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Despite tariffs, some European companies are hesitant to expand in the US
The erratic tariff policy of U.S. president Donald Trump is making some European smaller companies question whether it's worth expanding into the U.S. Trump wants to encourage foreign companies to invest in the United States by imposing levies on steel, cognac, cars, and sandals. This will create new factories, and thousands of American jobs. The auto and pharmaceutical sectors have been quick to announce or consider expansions. However, some smaller companies are hesitant about committing. EuroGroup Laminations, an Italian company, pays no import duties on the rotors, stators, and other components it provides to U.S. automakers, such as Ford and GM. These products are produced in Mexico and comply with current import regulations. Marco Arduini, CEO of the company, said that even if the company had to move production to the U.S., it would be subject to tariffs on the type of steel it uses for its automotive parts. He said that avoiding potential U.S. Tariffs would not compensate for the extra costs or low availability of steel. U.S. Labour costs are also a concern, as they can be up to six-times higher in Mexico. Due to the current situation, including the possibility that tariffs could trigger a U.S. economic recession, ebm papst, a German motor and fan manufacturer has halted plans to build a new U.S. plant or to expand an existing U.S. site. Klaus Geissdoerfer, CEO of the company, said that if there were an economic downturn on American soil, it could affect demand in a different way. Many economies are built on the strength of small and medium-sized businesses (SMEs), including Italy and Germany. Both countries are members of the European Union and major exporters into the United States. They may be able to react more quickly to new trade risks than larger companies because they have less financial cushioning. Marc Tenbieg is the head of DMB, the association representing Germany's SMEs. DMB said in separate comments that a few SMEs are currently reviewing their U.S. business as a result Trump's policies. Andrew Adair said that some member companies of the German engineering association VDMA have delayed purchases. He made this statement following a visit to the United States in early August. He said, "The industry appears to be on hold at the moment." Trump announced a series broad tariffs on goods from other countries imported into the United States on April 2. The tariffs included a 20% on EU imports, which was then lowered to 10% as part of what Trump called a "90-day pause" following the selloff in U.S. stocks. Trump's statements that other countries "screwed" the U.S. over the years, reflecting his anger at U.S. Trade Deficits including one of 235.6 billion dollars with the 27-nation EU, have also raised the temperature in the diplomatic and political arena. LAPP in Germany, which produces everything from wires and cables to robotics for factory, has maintained its plans to double the production capacity at their New Jersey site by 2025. Matthias Lapp, CEO of Lapp & Co., said: "As a business family, we plan on the long-term, not just for elections." Tariffs have the potential to affect demand and inflation in the United States. RBC Capital estimates that imports account for 10% of U.S. consumer spending and that "it will be relatively difficult for consumers" to switch away from imported products. The consultancy AlixPartners believes that the average U.S. household's discretionary spending in a post tariff world will drop by more than 10 percent to $27,000 and recommends companies adopt a pause-and-monitor approach. Eurostat data show that in each of the three previous years, the EU exported an average of more than 500 billion euro of goods to the U.S. These were mostly pharmaceuticals and vehicles, but also machinery. Trump's primary targets are the steel, auto and car part manufacturers in the EU. The U.S. is still the EU's largest trading partner. However, the new tariffs have sparked some political resistance against greater exposure. French President Emmanuel Macron has asked European firms to temporarily suspend their planned investments. Industry groups urge European companies to instead focus on other foreign markets, such as India and Latin America. Sebastian Zank is the head of Scope's corporates rating production. He said, "We have seen how quickly things can change." Everyone will remain seated until the picture that emerges can be described as "sustainable."
