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MORNING BID EUROPE - Risk assets are trampled under Trump's tariffs for everyone
Trying to stay up-to-date with the latest news on tariffs? This daily news digest provides a quick overview of global trade headlines. Tariff Watch is free. Sign up here. Wayne Cole gives us a look at what the future holds for European and global markets. The week has started off rocky in Asia, as stocks have fallen across the board due to a rush to risk. Bonds extended their rally while gold reached another record. The mood was already fragile before the announcement of U.S. Tariffs on Wednesday, but President Trump exacerbated it by telling reporters aboard Air Force One that levies will cover all countries - not just select ones. He is known to make these comments in the early hours of Asia's trading day, when liquidity is low. This causes a lot of waves. Nikkei was the worst of the lot, with a drop of 3.8%. It was the biggest daily fall in six months. Almost all of Asia ended up in the red. Nasdaq's futures fell 1.3%, and major European stock futures were not far behind. Analysts were convinced by Trump's apparent indifference towards rising auto prices. Goldman Sachs expects that reciprocal tariffs across all U.S. trade partners will average 15%. Goldman Sachs increased the likelihood of a U.S. economic recession from 20% to 35% in the same note. The "R"-word is now on everyone's lips. Investors expect this slowdown will outweigh the inflationary effect of tariffs, and push the Fed to cut rates by 75 basis point this year. However, it would take a significant increase in unemployment for such action to be warranted. The markets have 60 bps of ECB easing for this year, and 50 bps of Bank of England easing. Bond investors were comforted by the thought of this easing and the flight to safety. The yields on ten-year Treasury bonds fell from 4.40% to 4.21% last Thursday, a drop of nearly 4%. The question is whether the rally will continue when the inflation data begin to show the effect of tariffs. As of now, lower yields are pushing the dollar against the yen and the euro, while the pound and the Euro have also risen. The yields are important, but it could be harder for the US dollar to maintain its status as a safe haven when the White House is at the center of the turmoil. Market developments on Monday that may have a significant impact - German retail sales data, CPI and imported prices Speakers from Riksbank, Norges Bank Dallas Fed Manufacturing Survey for March
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Where's my car, dude? Toyota hybrid buyers facing long waits
Four people with knowledge of the situation say that Toyota's gasoline/electric hybrids are in high demand, and suppliers are struggling to keep up. This has led to parts shortages and long waits for buyers. Two people said that Toyota dealers in major markets such as the U.S.A., Japan China and Europe have low stock of hybrids. Toyota, which is the leader in hybrids, faces a major challenge from this surge in demand. It also validates the Japanese automaker’s bet in the technology, despite predictions from some competitors that battery-only vehicles would wipe hybrid demand out. LMC Automotive's data shows that global sales of hybrids and plug-in models have nearly tripled in the last five years. One person said that Toyota customers in Europe are currently waiting 60-70 days on average for new hybrids. This is about twice as long as it will be by 2020. Toyota says that the Yaris Cross Hybrid and RAV4 Plug-in Hybrid are the vehicles with the highest demand in Europe and the shortest supply. A Toyota website shows that buyers in Japan wait between two and five months to receive many models. One person reported that Prius hybrids had been sold out at a dealership on the West Coast of the United States by mid-February, and only a few Camry hybrids remained. Another person stated that delivery times in India have improved from last year, but still range between two and nine months, depending on the model. Ten industry figures were interviewed, including Toyota employees and suppliers. They described the bottlenecks that are affecting the supply chain for hybrid vehicles. Toyota has not previously disclosed details of the parts or suppliers involved and the measures it is considering in order to relieve the pressure on one market. Toyota stated in a press release that the demand for hybrid cars had increased "significantly" in the last year, in all regions. It was responding by increasing production. The automaker claimed to have improved its vehicle delivery lead times over the last year. The report stated that "currently, the production capacity of hybrid parts and components at our suppliers' and in-house part manufacturing is aligned with our annual production plan and our vehicle assembly capacities." Snarls for Supply Some customers are frustrated by the delivery times. Saugata Dasgupta is an Asia Development Bank executive based in New Delhi. He told us he had ordered a hybrid Toyota Innova Hycross in January 2023. He learned in August 2024 from the dealer that he would have to wait another 25-30 weeks. Another email arrived this month: He will need to wait 15 to 25 more weeks. Dasgupta claimed that he had given up on waiting by then and purchased a gasoline powered model from the local automaker Mahindra & Mahindra. Two of the people who spoke to us were anonymous because they were not authorized to reveal the