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Research Market strategy
by Swissquote Analysts
Morning News

Trump Administration Delays Decision on Car Tariffs

Topic of the day

The Trump administration has put off a final decision on whether to impose broad tariffs on automobile and auto-part imports for about six months. President Trump was facing a deadline this week on whether to impose tariffs following a report from the Commerce Department about the national-security risks of automotive imports. The major parts of the U.S. auto industry are united in opposing the tariffs, and industry officials were expecting a delay rather than a move to impose tariffs. Mr. Trump has repeatedly warned he could impose tariffs on cars produced by major trading partners including the European Union and Japan, and the administration has sought to use the pressure from that threat to negotiate bilateral trade agreements. Mr. Trump faces broad opposition from the industry and lawmakers on the tariffs, as well as legal challenges to his use of the national-security law known as Section 232. The law allows for an additional 180 days for negotiations with trading partners, following a 90-day decision window for the president that closes this week. The Trump administration is likely to formalize the delay in the coming days. It wasn't immediately known if the upcoming statement would detail possible tariffs or quotas or the trading partners that could be hit by the penalties.

Swiss stocks

After a day of ups and downs, the SMI closed up 0.8 percent on 9,481 points Wednesday. The market abruptly turned positive in the afternoon on news that the US would impose no car tariffs on Europe at present, firing hopes of a conciliatory end to the US-European trade conflict. The euro’s subsequent upward surge against the Swiss franc also helped the Swiss market. Lafargeholcim climbed 2.7 percent on positively received first-quarter figures, including high profitability across all business segments and an optimistic outlook. Analysts said the firm was on course to achieve its 2019 goals, with EBITDA up 20.6 percent on a compative basis and debt reduction underway. Zurich Insurance rose 1.6 percent after analysts began tracking the stock with an "outperform" recommendation, saying the group was focusing activities more on increasing dividends for investors. Nestle rose 1.3 percent on a media report that it was starting talks to divest its skin care segment, worth an estimated $ 10 billion.

International markets

Europe

Figures showed Germany's economy expanded 0.4% in the first quarter, after Europe's largest economy narrowly avoided a recession late last year. Some analysts remain wary that a slowdown in business confidence around the world following the latest tariffs will hurt growth more in the future. The Stoxx Europe 600 edged up 0.5%. Credit Agricole's first-quarter net profit fell 11%, undershooting analysts' expectations but the French bank remained confident in its medium term plan. Credit Agricole fell 2,6%. Shares of car makers and suppliers trade higher after the Trump administration decided to delay a decision on whether to impose tariffs on European car imports by six months. Volkswagen shares are up 3.7%, while German competitors BMW and Daimler trade 3.3% and 2.6% higher respectively. French auto-parts supplier Michelin is up 2%, while Germany's Continental and Schaeffler are 1.9% and 1.0% higher. The Stoxx Europe 600 Autos & Parts trades 1.6% higher.

United States

U.S. stocks climbed, advancing for a second consecutive session on hopes that thawing trade tensions will boost the outlook for the world economy. The Dow Jones Industrial Average was up 173 points, or 0.7%, at 25705 intraday. The S&P 500 added 0.8%, moving 3% below its April 30 record. It remains up 14% for the year. The tech-laden Nasdaq Composite added 1.3%. Stocks erased declines from earlier in the day after Treasury Secretary Steven Mnuchin said U.S. negotiators are likely to travel to Beijing soon and reports emerged that the Trump administration is putting off a final decision on whether to impose broad tariffs on automobile and auto-part imports. Among individual stocks Wednesday, Macy's swung between gains and losses and was recently down 1.3% after the retailer posted stronger-than-expected sales growth in its latest quarter. Investors will also parse coming earnings from Walmart and other sellers of consumer goods for possible clues about how the companies plan to handle 25% tariffs on more than $40 billion of goods that are imported from China and directly purchased by U.S. consumers. Internet stocks extended a recent rebound, with Google parent Alphabet rising more than 4% after Deutsche Bank increased its price target on the stock and Facebook and Netflix also climbing about 3%.

Asia

Asian markets were mixed in early trading Thursday. Any gains were slight, though New Zealand continues to outperform in rising 0.5% and hitting fresh record highs. Meanwhile, Indonesia's benchmark has started higher after hitting another 2019 low yesterday. Conversely, benchmarks in Japan and the Philippines are down more than 0.5% as both continue their recent struggles; the Nikkei has risen just twice the past 3 weeks while the PSEi has shed 6% in the last 5 weeks.

Bonds

In one sign of heightened growth worries, bond yields slid with investors seeking safety in U.S. Treasurys. The yield on the benchmark 10-year U.S. Treasury note fell to 2.384%, according to Tradeweb, from 2.421% a day earlier. Bond yields fall as prices rise.

Analysis

Dt. Bank raises Alphabet target to 1.400 (1.300) USD - Buy
Barclays raises STMicro target to 19 (18) EUR - Overweight
IR downgrades Utd. Internet target to 46 (47) EUR - Buy
IR raises K+S target to 18,70 (17,90) EUR - Hold


Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.

 
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