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LyondellBasell's quarterly profit forecast misses on account of weak volume
LyondellBasell missed Wall Street's quarterly profits expectations on Friday due to maintenance activities and lower volumes of its largest segment, supplying raw materials for the automotive, construction, and electronics industries. Following the results, shares of the petrochemicals producer fell 2.5% on premarket trading. The company announced an improvement plan for cash flow to help it navigate current macroeconomic volatility, and boost its earnings to $500 million. The chemical industry has been suffering due to a slump in demand and the rising cost of raw materials, particularly in Europe. Businesses are also being forced to reconsider their strategy in the region due to the strict regulatory environment. In a recent statement, CEO Peter Vanacker stated that "we continue to take reasonable measures to improve our near-term cash flow generation and remain committed to delivering our three-pillar strategies through this extended industry downturn." Eastman Chemical, a peer company, announced plans on Thursday to reduce expenses as a result of the market volatility caused by President Trump's tariff plans. The business activity in the Eurozone barely increased in February as a slight increase in services barely compensated for the ongoing decline in manufacturing. LyondellBasell’s largest segment in terms of sales volume, olefins and polyolefins, Americas, reported core adjusted earnings of $251 millions, down from the $521 million earned last year as higher feedstock prices impacted margins. The adjusted core profit for its Intermediates & Derivatives segment, which produces oxyfuels, intermediate chemicals and intermediate chemicals, dropped 69.9% from the previous period to $94 millions. The revenue for the quarter ending March 31 decreased from $8.3 Billion last year to $7.7 Billion. In the second quarter, the company anticipates seasonal improvements in demand across all businesses. According to LSEG, on an adjusted basis the company reported a profit per share of 33 cents in the quarter of January-March, compared to analysts' estimates of 43 cents. (Reporting from Pooja Menon, Bengaluru. Editing by Vijay Kishore.)
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Secretary of State for India says India will offer incentives to steelmakers in order to promote decarbonisation
The federal secretary of steel announced on Friday that India has a number of incentives in place to encourage the production of green-colored steel and to drive the decarbonisation efforts of local steelmakers. India wants to reduce its greenhouse gases emissions. India, after China the largest steel producer in the world, is working on a "green steel" policy to reduce carbon emissions from the production and procurement of this key building material. Sandeep Poundrik, speaking at a recent industry event, said: "We're trying to do many things to encourage green steel... including working on a project... where we'll try to support industry decarbonisation." The government will hopefully approve it soon." Poundrik said that firms would be encouraged to produce greener steel and use renewable energy. The official also said that the government was working to mandate a certain percentage green steel in all state-funded projects. India last year defined green steel to be steel that emits less than 2,2 tonnes of carbon dioxide per tonne of production. (Reporting by Neha Arora in Mumbai and Hritam Mukherjee in Bengaluru; Editing by Mrigank Dhaniwala)
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Asian and European stock markets steady; US stocks jittery due to conflicting trade tension signals
The dollar is on track to see its first weekly gain in over a month as investors take comfort in signs that the U.S., China and other countries are willing to end their trade war. In a sign that investors are unsure of how long this relief will last, U.S. Stock Futures were slightly down by 1048 GMT after the publication of an interview in Time magazine with U.S. president Donald Trump, where he stated that high tariffs on imports from abroad a year hence would be a "total win". Trump said that his administration had been in contact with China about a possible tariff agreement and that Chinese President Xi Jinping called him. This was contrary to comments made by Chinese officials on Thursday. The STOXX Index, the benchmark for Europe, rose by 0.27% after China removed some U.S. imported goods from its 125% tariffs. This was the clearest indication yet that Beijing responded to concerns over the impact of titt-for-tat duties on its economy. U.S. Futures started positively after Alphabet, the parent company of Google and tech giant Alphabet, beat profit expectations and confirmed AI spending targets. Its shares rose nearly 5% after-hours and pulled along its peers. S&P emini futures were down 0.26% by 1048 GMT, and NASDAQ 100 futures were down 0.36%. . The dollar, after a turbulent few weeks that saw tariff announcements and reversals, as well as a flight from U.S. assets and assets, has found its footing at around $1.1354 for the euro and 143.3 Japaneseyen. Eli Lee, Chief Investment Strategist at Bank of Singapore said that the peak of tariff threats is likely to be behind us. Both sides have stated that they will not increase rates above current levels. The tit-for-tat tariffs, which began on April 2, when U.S. president Donald Trump announced hefty import duties, had threatened to stall the trade between two of the world's largest economies. They also sparked concerns of a global slowdown. UNEASY CALM Hong Kong's Hang Seng index rose 1%, and mainland China’s Shanghai Composite Index and blue-chip CSI300 also saw small gains. The Nikkei 225 index rose 1.8% in Japan on Friday, regaining all of its losses following Trump's announcement that the United States would be imposing the highest tariffs it has ever seen. Trump suspended most of these tariffs, with the exception of China, which will have a 10% tariff. In a client note, ING currency analyst Francesco Pesole said that there is a sense among market participants that they can now impose a more favourable stance from the U.S. Government. Investors will seek confirmation of a more optimistic view on U.S. Assets to justify further dollar gains. The U.S. Dollar Index was up by 0.2% this week, at 99.623, while U.S. Treasury Yields remained flat. WARNING SIGNAGE The gold price, which has soared in this year due to investors seeking safe haven assets that are not tied to the dollar, fell 1% on the Friday, and was heading towards a weekly decline on signs of a possible de-escalation in trade tensions. There were plenty of warnings that the calm surface on the markets may not last. Procter & Gamble cut or withdrawn forecasts for American Airlines, PepsiCo and Chipotle Mexican Restaurant overnight due to increased consumer uncertainty. The Gold/S&P500 ratio, which is a measure of investor gloom and reflects the mood of the market, has reached its highest level since 2020, when the bear market was triggered by the pandemic.
