Trump's Ukraine Pivot Fuels 100% Gains in World's Defense Stocks
Security-related shares have been on a tear this year, with Germany's Rheinmetall AG ranking as the best-performer in the MSCI World Index as money managers anticipate a jump in military spending. The buzz has spilled over into Asia, where South Korea's Hanwha Aerospace Co. and its unit Hanwha Ocean Co. have both rallied over 100% to beat all their regional peers.
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10 hours ago
- Yahoo
JPMorgan Warns of Stocks Complacency as Earnings Outlook Dims
(Bloomberg) -- Signs of stock-market complacency are emerging as the searing equities rally coincides with an acceleration in earnings downgrades, according to JPMorgan Chase & Co. quantitative strategists. Trump Awards $1.26 Billion Contract to Build Biggest Immigrant Detention Center in US Why the Federal Reserve's Building Renovation Costs $2.5 Billion Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom Milan Corruption Probe Casts Shadow Over Property Boom How San Jose's Mayor Is Working to Build an AI Capital Stocks have bounced back from April's slump at an even faster pace than after the Covid pandemic, sending the MSCI World Index and many regional benchmarks to record highs. At the same time, consensus data shows downgrades outpacing upgrades sharply in global earnings revisions, the JPMorgan team led by Khuram Chaudhry said. 'There appears to be an environment of bullish sentiment, speculation, and a growing air of complacency,' they wrote. 'Either sell-side analysts are about to start a new round of upward revisions or the market is at risk of suffering a period of increased volatility and draw-downs. Something has to give!' Net revisions for global earnings have slid 14.3% on a one-month basis and 18.7% over three months. For now, the US shows fewer cuts, thanks to strength in sectors like technology, they said, while regions like Asia and Europe face accelerating earnings-per share downgrades. Guidance in Europe has been weak, given the uncertainty around tariffs, with a slew of profit warnings, especially in the chemical sector. In the US, expectations are high for the Big Tech names after a 35% surge in the Nasdaq 100 since its April low. Cracks could still emerge in the second half, the analysts said. 'The US market is thriving on sectors like Technology and the 'Magnificent 7' stocks, fueled by the Generative AI trend,' they wrote. 'Yet cracks and volatility are increasingly likely in the second half. Investors should be on the lookout for a potential market rotation!' UK Profit Warnings Citing Geopolitics Hit a Record High, EY Says For those expecting looser monetary policy to boost the market, the three to four cuts priced in over the coming 12 months shouldn't be taken as a positive, Chaudhry and his team said. 'Any forthcoming interest rate cuts may signal underlying weakness, rather than a build up in positive sentiment.' Elon Musk's Empire Is Creaking Under the Strain of Elon Musk Burning Man Is Burning Through Cash A Rebel Army Is Building a Rare-Earth Empire on China's Border Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All ©2025 Bloomberg L.P.
Yahoo
5 days ago
- Yahoo
Carmakers Face Uncertainty as Tariffs and Earnings Collide
(Bloomberg) -- Investors in auto firms, which sit squarely in the bullseye of US President Donald Trump's trade war, are about to find out if earnings back up the sector's scorching rebound from this year's lows. The Dutch Intersection Is Coming to Save Your Life Advocates Fear US Agents Are Using 'Wellness Checks' on Children as a Prelude to Arrests Mumbai Facelift Is Inspired by 200-Year-Old New York Blueprint LA Homelessness Drops for Second Year Manhattan, Chicago Murder Rates Drop in 2025, Officials Say A gauge of stocks of US carmakers and suppliers has soared more than 40% from its tariff-fueled April depths, handily beating the S&P 500 Index's 26% gain. Meanwhile, the MSCI World Auto and Components Index has climbed 30% in that period, outpacing the MSCI World Index's 25% advance. Investors dove into the beaten-down shares during the furious rally unleashed when Trump paused most of his aggressive levies in April. But the recovery, which has since stalled out, creates a conundrum: While the shares are now much more costly, the tariff outlook hasn't grown much clearer as the sector gets ready to announce quarterly profits starting next week. Add to that headwinds around the affordability of new vehicles, rising global competition from Chinese brands like BYD Co., and China's efforts to regulate the sector, and some analysts are wary of making broad bets on the industry at the moment. 'Auto stocks have bounced back, but the setup into earnings is murky,' said Keith Lerner, co-chief investment officer at Truist Advisory Services. 'This is a market for selectivity, not broad exposure.' General Motors Co., Tesla Inc. and Volkswagen AG release earnings next week, with Ford Motor Co., Stellantis NV, Mercedes-Benz Group AG and BMW AG coming the week after. Japan's Toyota Motor Corp., the world's No. 1 carmaker, and China's Geely Automobile Holdings Ltd. are due to report next month. 