Stocks in the automotive industry surged in Europe as President Donald Trump hinted at potential exemptions for certain car companies from tariffs. This news led to a 2.5% jump in Europe’s Stoxx 600 autos and parts index on Tuesday morning, with hopes of a reprieve for the global automotive sector.
In a speech from the Oval Office, Trump mentioned his intention to assist some original equipment manufacturers (OEMs) by allowing them more time to shift their production to the U.S. This comes after the Trump administration imposed a 25% charge on all imported foreign cars, with plans to implement tariffs on some auto parts by May 3.
Shares of Milan-listed Stellantis rose by 5%, French car parts supplier Valeo was up by 4.9%, and German auto giant Volkswagen saw a 3.3% increase. Analysts at Citi noted that auto companies are holding off on revising financial guidance, likely in anticipation of changes to the tariff regime.
Meanwhile, the luxury sector faced challenges as LVMH reported a 3% decline in first-quarter sales, missing analyst expectations. The decline was particularly evident in the wines and spirits business, with weaker demand in the U.S. and China affecting cognac sales. This unexpected drop led to LVMH briefly losing its position as the world’s largest luxury firm to Hermès.
In the UK, the labor market saw a slight uptick in the employment rate, with wage growth remaining strong. Despite a decrease in payrolled employees and sluggish labor market activity, wage growth excluding bonuses reached 5.9% from December to February.
Federal Reserve Governor Christopher Waller expressed optimism that inflation from tariffs would be temporary and discussed the potential impact on interest rates. He emphasized the importance of considering different scenarios related to tariffs and their implications for economic growth.
As European markets opened, expectations were mixed, with the UK’s FTSE 100 index predicted to open higher, Germany’s DAX up by 15 points, France’s CAC down by 40 points, and Italy’s FTSE MIB higher by 135 points. Earnings reports from Ericsson and Publicis, along with data releases on European industrial production and economic sentiment surveys, were anticipated on Tuesday.