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Phillips 66, a US refiner, reports a larger-than-expected quarter loss
Phillips 66 announced a larger-than-expected first-quarter loss on Friday. Lower refining margins due to widespread maintenance and turnaround activities across the U.S. refinery sector weighed down on its performance. In preparation for summer driving, U.S. refineries undergo seasonal maintenance and turn-around activities. This scheduled downtime can temporarily impact refinery performance and revenue capture. Mark Lashier, CEO of the company said: "Our results are not only reflective of a macro-environment that is challenging but also reflect our biggest spring turnaround program ever." The refining division of the company posted a $937 million loss during the first quarter of this year, compared to a $216 million profit a year earlier. Phillips 66 reported that its realized refining profit margins dropped to $6.81 a barrel in the quarter January-March, down from $11.01 a barrel a year ago. Its refinery usage was 80%, compared to 92% a year ago. According to data compiled and analyzed by LSEG, the Houston-based company reported an adjusted loss per share of 90 cents for the three-month period ended March 31. This compares with the analysts' average loss estimate of 72 cents. Reporting by Vallari Shrivastava, Bengaluru. Editing by Maju Sam and Shilpi Majumdar.
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Former Brazilian President Collor is arrested for corruption
Fernando Collor de Mello, the former Brazilian president, was arrested in Maceio on Friday after a Supreme Court judge rejected his appeals against a prior conviction and ordered that he begin serving time behind bars. Collor's attorney, Marcelo Bessa said that Collor was arrested at 4:00 am local time (0700 GMT), while traveling to Brazil’s capital Brasilia. He planned to surrender himself following Supreme Court Judge Alexandre de Moraes’ arrest order. Bessa, in a press release, said that the former president had been detained by federal police officers in Maceio. This is the capital of Alagoas. Moraes issued his order on Thursday after Collor, who was the first president of Brazil to be elected after the end the military dictatorship ended in 1985, had been sentenced to eight years and ten months in jail in 2023 for corruption and money laundering. Collor's attorney had expressed "surprise" and "concern" over Moraes decision in a statement released late Thursday. However, he added that the former President would comply with the Order. The 2023 conviction was handed down after Brazilian prosecutors accused Collor receiving bribes of around 30 million Reais ($5.28million) from a subsidiary of the state-run oil firm Petrobras. Collor was elected president in 1990. However, he did not complete his term because Congress decided to impeach Collor two years later over a separate scandal of corruption for which the Supreme Court acquitted Collor in 1994. Later, he was elected to the Senate as a Senator for Alagoas. He left Congress at the beginning of 2023 after an unsuccessful attempt to become governor of Alagoas.