'Fluid Situation' Most companies are poised to announce numbers for the three months through June — after a stretch in which Trump unveiled a slew of tariffs on auto imports, goods from Mexico and Canada, steel and aluminum and nearly all US trading partners. Many of the measures have been paused, but this month brought a fresh blow as Trump announced tariffs on copper and unleashed ultimatums on counterparts including Japan, Brazil, the European Union and Mexico. The impact of the potential tariff regime on automakers, which have a sprawling global supply chain and are uniquely exposed to the risk, is a key theme investors and analysts will be watching. 'It is a fluid situation still and investors were not really prepared for the latest round of tariffs that were announced earlier this month,' said Garrett Nelson, an analyst at CFRA Research. He has a hold-equivalent rating on the US auto sector, citing valuations and tariff-related uncertainty among other reasons. Wall Street is already lowering expectations for some of the biggest carmakers. Analysts' second-quarter average profit estimate for GM has dropped 18% over the past six months and Ford's has sunk 30%, according to Bloomberg Intelligence. For EV giant Tesla it's declined 47% over the same period, with a potential hurdle looming as a federal tax credit for consumer purchases of electric vehicles ends in September. The overarching question is how companies are handling tariff-triggered cost increases. A Bank of Japan report this month showed the country's automakers slashed prices of exports to the US — a sign they were sacrificing profits to stay competitive. Industry analysts expect Toyota to fare better than its domestic peers given its sizable profits, and see Honda Motor Co. benefiting from extensive local manufacturing. The picture is gloomier in Europe. Volkswagen's sales dropped 16% in the US in the second quarter, a sharp reversal from the 4.4% growth in the first three months of the year before the new levies took effect. This week, Sweden's Volvo Car AB said it was taking an impairment charge of about $1.2 billion due to delays to some electric models and climbing tariff costs. Its CEO on Thursday urged the EU to cut tariffs on the US to help a trade deal. In contrast to the US sector's performance, the Stoxx 600 Automobiles and Parts gauge of European producers has trailed the rebound in the region's broader Stoxx 600 from an April low. 'The European mass-market players will be fighting for their piece of a pie in a pie that is pretty much stable, or unchanging, over the medium- to longer-term, with more competitors,' said Rella Suskin, an analyst at Morningstar Inc. 'So someone's got to lose share somewhere.' 'Lost Cause' A fast-emerging theme for European carmakers that have reported sales for the second quarter has been weakness in China — one of the world's largest auto markets — where domestic companies have become tough competitors. German sportscar maker Porsche AG said its global deliveries fell 6% in the first half of the year, and warned of a difficult road ahead due to fierce competition in China and slowing momentum in the US. BMW AG's sales stagnated in the second quarter as deliveries in China dropped, and Mercedes-Benz Group AG's vehicle sales declined in both the US and China. 'China is probably a lost cause for all foreign brands, except for Tesla,' Piper Sandler analyst Alex Potter wrote in a note to clients this month. The rise of Chinese EV makers such as Geely is also pressuring BYD, the country's top automaker, which saw its domestic passenger car sales decline the past few months. China this week pledged to rein in 'irrational competition' in its EV sector after BYD and other automakers cut prices to lure buyers. For Wall Street, partsmakers look like a bright spot. With car manufacturers facing intense political pressure to forgo price increases as tariffs hit, auto suppliers are showing signs of being able to pass along that expense. In Europe, for example, analysts favor tiremakers in particular as the companies successfully raise prices to offset US tariff costs, which Citigroup Inc. says reflects an early pass-through to consumers. 'We think more local players, especially Michelin, can benefit from this trend in a profitable way,' analysts led by Ross MacDonald wrote in a note this week. What the Tough Job Market for New College Grads Says About the Economy How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All Godzilla Conquered Japan. 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Los Angeles Times
5 days ago
- Los Angeles Times
Carmakers face uncertainty as tariffs and earnings collide
