EUROPEAN EQUITY UPDATE: Stocks sell off as Trump tariffs hit risk

STOXX 600: -1.4%

• European bourses opened lower across the board following a dire APAC session as risk is hit by US President Trump's imposition of tariffs on Canada, Mexico, and China, whilst also keeping the EU in its sight. Broad-based losses are seen across the majors.


• According to BBC, tariffs on the UK have not been ruled out, whilst suggesting the EU will "definitely" face import taxes "pretty soon."


• EU leaders to meet on Monday talk defence; no specific discussion on US tariffs expected but issue likely to be raised, according to an official cited by CNBC. "There’s a consensus in the European Union that one way to mitigate trade tensions with the US will be by increasing energy purchases." The source added, "There’s a realization that a trade confrontation with the EU is approaching."


• ECB's Villeroy meanwhile suggested US President Trump's tariffs will increase economic uncertainty, added that "it is a very worrying development", and "there will likely be further rate cuts".


• A full Newsquawk summary of the tariffs, views, and market implications is available on the headline feed.


• European bourses clambered off worst levels since the open despite a lack of macro fresh catalysts.


• EZ Final Manufacturing PMIs: Revisions and commentary mixed; ultimately had no impact on assets.


• EZ Inflation: Flash CPI printed mostly above expected - for headline and super-core, whilst the core printed in line. Services inflation meanwhile dipped a touch from the prior (3.9% vs prev. 4.0%). No major reaction seen across stocks.

Sectors: Negative

• Sectors are lower across the board with a clear defensive bias.


• The worst hit sectors are characterised by the most tariff-prone sectors: Autos & Parts, Tech, Industrial Goods


• Analysts at ING highlighted that “Industries like automotive and manufacturing, which are deeply integrated with US supply chains, will face increased costs and disruptions since many parts cross the border multiple times before becoming final product.”


• Defensive sectors are cushioned and see shallower losses: Telecoms, Utilities, Optimised Personal Care Drugs & Grocery and Media.

European Bourses: DAX 40 -1.9%, CAC 40 -1.9%, FTSE 100 -1.3%

• Broad-based losses are seen across the majors.


• 
  DAX 40: Gapped lower under 21,500 (vs 21,700+ close on Friday). Autos sector clearly lags: Daimler Trucks -5.5%, Volkswagen -5.2%, Mercedes-Benz -4.1%, Porsche -4.1%, Continental -4.0%, BMW -3.9%.


• 
  CAC 40: Opened just under 7,800 after testing levels near 8,000 on Friday but clambered off worst levels this morning. Luxury weighed on by downbeat Chinese sentiment amid Trump's tariffs and softer-than-expected Chinese Caixin Manufacturing PMI, ahead of Mainland China's return tomorrow. Worst performing stocks include Stellantis -5.9%, STMicroelectronics -4.5%, Kering -3.7%.


• 
  FTSE 100: Pressured by commodity stocks amid the implications of Trump tariffs on industrial demand.

US Equity Futures: ES -1.7%, NQ -1.9%, YM -1.4%, RTY -2.2%

• Losses seen across US futures amid the risk aversion and potential implications of a potential trade war after Trump's levies announced over the weekend.


• Economy-geared RTY suffers the deepest losses, closely followed by the Tech-laden NQ, with NVIDIA -3%, Apple -2.3%, Tesla -2.5% pre-market.


• Analysts at Goldman Sachs suggest “While the outlook is unclear, we think the Canada- and Mexico-focused tariffs are likely to be short-lived. We previously estimated that a long-term 25% tariff on imports from Canada and Mexico would raise core PCE prices by 0.7% and hit GDP by 0.4%. We expect to update these rough estimates and our forecast in light of the new tariff details.”


• ING warns that “Industries like automotive and manufacturing, which are deeply integrated with US supply chains, will face increased costs and disruptions since many parts cross the border multiple times before becoming final product.”

03 Feb 2025 - 10:20- EquitiesData- Source: Newsquawk