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SLB, a provider of oilfield services, misses its profit forecasts due to international weakness
SLB missed Friday's analysts' expectations for the first-quarter profit, due to a slowdown of demand for oilfield equipment and service in Latin America. Following the results, shares of the company dropped by nearly 2% during premarket trading. SLB's earnings report completes the first quarter earnings of top U.S. oilfield services providers. Halliburton, Baker Hughes and other rivals had earlier in the week expressed concerns over weakening markets and tariff uncertainty. Halliburton warned that its second-quarter earnings would be hit by tariffs and reduced North American activity in the oilfields, while Baker Hughes predicted further spending cuts from global producers due to waning demand expectations and declining crude prices. SLB CEO Olivier Le Peuch stated in a press release that the industry could experience a possible shift in priorities due to changes in global economic conditions, fluctuating commodities prices, and evolving tariffs. All of these factors may impact upstream investment in oil and gas and, ultimately, affect demand for SLB's products and services. SLB reported that international revenue dropped 5% in the first quarter to $6.73 Billion. According to LSEG data, the company, formerly Schlumberger, reported earnings of 72 cents for the three-month period ended March 31. This was below analysts' average estimates of 74 cents.
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Cornwall Insight reports that Britain's cap on energy prices will fall by 9% this July.
The cap on domestic energy prices in Britain is expected to drop by around 9% this July, after wholesale energy costs fell amid the warmer weather conditions and U.S. tariffs announcements fuelled fears about economic growth. The government would welcome a reduction in the cap, as it is under pressure to keep its promise to reduce household energy costs. The benchmark British gas price has fallen by around 40% in the last few months as warmer weather has curtailed demand. In addition, the EU Parliament endorsed weaker storage regulations for gas and there are growing fears about a global trade conflict that could hinder economic growth and industrial production. "We've all seen markets rise and fall quickly, and that the market fell so rapidly shows the vulnerability of the market to market and geopolitical shifts," said Craig Lowrey. Principal Consultant at Cornwall Insight. The British energy regulator Ofgem caps household energy bills every quarter, using a formula which reflects wholesale prices of energy and also includes network costs from suppliers and environmental and other social levies. Cornwall Insight predicts that Ofgem will lower its price cap in July, to 1,683 pounds (2,238.89 dollars) per year based upon average usage. In April it was 1,849 pounds. Lowrey stated that the high volatility of the market could mean the cap forecast will change before it is set by Ofgem at the end May. ($1 = 0.7517 pound) (Reporting by Susanna Twidale, editing by Mark Heinrich).
Swiss central bank faces protests over its investments
The Swiss National Bank AGM was protested by environmentalists on Friday. They urged the central bank not to invest in companies that they claim contribute to the destruction of the environment, such as the Amazon rainforest or Brazil's Cerrado Savannah.
The protests in Bern were aimed at the SNB holdings of firms that had been identified by a University College London study as "Environmental Tipping Point" companies - corporations whose actions they claim cause irreversible environmental damage.
The campaigners gathered outside the shareholders meeting of SNB with banners saying, "Deforestation Is Not A Swiss Value" and placards with an image mocking up SNB Chairman Martin Schlegel with a speech balloon saying "burn baby Burn."
Activists called for stricter exclusion criteria to be applied to the SNB's investment and demanded that the central bank use its influence as an investor to influence the behaviour of companies.
They said that the central bank should divest if companies fail to comply with SNB guidelines, which prohibit them from purchasing securities in companies who cause severe environmental damages.
Asti Roesle, Climate Alliance Switzerland, said: "If the SNB ignores environmental and climate risks in its monetary decision-making process, it acts shortsightedly and fails to fulfill its duty to protect future generation."
She said that the climate change has already visible impacts on Switzerland, such as melting glaciers and destructive storms causing landslides.
Roesle said that the SNB, which is expected to address the shareholders at the meeting due to the size of its equity investments, could have a significant impact due to the fact that about 25% its 756 billion Swiss Francs ($914 Billion) in foreign reserve are held in global shares.
The SNB has a passive, market-neutral investment strategy. It is not mandated by the Swiss government to influence the development of certain economic sectors. Instead, it focuses primarily on controlling inflation.
In its sustainability report, it states that it excludes companies who severely harm the environment or violate human rights. The report also excludes coal mining companies.
Critics say this is not enough and they want a similar approach to Norway's sovereign fund, which informs companies of its climate change expectations as well as votes on the subject.
Guillaume Durin, from BreakFree, a Swiss climate group, said that the SNB still invests in companies which cause climate damage.
Durin stated that "the SNB doesn't respect its own rules." As a passive investor the SNB is complicit in the destruction of ecosystems that are critical to the balance of the planet. $1 = 0.8275 Swiss Francs (Reporting and Editing by William Maclean, William Revill)
(source: Reuters)