Investors in auto firms, which sit squarely in the bullseye of President Donald Trump's trade war, are about to find out if earnings back up the sector's scorching rebound from this year's lows. A gauge of stocks of U.S. carmakers and suppliers has soared more than 40% from its tariff-fueled April depths, handily beating the S&P 500 Index's 26% gain. Meanwhile, the MSCI World Auto and Components Index has climbed 30% in that period, outpacing the MSCI World Index's 25% advance. Investors dove into the beaten-down shares during the furious rally unleashed when Trump paused most of his aggressive levies in April. But the recovery, which has since stalled out, creates a conundrum: While the shares are now much more costly, the tariff outlook hasn't grown much clearer as the sector gets ready to announce quarterly profits starting next week. Add to that headwinds around the affordability of new vehicles, rising global competition from Chinese brands like BYD Co., and China's efforts to regulate the sector, and some analysts are wary of making broad bets on the industry at the moment. 'Auto stocks have bounced back, but the setup into earnings is murky,' said Keith Lerner, co-chief investment officer at Truist Advisory Services. 'This is a market for selectivity, not broad exposure.' General Motors Co., Tesla Inc. and Volkswagen AG release earnings next week, with Ford Motor Co., Stellantis NV, Mercedes-Benz Group AG and BMW AG coming the week after. Japan's Toyota Motor Corp., the world's No. 1 carmaker, and China's Geely Automobile Holdings Ltd. are due to report next month. Most companies are poised to announce numbers for the three months through June — after a stretch in which Trump unveiled a slew of tariffs on auto imports, goods from Mexico and Canada, steel and aluminum and nearly all U.S. trading partners. Many of the measures have been paused, but this month brought a fresh blow as Trump announced tariffs on copper and unleashed ultimatums on counterparts including Japan, Brazil, the European Union and Mexico. The impact of the potential tariff regime on automakers, which have a sprawling global supply chain and are uniquely exposed to the risk, is a key theme investors and analysts will be watching. 'It is a fluid situation still and investors were not really prepared for the latest round of tariffs that were announced earlier this month,' said Garrett Nelson, an analyst at CFRA Research. He has a hold-equivalent rating on the U.S. auto sector, citing valuations and tariff-related uncertainty among other reasons. Wall Street is already lowering expectations for some of the biggest carmakers. Analysts' second-quarter average profit estimate for GM has dropped 18% over the past six months and Ford's has sunk 30%, according to Bloomberg Intelligence. For EV giant Tesla it's declined 47% over the same period, with a potential hurdle looming as a federal tax credit for consumer purchases of electric vehicles ends in September. The overarching question is how companies are handling tariff-triggered cost increases. A Bank of Japan report this month showed the country's automakers slashed prices of exports to the U.S. — a sign they were sacrificing profits to stay competitive. Industry analysts expect Toyota to fare better than its domestic peers given its sizable profits, and see Honda Motor Co. benefiting from extensive local manufacturing. Volkswagen's sales dropped 16% in the U.S. in the second quarter, a sharp reversal from the 4.4% growth in the first three months of the year before the new levies took effect. This week, Sweden's Volvo Car AB said it was taking an impairment charge of about $1.2 billion due to delays to some electric models and climbing tariff costs. Its CEO on Thursday urged the EU to cut tariffs on the U.S. to help a trade deal. In contrast to the U.S. sector's performance, the Stoxx 600 Automobiles and Parts gauge of European producers has trailed the rebound in the region's broader Stoxx 600 from an April low. 'The European mass-market players will be fighting for their piece of a pie in a pie that is pretty much stable, or unchanging, over the medium- to longer-term, with more competitors,' said Rella Suskin, an analyst at Morningstar Inc. 'So someone's got to lose share somewhere.' A fast-emerging theme for European carmakers that have reported sales for the second quarter has been weakness in China — one of the world's largest auto markets — where domestic companies have become tough competitors. German sportscar maker Porsche AG said its global deliveries fell 6% in the first half of the year, and warned of a difficult road ahead due to fierce competition in China and slowing momentum in the U.S. BMW AG's sales stagnated in the second quarter as deliveries in China dropped, and Mercedes-Benz Group AG's vehicle sales declined in both the U.S. and China. 'China is probably a lost cause for all foreign brands, except for Tesla,' Piper Sandler analyst Alex Potter wrote in a note to clients this month. The rise of Chinese EV makers such as Geely is also pressuring BYD, the country's top automaker, which saw its domestic passenger car sales decline the past few months. China this week pledged to rein in 'irrational competition' in its EV sector after BYD and other automakers cut prices to lure buyers. For Wall Street, partsmakers look like a bright spot. With car manufacturers facing intense political pressure to forgo price increases as tariffs hit, auto suppliers are showing signs of being able to pass along that expense. In Europe, for example, analysts favor tiremakers in particular as the companies successfully raise prices to offset US tariff costs, which Citigroup Inc. says reflects an early pass-through to consumers. 'We think more local players, especially Michelin, can benefit from this trend in a profitable way,' analysts led by Ross MacDonald wrote in a note this week. Dey, MacDonogh and Yang write for Bloomberg.