information. One person said that a shortage of magnets in parts for Aisin Corp was a major problem. This person stated that Aisin, a major component maker for the Toyota Group, was unable to obtain rotors or stators from their suppliers. As a result of this, delivery of hybrid motors by Toyota was delayed. The magnets were sourced in Japan and China but the supply problem for Aisin, according to the person, was global. Another person stated that Denso's inverters were also delayed due to bottlenecks with suppliers at the second and third tiers. Inverters are used to convert the battery current into a form that can be controlled by the motor. Two people said that Toyota is looking at other suppliers than Denso to meet its component needs, and may even consider manufacturing inverters there. Toyota didn't address questions about specific suppliers. Aisin Denso refused to comment. Last year, it was reported that Toyota plans to convert the majority of its line to hybrid vehicles. This could increase pressure on suppliers. Addition of Capacity Varinder Waddhwa is a vice-president at Toyota Kirloskar Motor in India. He said that the removal of supply chain bottlenecks has already led to "significant rationalization" in wait times. Wadhwa stated that the company has recently increased its capacity to produce 32,000 additional vehicles per year and is investing in another 100,000 vehicles. Toyota also invested $14 billion in a battery factory in North Carolina in order to meet the demand for hybrid vehicles. It has stated that it will begin shipping batteries for North American electric vehicles in April. Toyota built hybrids in nearly half of its vehicles assembled in the U.S. Toyota's hybrids are one of the few bright spots in China where it is facing fierce competition, such as BYD. Toyota's total sales in China fell by 7% in 2024 compared to a year ago, but sales of electrified vehicles (mostly hybrids) grew by 27%. According to someone familiar with the situation, competitors such as Hyundai, and its Kia affiliate, are also struggling to ramp-up production of hybrids. This is primarily due to a shortage of capacity. This month, a Hyundai dealer in Seoul stated that it would take a full year to receive the hybrid version for the Palisade SUV. Documents from Kia show that the wait time for its Carnival hybrid is 10 months and seven months for Sorento. Hyundai has not responded to any questions regarding the current situation. Hyundai announced in August that it will double its hybrid line-up to 14 models by 2030, to counter the slowdown of EV adoption. Honda, another hybrid player, reported strong demand in North America and Japan but refused to provide specifics about delivery times. Hybrids are worth the wait for some customers because of fuel savings. Rakesh Kumar is a businessman from India's Uttar Pradesh. He finally received his Toyota Hyryder in March, nearly five months after ordering it. He said: "We already have a hybrid in our family, and I know that it gets better mileage than any other vehicle." Aditi Shirouzu and Norihiko Shrouzu reported; additional reporting was done by Daniel Leussink and Heekyong Yah in Seoul and Hyunjoo Ji and Heekyong Jin in Tokyo; Saurabh Sharma and David Dolan edited the story.
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Oil markets are waiting to see if Trump’s Russian oil tariff threats is a bluff
The oil markets shrugged Monday off the threat of U.S. president Donald Trump to impose tariffs on Russian oil buyers as the shock factor of the White House's barrage of threats begins to wear out with jaded traders. Analysts and traders have questioned the seriousness of Trump's proposal. Warren Patterson, ING's director of commodities strategy, said that the U.S. government's announcements on tariffs and other sanctions have a tired feel. He said that the market would not overreact until he could provide more concrete information. The price of oil fell on Monday. Brent crude futures, the most active, were down 0.2% to $72.59 per barrel at 0028 GMT. U.S. West Texas intermediate crude was also lower by 0.3% to $69.18 per barrel. China and India are the two largest buyers of Russian crude oil. Their consent is crucial for any secondary sanctions package to seriously harm exports. Sinopec, Zhenhua Oil, and two other Chinese oil companies have stopped buying Russian oil due to recent U.S. sanctions against Moscow. On Monday morning, however, several Chinese traders appeared unfazed. Three people who spoke to all said that Trump's constant brinksmanship made them discount what he said. Unidentified trader said: "We are all numb, the oil prices don't respond." It's not worth listening to Trump any more. A second said: "It is hard to know what impact it would have as Trump always lies, and his words are no longer credible." Analysts said that if the tariffs were to become a serious threat to the markets, they would focus on how strict the policy was and whether the Organization of Petroleum Exporting Countries (OPEC) would increase production to compensate for any decrease in Russian exports. Patterson said that the secondary sanctions on Venezuelan oil imposed last week can be used as a template for markets to evaluate the impact of similar policies against Russia. Chinese buyers had already stopped their purchases before the sanctions took effect on Wednesday. Analysts and traders expect that some sales will resume as buyers come up with workarounds, unless Beijing bans all purchases.
