compensation plan to resolve Kurdistan oil dispute -- Reuters
+5.9% DNO.NO (DNO ASA NOK13.87, +0.77) -- Iraq parliament approves compensation plan to resolve Kurdistan oil dispute -- Reuters; Sparebank 1 Markets upgrade
+0.4% PARKEN.DC (PARKEN Sport & Entertainment DKK135.00, +0.50) -- FY25 outlook
+0.2% G.IM (Assicurazioni Generali €30.66, +0.07) -- UniCredit remains focused on takeover bid for Banco BPM and stake in Commerzbank, and not Generali - Reuters
+0.1% SAN.FP (Sanofi €104.22, +0.12) -- buyback own shares from L'Oreal
Notable Decliners
-28.0% SDY.LN (Speedy Hire £0.20, -0.08) -- FY trading statement
-12.7% BAER.SW (Julius Baer Group CHF55.98, -8.18) -- FY earnings; update on sale of Julius Baer Brazil; Chairman not to stand for re-election
-8.9% FRVIA.FP (Forvia €9.32, -0.90) -- US tariffs potential impact; CIC Market Solutions downgrade
-4.5% VOW3.GR (Volkswagen €94.24, -4.46) -- US tariffs potential impact; France Jan new passenger car registration
-4.2% STLAM.IM (Stellantis €12.35, -0.55) -- US tariffs potential impact; CEO serach update; simplifies its organization
-4.0% VRLA.FP (Verallia €28.66, -1.18) -- notes BWGI's potential tender offer for the company
-3.6% ELUX.B.SS (Electrolux SEK97.52, -3.68) -- US tariffs potential impact
-3.5% RCO.FP (Remy Cointreau €53.45, -1.95) -- US tariffs potential impact
-2.9% MBG.GR (Mercedes-Benz Group €56.92, -1.73) -- US tariffs potential impact; France Jan new passenger car registration
-2.6% CON.GR (Continental €66.88, -1.78) -- US tariffs potential impact
-2.5% BMW.GR (Bayerische Motoren Werke €76.34, -2.00) -- US tariffs potential impact; France Jan new passenger car registration
-2.5% DGE.LN (Diageo £23.61, -0.60) -- US tariffs potential impact
-2.1% SAND.SS (Sandvik SEK224.90, -4.90) -- acquires three US-based CAM resellers; price not disclosed
-1.9% GALP.PL (Galp Energia SGPS €15.83, -0.32) -- prelim Q4
-1.9% MT.NA (ArcelorMittal €23.64, -0.45) -- US tariffs potential impact
EU companies reporting tomorrow:
Benelux: TomTom (TOM2.NA)
DACHs: UBS Group (UBSG.SW), Infineon Technologies (IFX.GR), OMV (OMV.AV), Raiffeisen Bank International (RBI.AV), AT & S Austria Technologie & Systemtechnik (ATS.AV)
France: BNP Paribas (BNP.FP), Publicis Groupe (PUB.FP), SCOR (SCR.FP), Dassault Systemes (DSY.FP), Amundi SA (AMUN.FP)
Nordics: Coloplast (COLO.B.DC), DSV A/S (DSV.DC), Vestjysk Bank (VJBA.DC), Addtech (ADDT.B.SS), Billerud (BILL.SS), Kinnevik (KINV.B.SS), Nobia (NOBI.SS), Nordic Waterproofing Holding (NWG.SS), Bonava (BONAV.B.SS), Sleep Cycle (SLEEP.SS), Tobii (TOBII.SS), Inwido (INWI.SS), eQ (EQV1V.FH), Norsk Titanium (NTI.NO)
Southern Europe: Intesa Sanpaolo (ISP.IM), Unicaja Banco (UNI.SM)
UK: Diageo (DGE.LN), NWF Group (NWF.LN), Vodafone Group (VOD.LN), Alumasc Group (ALU.LN),
Trading Update: Vodafone Group (VOD.LN), Staffline Group (STAF.LN), SCOR (SCR.FP), Bonduelle (BON.FP), Maisons du Monde (MDM.FP), Abeo (ABEO.FP)
Data:
Economics:
Manufacturing PMI Jan
Netherlands 48.4 vs consensus 48.3, prior 48.6
Sweden 52.9 vs consensus 52.2, prior 52.4
Spain 50.9 vs consensus 53.5, prior 53.3
Switzerland 47.5 vs consensus 49.0, prior 48.4
Italy 46.3 vs consensus 46.4, prior 46.2
France 45.0 vs preliminary 45.3
Germany 45.0 vs preliminary 44.1
Eurozone 46.6 vs preliminary 46.1
Norway 51.2 vs consensus 50.2, prior 50.3
UK vs preliminary 48.2
Netherlands Jan preliminary CPI +3.3% y/y vs consensus +3.5%, prior +4.1%
Finland Jan preliminary HICP +1.6% y/y vs consensus +1.3%, prior +1.6%
Austria Jan preliminary CPI +3.3% y/y vs consensus +1.9% and prior +2.0%
Eurozone Jan preliminary CPI +2.5% y/y vs consensus +2.5%, prior +2.4%
core CPI +2.7% y/y vs consensus +2.6% and prior +2.7%
Italy Jan preliminary CPI +1.5% y/y vs consensus +1.0%, prior +1.3%
Markets:
WTI Crude (Mar 25): +$0.30 or +0.41% to $72.83
€-$ +0.0053 or +0.52% to 1.0306
£-$ +0.0106 or +0.86% to 1.2420
€-£ (0.0113) to 0.8304
S&P 500 (0.63%)
Performance year-to-date
FTSE 100: +4.91%
DAX: +7.51%
CAC: +6.31%
MIB: +5.79%
Stoxx 600: +5.27%
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