European auto stocks break down as Trump unleashes 25% tariff on non-US made vehicles

EU mid-market update: European auto stocks break down as Trump unleashes 25% tariff on non-US made vehicles; Norges holds rates steady yet again and turns hawkish.

Notes/observations

- European equities opened sharply lower, led by a plunge in auto stocks after Trump’s overnight bombshell of permanent tariffs on autos not made in the US, effective April 2nd. Starting at 2.5% and scaling to 25% with no exceptions. German automakers, which are critical to EU-US trade, bore the brunt: Porsche, Mercedes, BMW, and VW slumped, dragging the autos sector to December lows. EU is preparing retaliatory tariffs (~20%), amplifying fears of a tit-for-tat spiral. Tech shares (ASML, STMicro) also weakened amid broader risk-off sentiment.

- Few hours ago, Pres Trump has also stated that if the EU and Canada collaborate to economically harm the US, he will impose significantly larger tariffs on both entities than those currently planned. He emphasizes that these measures would be taken to protect the interests of the US, which he describes as the greatest ally both the EU and Canada have ever had.

- Norges Bank held rates for the tenth straight meeting, citing higher-than-expected inflation. Annual inflation rose to 3.6% in Feb (prev 2.3%), the highest since Apr 2024. Policymakers see a likely rate cut later in 2025 but warn against premature easing. Staff forecasts suggest a cut to 4% by year-end, with a gradual decline thereafter.

- Amid safe haven flows, German 10-year Bund yields dipped below 2.8%, while US Treasury yields climbed. Silver topped $33.70/oz, while WTI crude eased to $69/bbl, though supply risks from Iran and Venezuela sanctions propped up prices.

- Asia closed mixed with KOSPI underperforming -1.4%. EU indices -0.3% to -1.1%. US futures +0.0-0.2%. Gold +0.6%, DXY 0.0%; Commodity: Brent -0.2%, WTI -0.2%; Crypto: BTC -0.5%, ETH -1.7%.

Asia

- China Feb Industrial Profits YTD Y/Y: -0.3% v -3.3% prior (Dec).

- China Vice Premier Ding Xuexiang noted that the domestic economy was growing steadily with a stronger outlook; Had a good start this year and would implement more pro-active macro policies.

Global conflict/tensions

- US Sec State Rubio stated that Russia-Ukraine agreement was 'in principal'; Russia detailed number of conditions afterwards, which US was going to evaluate.

- Treasury Sec Bessent stated that might get Ukraine signatures next week on economic partnership. Reiterates that Trump would not hesitate on raising Russian sanctions if it gave him a negotiating advantage.

Europe

- ECB’s Centeno (Portugal, dove) stated that could expect further rate cuts. Did not see the case for pausing sooner than previously expected.

Americas

- Pres Trump signed EO on auto tariffs at 25% for all cars and light trucks not made in US (raised from the current base tariff of 2.5%); Other countries "would be pleasantly surprised" on April 2nd when we announce reciprocal tariffs. Reciprocal tariffs would be very lenient; In many cases, less than those charged to the USA.

- Canada PM Carney commented that the 25% auto tariffs were a 'direct attack' on Canadian workers; Tariffs would "hurt us" but would defend our country; Had ‘options’ on retaliatory measures. Tariffs were a violation of the USMCA Trade Agreement; Trump has betrayed USMCA.

- Trump also suggested "a little reduction" in tariffs if China agrees to a deal on TikTok in the US.

- US Congressional Budget Office (CBO) said to note that Treasury Dept’s ability to borrow would probably be exhausted in Aug or Sept unless the limit on how much the Federal govt can borrow was increased.

Speakers/fixed income/FX/commodities/eratum

Equities

Indices [Stoxx600 -0.70% at 544.90, FTSE -0.69% at 8,629.54, DAX -1.00% at 22,619.33, CAC-40 -0.73% at 7,972.14, IBEX-35 -0.51% at 13,357.70, FTSE MIB -0.47% at 38,875.00, SMI -1.17% at 12,787.40, S&P 500 Futures +0.07%].

Market focal points/key themes: European indices open lower across the board and remained under pressure through the early part of the session; renewed tariff concerns seen keeping risk appetite at bay; among sectors managing gains are consumer discretionary and utilities; sectors dragging to the downside include industrials and materials; automotive subsector particularly hit following Trump announcement to tariff car imports; MFE confirms takeover offer for Proseiben; reportedly Lyft among potential bidders for FreeNow; earnings expected in the upcoming US session include Winnebago and TD Synnex.

