LIVE MARKETS-Citigroup upgrades European autos on tariff mitigation hopes

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CITIGROUP UPGRADES EUROPEAN AUTOS ON TARIFF MITIGATION HOPES

Citigroup analysts have turned bullish on European autos as it expects the sector to remain relatively more insulated from President Donald Trump's tariffs than its U.S. and Chinese counterparts.

The Wall Street brokerage upgraded the sector to "overweight" and said ongoing negotiations and probable tariff deferral would help shares in European auto makers recover from some of their recent stint of underperformance.

The STOXX 600's automobiles and parts .SXAP sub-index is down 4.8% so far this year.

"We think the European profit pool still seems likely to be better protected and less structurally at risk than either the U.S. or Chinese profit pools (no matter where production is located)," said Citigroup strategists in a note dated April 25.

The U.S. auto sector is grappling with uncertainty caused by Trump's shifting tariff policies and China's retaliatory levies as the two economies remain tied in a trade war.

In the face of Trump's 25% levies on all imports of foreign-made cars, automakers have rushed to offer deals to would-be buyers, but they've also warned of price hikes going forward as they fully absorb the impact of tariffs.

In a separate note earlier on Friday, Citi strategists downgraded their view on the European construction and energy sectors to "underweight" from "neutral.

(Kanchana Chakravarty)

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