EU tariff reaction, Stoxx 600, FTSE

Europe’s Stoxx 600 index closed 0.06% lower on Monday, after shaving off losses late in the day to finish at a session high.

Investors are still trying to assess whether U.S. President Donald Trump’s threat of 30% tariffs on European Union imports will be averted before the Aug. 1 deadline. During a press conference Monday, Trump said he was “open to talk” on trade, including with Europe.

The U.K.’s FTSE 100 has been a rare bright spot among European bourses, closing up 0.64% at 8,998.06 points to break its record high set last week. London has already negotiated a 10% blanket tariff rate with the White House, and a sharp drop in sterling against the U.S. dollar and euro on Monday helped boost some of the index’s internationally-oriented firms.

— Jenni Reid

Shares of Volvo Cars plunged 5.5% in late trade after the Swedish automaker said it would face a one-off, non-cash impairment charge of 11.4 billion Swedish kronor ($1.19 billion) in the second quarter related to two models.

The firm said Monday that its upcoming Volvo EX90 electric SUV will have a “reduced lifecycle profitability” due to previous launch delays and additional development costs. Meanwhile, it is not currently able to sell its new all-electric Volvo ES90 saloon profitably in the U.S. due to import tariffs. Margins on the ES90 are also under pressure in Europe due to the impact of tariffs, it said.

Fredrik Hansson, Volvo Cars CFO, said the models had nonetheless “laid a critical technological foundation” for the company’s future.

A 9 billion Swedish kronor effect on net income will be reflected in results due July 17, Volvo Cars said.

In April, the U.S. placed 25% import duties on vehicles imported to the U.S.

— Jenni Reid

The European Commission is set to share a proposal for a second tranche of countermeasures against U.S. tariffs with European Union members on Monday, the bloc’s trade commissioner Maros Sefcovic said.

“Our rebalancing measures on steel and aluminum are suspended until early August, and today, the commission is sharing with the member states the proposal for the second list of goods accounting of some 72 billion euros [$84.1 billion] worth of U.S. imports,” he said during a Monday press conference, adding that member states would now be able to discuss the proposal.

The EU’s measures in response to U.S. President Trump’s steel and aluminum duties are set to target U.S. goods worth around 21 billion euros.

“This does not exhaust our toolbox, and every instrument remains on the table,” Sefcovic warned.

He reiterated that the EU was still aiming for a negotiated solution, but was also preparing for all potential outcomes.

“Later today, I will continue my engagement with my U.S. counterparts. The EU as you know very well, never walks away without genuine effort, especially considering the hard work invested, how close we find ourselves to making a deal, and the clear benefits of the negotiated solution,” Sefcovic said.

— Sophie Kiderlin

The Stoxx Europe Automobiles & Parts index is among the biggest benchmark decliners as investors digest risks from U.S. President Donald Trump’s tariff threat.

The index is down 1.2% as of 2.45 p.m. in London. VW, Mercedes and BMW are among those in the sector losing the most, falling 1.5%, 1.7% and 2.3%, respectively.

Investors have rushed into parts of the markets typically perceived to be safer, such as healthcare, utilities, and telecoms. These are up between 0.2% to 0.5%.

 — Ganesh Rao

Deutsche Bank strategists warned that stock market investors haven’t appropriately discounted risks from tariffs, as multiple negative factors are set to be in play by the end of the month.

“Markets are clearly not pricing in these higher tariffs, and we may only know the outcome in the final hours, offering the potential for a sharp market reaction and heightened volatility,” said Henry Allen, macro strategist at Deutsche Bank.

“Second, it’s the US jobs report that same day, and last year demonstrated that even a modest downside surprise can cause a big selloff, if investors are already jittery,” added Allen. Markets had fallen nearly 3% on the week ending 2nd August 2024 after data showed that far fewer jobs were created than expected, while unemployment had risen…