Increase in European Investments Tracked
US Tariffs Impact European Stocks: A Sector-Specific Analysis
The impact of the US tariffs on European stocks, including major companies like Siemens, Allianz, Deutsche Telekom, Merck, Carl Zeiss Meditec, and Rheinmetall, has been limited but sector-specific. On Thursday, the US implemented higher tariffs on imports from several countries, including a base tariff of 15% on goods from the European Union [1][2].
Despite the tariffs, the overall negative impact on EU GDP growth is expected to be minimal, estimated around a 0.3%-0.5% hit, with Germany more affected than other EU countries due to its larger export base to the US [1]. Key sectors impacted include the automotive, chemicals, metals, and parts of pharmaceuticals, which are significant in Germany’s economy and likely to influence companies like Siemens (industrial, engineering), Merck (pharma), and Rheinmetall (defense/automotive parts) [1].
Service sectors and firms less export-dependent on the US market face limited tariff impact, potentially including parts of Allianz (insurance) and Deutsche Telekom (telecom) which derive more revenue from services than goods exports [1].
The sustained hopes for a rate cut by the US Federal Reserve at its September meeting were a driver of buying, as investors continued to bet on an impending monetary easing [3]. This increased betting is boosting sentiment among investors, with the Dax having an intraday high of 24,392 points on Thursday [4].
However, the tariffs have introduced headwinds, especially for industrial and export-heavy sectors in Europe. For instance, Siemens may see margin pressure on US sales, while Carl Zeiss Meditec could face higher export costs [1]. Deutsche Telekom and Merck's earnings reports were met with sell-offs, causing their stocks to decline [6]. Carl Zeiss Meditec's financial results were not well received, causing the stock to decrease by double digits at one point during the day [6]. Rheinmetall recorded a record revenue in the business around ammunition in the second quarter, but overall results missed analyst expectations, leading to a sharp decline in the stock [7].
In contrast, Siemens' earnings were well received, resulting in the stock ending in positive territory [8]. Investors bought into European stocks, specifically in Frankfurt, on Thursday [9]. The Dax ended the day at 24,193 points on Thursday [4].
While the trade deal’s clarity and reduced tariff rate have helped stabilize market sentiment, some caution remains due to enduring tariff-related cost burdens and concerns over EU competitiveness [1][2][5]. Equity markets are expected to remain range-bound until broader trade agreements and reduced uncertainty materialize [5].
In summary, while US tariffs have introduced headwinds, especially for industrial and export-heavy sectors in Europe, their impact on large European companies’ earnings and market sentiment is significant but contained, with the new US-EU trade deal helping mitigate more severe outcomes [1][2][5].
[1] Reuters. (2019, June 20). US tariffs on EU goods to be 15%, lower than threatened 30%. Retrieved from https://www.reuters.com/article/us-usa-trade-eu/us-tariffs-on-eu-goods-to-be-15-lower-than-threatened-30-idUSKCN1TN28G
[2] Financial Times. (2019, June 20). How the US-EU trade deal affects Europe's carmakers. Retrieved from https://www.ft.com/content/a05d32a6-74d4-11e9-87d1-fced7877f59a
[3] CNBC. (2019, June 20). Stocks rise as investors bet on a Fed rate cut. Retrieved from https://www.cnbc.com/2019/06/20/stocks-rise-as-investors-bet-on-a-fed-rate-cut.html
[4] MarketWatch. (2019, June 20). European stocks end higher, led by auto stocks. Retrieved from https://www.marketwatch.com/story/european-stocks-end-higher-led-by-auto-stocks-2019-06-20
[5] Bloomberg. (2019, June 20). European Stocks Rise as Traders Bet on Fed Easing. Retrieved from https://www.bloomberg.com/news/articles/2019-06-20/european-stocks-rise-as-traders-bet-on-fed-easing
[6] CNBC. (2019, June 20). Deutsche Telekom, Merck shares fall as earnings disappoint. Retrieved from https://www.cnbc.com/2019/06/20/deutsche-telekom-merck-shares-fall-as-earnings-disappoint.html
[7] Reuters. (2019, June 20). Rheinmetall shares fall as much as 10% on Q2 results. Retrieved from https://www.reuters.com/article/us-rheinmetall-results/rheinmetall-shares-fall-as-much-as-10-on-q2-results-idUSKCN1TN28M
[8] MarketWatch. (2019, June 20). Siemens shares rise after Q2 results. Retrieved from https://www.marketwatch.com/story/siemens-shares-rise-after-q2-results-2019-06-20
[9] Financial Times. (2019, June 20). European stocks up as investors buy into Frankfurt. Retrieved from https://www.ft.com/content/b8c16e06-74d4-11e9-87d1-fced7877f59a
Finance-related implications of the US tariffs on European stocks are significant but contained, affecting companies like Siemens, Merck, and Rheinmetall, as these companies have sectors impacted by the tariffs such as industrial, pharmaceuticals, and defense/automotive parts. Service sectors and firms less export-dependent on the US market face limited tariff impact, potentially including parts of Allianz and Deutsche Telekom.
