Here's What Investors Are Saying About the Trump/Juncker Meeting
(Bloomberg) -- Equity markets in Europe cheered a move by the U.S. and the European Union to defuse trade tensions, which investors and analysts see as an encouraging sign for tariff-hit stocks while also noting that negotiations are just beginning.
The Stoxx 600 automobiles & parts index gained as much as 2.3 percent after President Donald Trump and European Commission President Jean-Claude Juncker agreed to put car tariffs on hold. The auto sector plunged 2.9 percent on Wednesday after Fiat Chrysler Automobiles NV and General Motors Co. both reduced their guidance.
Here’s what investors and analysts had to say about the latest tariff developments.
Bankhaus Metzler automotive analyst Juergen Pieper, by phone
- “The news is certainly positive and boosting European car shares today, even though I don’t 100% trust this to be the end of the story. The news flow on tariffs has been very volatile and I think a trade war is not off the agenda yet.”
Commerzbank, in a note
- “Does that mean the market can breathe a sigh of relief as the trade war is over? I am skeptical and fear that this is also a question of political calculation. It is positive that no new tariffs between the EU and the U.S. are going to be imposed despite the fact that the EU will maintain its 10% tariffs on U.S. cars which was a thorn in Trump’s side and that the EU and U.S. want to work on reducing existing trade restrictions. However, I can hardly imagine that the issue has been solved thanks to a few EU imports of soy beans and liquid gas.”
Sylvain Goyon, head of strategy at Oddo & Cie, in a message
- While the initial reaction for risky assets is positive, no effective decision has been taken and the negotiation process has just started. He adds that “volatility linked to this topic is here to stay” and “differences” over auto and car parts aren’t resolved yet, while the steel and aluminum tariffs are still ongoing. The outcome is “an encouraging sign” that needs to be confirmed by some similar decisions on U.S./China, which seems unlikely in the short term.
Daiwa Capital Markets, in a note
- The U.S.-EU trade talks appeared “more conciliatory than markets had expected.”
- “What feels like a notable victory for the EU side, Trump and Juncker agreed to put on hold increases in import duties eliminating the possibility of the US proceeding with its threat to levy substantial tariffs on auto imports from the EU.”
Evercore ISI, in a note
- Developments are “a strong short-term market positive” though remaining alert “to the non-trivial possibility that negotiations fall apart.” On the auto front, this is a very positive while noting that first comments were “non-auto industrials” and broad bilateral agreements can take years.
- No immediate EU/U.S. tariffs is “a good thing” with the market pricing in 50%-60% probability of trade-war in autos as of yesterday. “All negative earnings aside, we would expect the broad sector to bounce today given negative positioning.”
Guillermo Hernandez Sampere, head of trading at MPPM EK
- “There’s short-term relief until the next chapter will be opened. We need to get used to this form of "negotiations.” The positive thing is the reaction of U.S. entrepreneurs to support free and global trade. But again, as long as this uncertainty hangs like a Damocles sword over markets, those hiccups will return and undermine the economic outlook."
Read more on the U.S./EU ceasefire in their trade spat: Carmakers Surge After Trump Agrees to Put Auto Tariffs on Hold
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