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Trades to Make Europe Great Again are gaining momentum
Investors are recognizing that a more independent and less U.S. dependent Europe is emerging. These opportunities go beyond simply buying defence stocks. There is good reason to be cautious, as the massive German expenditure on infrastructure and defence will not be felt for some time. Many are still playing the long-game. Mark Dowding is the CIO of RBC's BlueBay Fixed Income team. He said that MAGA trades have now replaced MEGA trades. MAGA trades had lost their appeal. Mark was referring to President Donald Trump's Make America Great Again campaign. DEFENCE FIRST The German fiscal expansion and the Brussels plan to mobilize up to 800 billion euro ($866 billion) in rearmament means that defence stocks are still a fertile investment ground, even though they have risen since Russia invaded Ukraine 2022. European aerospace and defense stocks are up 33% in the past year. The valuation multiples of these stocks now exceed those of their U.S. counterparts, reaching levels usually associated with high-tech or luxury goods. This month, the tankmaker Rheinmetall briefly traded at a higher price than Ferrari, with a 44-fold multiple of its expected earnings. Investors are willing to pay more for this long-term trend. Citi estimates that the average annual profit growth of defence companies is expected to range from 8% at BAE up to 32% at Rheinmetall by 2028. It's not easy for the European Union to purchase more European weapons. Data from the European Commission shows that 78% of EU purchases have been made outside the EU since 2022. 63% went to the U.S. Some caution after a large rally. Markus Hansen, the Vontobel Fund Manager Markus Hansen believes that investors should concentrate on areas where there is a real and pressing need such as rebuilding depleted ammo stockpiles or infantry-related gear. Defence supply chain companies and other sectors, including communications, could also benefit. Eutelsat's stock has risen 260% in the last month on speculation that it could replace Elon Musk’s Starlink satellite to provide internet access to Ukraine. Defence is not just about weapons. It's also about data, communication and logistics. Tomas Hildebrandt, portfolio manager at Evli, said that the value chain is a complex one where suppliers are important. He said that examples could include the truckmaker Scania, Traton's Atlas Copco, which manufactures machinery for industrial and infrastructure projects, as well as construction companies. Hey Bond There will be more triple-A rated debts, whether they are joint EU bonds or German debt. This will help to maintain the status of the euro as a reserve currency. The historic infrastructure and defense spending in Germany could amount to more than A Additional debt of trillions of euros Even the EU's supporters did not anticipate this move just a few months ago. The SAFE bonds will add to the EU's debt of 650 billion euros. This is a sign that the EU might be able to become a permanent borrower, as investors had long hoped. It would also mean it was ready to take on another challenge following its COVID-19 Recovery Fund. However, the loans are only a small part of the 800-billion euro plan. The rest is left to the national governments. 3/ BINGING ON IT The fiscal boost has brightened the economic outlook and European banks have surged by 26% in the first quarter of the year, their best since 2020. Berenberg predicts that Germany's GDP will grow by roughly 1.4% between 2026 and 2027, after nearly four years of stagnation. According to a March survey by BofA, the biggest sector overstretch in Europe is insurance and banks. Industrials are next. Trevor Yates is a senior investment analyst at GlobalX and noted that the firm's DAX German stocks ETF has been receiving a lot of interest. Investors expect European regulators to ease bank rules in light of the U.S. regulatory drive. BlueBay Dowding stated that European bank capital bond were the firm's biggest overweight position in multi asset credit funds. PERIPHERAL WINNS Manish Kabra of Societe Generale's multi-asset strategist says that Spanish and Italian stocks are cheaper than those found in the core Europe. They could be poised to gain. Southern European stocks also have a lower exposure to U.S. Tariffs than Germany and France, but they are heavily exposed to banks. There are parallel developments. The German debt brake is one thing, but the MDAX (midcap) and the long euro are the other. "The two things that impact the banks are banking regulation and nominal GDP growth in Europe," Kabra explained. The periphery provides exactly that. 5/ RENEWABLE Analysts said that the push for Europe to become more independent in energy, starting 2022, will continue. Renewable energy and domestic power companies are expected to benefit. The European Commission presented an Action Plan that aims to accelerate permits for renewable energy, change the way energy tariffs are calculated, and increase aid from state for cleaner industries and flexible power generation. The German government plans to increase its spending by 100 billion euros, which will go towards climate and economic transformation. Think tank Ember reports that solar generation will provide 11% of EU electricity in 2024 compared to 9.3% in 2030, and surpass coal. Iberdola Endesa Enel, European utility companies have all rallied between 7-16% this year.