Equities

- Consumer discretionary: Next [NXT.UK] +7.0% (FY results, raises guidance), H&M [HMB.SE] -1.0% (results; earnings call comments), Jungheinrich [JUN3.DE] +3.0% (FY results, raises rev guidance).

-Financials: ING Groep [INGA.NL] +0.5% (analyst upgrade).

- Industrials: Daimler Truck [DTG.DE] -1.0%, BMW [BMW.DE] -4.0%, Continental [CON.DE] -3.0%, Mercedes [MBG.DE] -1.5%, Volkswagen [VOW3.DE] -2.5%, Ferrari [RACE.IT] -3.5%, Aston Martin [AML.UK] -5.0%, Porsche [P911.DE] -1.5% (Pres Trump: Signs EO on auto tariffs at 25% for all cars and light trucks not made in US (raised from the current base tariff of 2.5%) - Technology: SUSS Microtec [SMHN.DE] +1.0% (FY results) - Telecom: Prosiebensat.1 [PSM.DE] -10.5% (MediaForEurope (MFE) confirms voluntary public takeover bid at price equal to the 3 months volume-weighted average; ~78% of offer price expected to be paid in cash and ~22% in newly-issued MFE A shares).

Speakers

- ECB's Kazaks (Latvia) commented that could probably keep cutting rates if baseline held.

- ECB's Wunsch (Belgium) noted that ECB was facing a difficult balancing act as tariffs would be bad for growth and would be inflationary. A pause in easing should be on the table at the April meeting.

- BOE’s Dhingra (dovish dissenter) noted that she higher prices in short term as tariffs rise, but cooler in long term.

- Norway Central Bank Policy Statement noted that a restrictive monetary policy was still needed. Same stance warranted for somewhat longer. Rate would most likely be reduced in course of 202. Rate path consistent with a decline in policy rate to 4% by end of year.

- Norway Central Bank (Norges) Gov Bache post rate decision press conference noted that the economy had not evolved as envisioned.

- Poland Central Bank (NBP) Gov Glapinski stated that saw no scope to change interest rates.

- France Stats Agency INSEE: 2024 public deficit at 5.8% v 6.0% target.

- France Fin Min Lombard stated that the country was at risk if it failed to cut the deficit. Would reassess economic growth outlook mid-April

- President Trump social post stressed that If the European Union worked with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned would be placed.

- German Econ Min Habeck stated that needed to deliver a decisive response from EU on tariffs and must be clear that we will not back down to US. Would support EU Commission efforts to find a solution via negotiations.

- UK Chancellor (Fin Min) Reeves stated that did not want to do anything that could escalate trade situation (regarding Trump tariff announcement on autos).

- Austria WIFO Think Tank Quarterly Economic Forecasts which cut the 2025 GDP growth forecast from +0.6% to -0.3%while maintaining 2026 GDP growth at 1.2%. WIFO raised 2025 CPI from 2.0% to 2.7% and raised 2026 CPI from 2.0% to 2.1%.

Currencies/fixed income

- USD was steady as US-EU bond yields diverged during the session. FX price action was listless with an empty economic calendar during the session. Trump tariffs remained the main focus point at this time.

- EUR/USD at 1.0770 as ECB speak kept an April rate cut on the table. Dealers noted that ECB easing bets saw an 80% chance of a cut in April.

- NOK currency was firmer after Norway Central Bank left its Deposit Rate unchanged. Statement pushed back the potential 1st rate cut into later this year.

- 10-year German Bund yield at 2.77% and 10-year Gilt yield at 4.76%. 10-year Treasury yield at 4.38%.

Economic data

- (FI) Finland Mar Consumer Confidence: -8.2 v -9.0 prior; Business Confidence: -5 v -6 prior.

- (FI) Finland Feb House Price Index M/M: -0.5% v -0.6% prior; Y/Y: -1.4% v +0.1% prior.

- (SE) Sweden Feb Household Lending Y/Y: 1.7% v 1.8% prior.

- (NO) Norway Feb Trend Unemployment Rate: 3.9% v 3.9% prior.

- (DK) Denmark Feb Retail Sales M/M: 0.8% v 0.2% prior; Y/Y: % v 5.0% prior.

- (TR) Turkey Feb Unemployment Rate: 8.2% v 8.4% prior.

- (ES) Spain Feb Adjusted Retail Sales Y/Y: 3.6% v 2.3%e; Retail Sales (unadj) Y/Y: 0.8% v 2.2% prior.

- (TW) Taiwan Feb Monitoring Leading Indicator: 37 v 34 prior.

