European Markets Turn Lower Amid Rising Trade Tensions with China

Bridgette Randall
13 Jun, 2024
Frankfurt

European markets faced headwinds amid interest rate path uncertainty and rising trade tensions with China. 

Benchmark indexes in Paris, London, and Frankfurt fell around 1% after the European Commission imposed additional tariffs on electric vehicles imported from China.

After seven months of investigation, the European Union imposed smaller-than-expected tariffs between 17.4% and 38% on Chinese automakers. 

Beijing is likely to retaliate with its own tariffs on agriculture, meat, and dairy imports from the European Union. 

Despite the additional tariffs imposed by the European Union, Chinese electric vehicle makers are likely to grow their market share in Europe amid rising demand for longer-range batteries and shorter battery recharge times. 

On the economic front, Germany's wholesale price index fell at a slower pace in May, and the eurozone's industrial output shrank in April. 

 

Eurozone Industrial Output Shrank in April

Industrial output in the eurozone rose 3% from a year ago in April, after a revised 1.2% decline in the previous month, Eurostat said in its monthly update. 

On a monthly basis, industrial output fell 0.1%, reversing a downwardly revised 0.5% increase in the previous month. 

Production of capital goods rose at a slower pace of 0.7% compared to 0.9% in March, and industrial output declined, deepening to 0.4% from 0.2%. 

However, energy equipment production rebounded to 0.4% from a decline of 0.1%, durable goods to 0.3% from a fall of 0.6%, and non-durable goods to 3.4% from a fall of 2.7%. 

 

Germany's Wholesale Prices Decline Slowed in May

Germany's wholesale prices in May declined 0.7% from a year ago, following a 1.8% decline in the previous month, Destatis reported Thursday. 

Wholesale prices declined for the 13th month in a row but fell at the slowest pace in the period due to the 13.9% decline in chemical product prices. 

Prices for iron, steel, and ferrous semi-finished metal products dropped 12.1%, and compared to April, these prices fell by 0.5%. 

Grain, raw tobacco, seeds, and animal feed declined 5.1% from a year ago but rose 3.4% from the previous month; milk, milk products, eggs, edible oils, and dietary fat prices eased 5.1% from a year ago. 

However, prices for fruits, vegetables, and potatoes increased by 6.4%; tobacco products increased by 5.4%; and sugar, confectionary, and baked products advanced by 7.2%. 

 

Europe Indexes and Yields

The DAX index decreased by 1.2% to 18,417.31; the CAC-40 index fell by 1.4% to 7,757.89; and the FTSE 100 index declined by 0.5% to 8,174.73. 

The yield on 10-year German bonds edged lower to 2.54%. French bonds inched lower to 3.18%; the UK gilts edged lower to 4.18%; and Italian bonds decreased to 3.97%.

The euro edged higher to $1.079; the British pound inched higher to $1.277; and the U.S. dollar weakened to 89.65 Swiss cents.

Brent crude decreased $0.47 to $82.12 a barrel, and the Dutch TTF natural gas rose by €1.33 to €36.29 per MWh.

 

Europe Stock Movers

Automakers in Germany, France, and Italy declined after the EU imposed additional tariffs on Chinese electric vehicles. 

Mercedes-Benz Group fell 1.9% to €63.55, Volkswagen Group plunged 3.7% to €105.55, and Stellantis eased 2.0% to €19.82. 

Wise PLC tumbled 11.5% to 745.0 pence after the international money transfer service provider targeted lower underlying income growth in the current year. 

Revenue in the fiscal year 2024 ending in March soared to £1.05 billion from £846.1 million, and pre-tax profit surged 229% to £481 million. 

The company estimated organic earnings growth in the current fiscal year to range between 15% and 20%. 

Crest Nicholson dropped 11.4% to 213.40 pence after the UK-based home builder swung to a net loss in the first half and lowered its annual earnings outlook again. 

Revenue in the first half fell to £257.5 million from £282.7 million, reflecting fewer new home bookings at the beginning of 2024. 

Net income in the first half ending on April 30 swung to a pre-tax loss of £30.9 million compared to a pre-tax profit of £28.4 million a year ago. 

The home builder lowered its 2024 pre-tax profit outlook to between £22 million and £29 million, from the previous range between £45 million and £50 million released in November. 

The company completed 788 homes in the first half, compared to 894 homes a year ago. 

The board declared an interim dividend of 1.0 pence per share, compared to a dividend of 5.5 pence per share a year ago.