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London copper falls to two-week lows on trade war fears
The copper price in London dropped to a 2-week low on Monday amid increased concerns over a global trade conflict, and as U.S. president Donald Trump's tariffs were looming. As of 0330 GMT, the benchmark three-month Copper on the London Metals Exchange lost 0.4% and was $9760 per metric tonne. Trump announced Sunday that the reciprocal trade tariffs he intends to introduce in this week will be applicable to all nations. Investors are worried by the high uncertainty surrounding Trump's Tariffs. Some arbitrage traders could lose money if Trump imposes copper tariffs earlier. The Shanghai Futures Exchange saw a 0.7% increase in tin prices, to 283,100 Yuan ($39,035.35). This was due to concerns about supply disruptions following an earthquake that occurred last Friday in Myanmar, which is rich in tin. Other metals include LME aluminium, which fell by 0.1%, to $2.544, lead, down 0.1%, to $2.025, zinc, down 0.6%, to $2.841, tin, down 1.4%, to $35.710, and nickel, up 1.6%, to $16,120 per ton. SHFE copper fell 1.0% to 79.990 yuan per ton. SHFE aluminium dropped 0.4% to 20.525 yuan per ton. Zinc fell 2.0% to 23.375 yuan. Lead lost 0.5% at 17,405 and nickel lost 1.5% at 128,940. $1 = 7.2524 Chinese Yuan Renminbi (Reporting and editing by Eileen Soreng, Rashmi aich and Violet Li)
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London copper falls to two-week lows on trade war fears
The copper price in London dropped to a 2-week low on Monday amid increased concerns over a global war of trade, and as U.S. president Donald Trump's tariffs were looming. As of 0155 GMT, the benchmark three-month Copper on London Metals Exchange (LME), lost 0.4% and was $9753 per metric tonne. Trump announced Sunday that he will introduce reciprocal tariffs this week to all countries. Investors are worried by the high uncertainty surrounding Trump's Tariffs. Some arbitrage traders could lose money if Trump imposes copper tariffs earlier. Due to concerns about supply disruptions following an earthquake that occurred in Myanmar, which is rich in tin, the tin price on the Shanghai Futures Exchange rose 0.6%, to 282,980 Yuan. Other metals include LME aluminium, which fell by 0.1% to 2,545 per ton. Lead also declined 0.3%, to $2 019, while zinc dropped 0.7%, to $2 835, tin was down 1.3%, to $35 750, and nickel was off 0.6%, to $16,290. SHFE copper fell by 0.9%, to 79.960 yuan (11,009.53) a ton. SHFE aluminium dropped 0.5%, to 20,500 yuan. Zinc fell 1.9%, to 23400 yuan. Lead lost 0.7%, to 17,390yuan. Nickel lost 0.4%, to 130.320yuan.
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Gold surpasses $3,100 due to US tariffs and uncertainty
Gold prices rose above $3,100 an ounce on Monday for the first-time as geopolitical concerns and worries about President Donald Trump’s tariffs, along with the possible economic fallout from them, drove a new wave of investment into the safe haven asset. Gold spot prices have reached a new record of $3,106.50 an ounce. Gold prices are at multiple record levels, up more than 18% this year. This is a hedge against geopolitical and economic turmoil. It broke the psychological $3,000 mark earlier this month for the first. This is a significant milestone, which experts believe reflects the growing concern over inflation, geopolitical tensions, and economic instability. Bullion's rise has led multiple banks to raise their gold price forecasts this year. Gold's appeal has increased in the face of geopolitical uncertainty and concerns about tariffs. Analysts at OCBC said that they remain positive on the outlook for gold in light of ongoing global trade tensions and uncertainty. Goldman Sachs has raised its price target for the yellow metal by a few dollars this month. Goldman predicts that gold will hit $3300/oz at the end of the calendar year, an increase from $3100. BofA predicts that gold will trade at $3.063/oz by 2025, and $3.350/oz by 2026, an increase over its previous estimates of $2.750/oz and $2.625/oz. Since he became president, Trump has proposed a number of new tariffs to protect U.S. industry and reduce trade deficits. These include a 25% tariff on imported autos and auto parts as well as an extra 10% on all Chinese imports. He plans to announce a new set of reciprocal trade tariffs on 2 April. Edward Meir, Marex consultant, said that "tariff issues will drive (gold) prices up until the tit for tat campaign is finalized." Analysts and investment banks believe that other factors such as robust central bank demand, exchange-traded funds, and inflows of ETFs will continue to support gold's spectacular rally this year. Reporting by Ashitha Shivprasad in Bengaluru and Anjana Anil; Editing by Veronica Brown, Maju Samuel
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Iron ore prices fall on China demand concerns
Iron ore futures fell on Monday due to concerns about demand prospects in China, the top consumer of iron ore. Steelmakers' production reductions have reduced ore's consumption. As of 0103 GMT, the most traded May iron ore contract at China's Dalian Commodity Exchange was trading 0.83% lower. It was 778 yuan (US$107.12) per metric ton. Beijing announced that it would reduce steel production due to an overcapacity. Although there has not been an official announcement yet, some steelmakers reduced their production to prepare for the formal announcement. This helped reduce demand for iron ore. Prices are also being impacted by concerns over the demand outlook, which have been intensified by a global trade conflict sparked by new U.S. Tariffs. Coking coal and coke, which are used to make steel, also suffered losses of 1.2% and 1.79 %, respectively. The Shanghai Futures Exchange saw a decline in most steel benchmarks. Rebar fell 0.53%, wire rod slipped 0.44% and hot-rolled coil dropped 0.65%, while stainless steel rose 0.15%. Singapore Exchange will be closed for the public holiday on Monday. $1 = 7.2628 Chinese Yuan Renminbi (Reporting and editing by Violet Li, Mei Mei Chu)
As tariff fears unnerve the markets, Asia stocks drop and gold reaches a record high.
