LIVE MARKETS-Europe's autos malaise to continue until outlook clearer

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EUROPE'S AUTOS MALAISE TO CONTINUE UNTIL OUTLOOK CLEARER

The struggle facing Europe's automakers returned to the radar on Thursday when Donald Trump said he may soon hike auto tariffs in an attempt to speed up U.S. investments.

The STOXX 600 autos and parts index .SXAP is down 2.2% on Friday and has fallen 4.5% this year, compared to an 8.5% gain for the broader STOXX 600 .STOXX.

Citi notes that the sector has an "infinite source of negative headlines", making it difficult for investors to engage.

"A combination of structural difficulties, binary tariff considerations, and short-term investment horizons combine to make it very difficult for investors to consider EU OEMs (original equipment manufacturers) for investment considerations," Citi research analyst Harald C Hendrikse says.

"In the current market, we think the concept of “priced in” doesn’t exist," Hendrikse adds. "Every headline simply further re-enforces the existing negative consensus."

On a long-term basis, this means the sector is cheap, but Hendrikse thinks the current malaise for the sector will continue at least through H1 2025 earnings and/or until the tariff uncertainties are properly addressed.

"Off very low current valuations, we continue to believe the upside could be significant," Henrikse says.

"But not before the re-basing has completed."

(Samuel Indyk)

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