- (NO) Norway Central Bank (Norges) left the Deposit Rate unchanged at 4.50% (as expected).

- (EU) Euro Zone Feb M3 Money Supply Y/Y: 4.0% v 3.8%e.

- (AT) Austria Mar Manufacturing PMI: 46.9 v 46.7 prior.

- (IS) Iceland Mar CPI M/M: 0.4% v 0.9% prior; Y/Y: 3.8% v 4.2% prior.

- (ZA) South Africa Feb PPI M/M: % v 0.7%e; Y/Y: % v 1.3%e.

Fixed income issuance

- None seen.

Looking ahead

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (UK) DMO to sell £3.0B in 4.0% Oct 2031 Gilts.

- 06:00 (PL) Poland to sell Bonds.

- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €7.0B in 6-month Bills.

- 06:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 06:40 (UK) BOE 7-day short-term repo operation (STR).

- 07:00 (CZ) Czech Republic to sell CZK5.0B in 6-month Bills.

- 07:00 (RO) Romania to sell RON500M in 6.75% Apr 2035 Bonds.

- 07:00 (BR) Brazil Central Bank Quarterly Monetary Policy Report.

- 08:00 (BR) Brazil Mar mid- IBGE Inflation IPCA-15 M/M: 0.7%e v 1.2% prior; Y/Y: 5.3%e v 5.0% prior.

- 08:00 (BR) Brazil Feb Central Govt Budget Balance (BRL): No est v 84.9B prior.

- 08:00 (MX) Mexico Feb Trade Balance: -$0.5Be v -$4.6B prior.

- 08:30 (US) Q4 Final GDP Annualized Q/Q: 2.3%e v 2.3% prelim; Personal Consumption: 4.2%e v 4.2% prelim.

- 08:30 (US) Q4 Final GDP Price Index: 2.4%e v 2.4% prelim; Core PCE Price Index Q/Q: 2.7%e v 2.7% prelim.

- 08:30 (US) Feb Advance Goods Trade Balance: -$138.0Be v -$153.6B prior (revised from -$155.3B).

- 08:30 (US) Feb Preliminary Wholesale Inventories M/M: 0.7%e v 0.8% prior; Retail Inventories M/M: +0.6%e v -0.1% prior.

- 08:30 (US) Initial Jobless Claims: 225Ke v 223K prior; Continuing Claims: 1.89Me v 1.892M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 21st: No est v $641.9B prior.

- 09:00 (UK) Daily Baltic Dry Bulk Index.

- 09:00 (ES) ECB’s De Guindos (Spain).

- 09:00 (FR) ECB's Villeroy (France) in Brussels.

- 10:00 (US) Feb Pending Home Sales M/M: +1.0%e v -4.6% prior; Y/Y: No est v -5.2% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Mar Kansas City Fed Manufacturing Activity: -5e v -5 prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 12:15 (BE) ECB's Wunsch (Belgium) in Brussels.

- 12:45 (ES) ECB's Escriva (Spain) in Brussels.

- 13:00 (US) Treasury to sell 7-Year notes.

- 13:30 (DE) ECB’s Schnabel (Germany).

- 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 50bps to 9.00%.

- 15:00 (AR) Argentina Q4 Current Account Balance: $0.8Be v $1.4B prior.

- 15:00 (AR) Argentina Jan Economic Activity Index (Monthly GDP) M/M: 0.2%e v 0.5% prior; Y/Y: 5.0%e v 5.5% prior.

- 15:05 (EU) ECB chief Lagarde.

- 16:30 (US) Fed’s Barkin.

- 17:00 (NZ) New Zealand Mar ANZ Consumer Confidence: No est v 96.6 prior.

- 17:45 (NZ) New Zealand Feb Filled Jobs M/M: No est v 0.3% prior.

- 19:30 (JP) Japan Mar Tokyo CPI Y/Y: 2.7%e v 2.9% prior; CPI Ex-Fresh Food Y/Y: 2.2%e v 2.2% prior; CPI Ex-Fresh Food, Energy Y/Y: 1.9%e v 1.9% prior.

- 21:00 (PH) Philippines Feb Trade Balance: -$4.3Be v -$5.1B prior; Exports Y/Y: 3.5%e v 6.3% prior; Imports Y/Y: 9.6%e v 10.8% prior.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years; 5~10 Years and 10~25 Years.

- 22:00 (SG) Singapore Feb M2 Money Supply Y/Y: No est v 6.0% prior; M1 Money Supply Y/Y: No est v 9.3% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.