Asian stocks fell on Friday, with South Korea and Japan being the hardest hit. Meanwhile, gold, a safe haven asset for investors was at an all-time high after President Donald Trump's latest tariff salvo stoked fears of a full-blown trade war.
Trump has moved forward with a 25% auto import tariff that will kick in next Monday. This move drew fierce criticism from politicians, industry executives and car manufacturers around the world.
Trump's escalation of the global war on trade that he started upon regaining power has shocked the markets. Shares of automakers around the world have been hit especially hard.
In Asia, the Nikkei index of Japan fell by nearly 2% due to sharp declines in Toyota and Honda. South Korea's benchmark stock index also dropped 2%. Both countries' economies are based on the auto industry.
European stock futures were lower. The DAX, which is heavily influenced by automakers in Germany, fell 0.2%. U.S. Futures were not much changed.
Fred Neumann is the chief Asia economist for HSBC. He said that "U.S. auto import tariffs are not a big surprise" as they have been discussed for a while.
To some extent, producers are able to shift their supply chains and production sites in order to minimize these effects. They may also pass on some of the cost increases to U.S. customers, since tariffs are a problem for nearly all producers.
Volvo Cars and Mercedes-Benz, as well as Volkswagen's Audi, Hyundai, and Volvo Cars have all already announced that they will be moving parts of their production. Ferrari, which produces all its cars in Italy said that it would increase prices by as much as 10% on certain models.
Hong Kong's Hang Seng Index fell 0.6%, as traders waited for clarity about Trump's tariff plans. Trump said that he was willing to lower tariffs against China in order to reach a deal with TikTok parent company ByteDance, which is based in China.
Now, the focus is on the reciprocal tariffs that will be announced by the U.S. on April 2. Trump said the measures might not be like-for-like levies, as he had pledged to impose.
"Not surprisingly, the tariff talk is resulting in another round of risk-off ... as traders try to ascertain the implications, but generally conclude that tariffs will be both growth-restraining and inflation-producing," said Thierry Wizman, global FX & rates strategist at Macquarie.
Inflation Test
The U.S. Dollar was stable on the currency markets ahead of the inflation report that will be released later in the day. The U.S. The U.S.
Dollar is heading for a drop in the next quarter as concerns about tariffs impacting U.S. economic growth weigh. The euro fell to $1.07887 but is still on track for a 4% increase in the period January-March.
The yen strengthened to 150.675 dollars, on track for a gain of nearly 4% against the dollar in the third quarter. Traders bet that the Bank of Japan would raise interest rates once again.
The data released on Friday revealed that core consumer inflation in Tokyo increased in March and remained above the central banks' target due to steady increases in food prices. This kept the market's expectations for a rate hike in the near future alive.
DBS's strategists predict a near-term consolidation of the yen. They believe that it is trapped between trade risks, and rising inflation.
Gold prices reached a record high in commodities on Friday, as the threat from trade wars prompted a rush to the metal of safety. Gold spot was up last by 0.77% to $3,079.5 an ounce.
Gold has risen by more than 17% during the first three months of this year. It is on track to have its best quarter since 1986.
Michael Brown, Senior Research Strategist at Pepperstone, said: "Continued demand for haven assets, combined with central bank purchases by EMs in an attempt to diversify FX reserve, makes for a compelling bull case."
The oil price eased as traders assessed the tightening crude supply and new U.S. Tariffs, along with their effect on global economy.
Brent crude futures fell 0.24% to $73.85 per barrel. U.S. West Texas Intermediate Crude Futures were down 0.27% at $69.73.
(source: Reuters)