Potential US auto tariffs would hurt Germany, Japan and Korea

Ratings firm Moody’s said on Tuesday that potential auto tariffs by the United States would be a risk to global growth, hindering economic momentum in Germany, Japan and Korea.

However, such a move would be less severe for China as Chinese vehicle exports were already subject to trade restrictions, Moody’s said in a report, adding that it would also be broadly credit negative for the global auto industry.

“Auto trade restrictions would cause a broader hit to business and consumer confidence globally in an already slowing global economy,” Moody’s Associate Managing Director Elena Duggar wrote.

Meanwhile the european shares opened slightly lower on Tuesday, weighed down by planemaker Airbus and its suppliers, which took a hit from proposed US tariffs, while an event-packed week kept investors cautious.

At 0728 GMT, the pan-European STOXX 600 index dipped 0.07 per cent, with Paris’s CAC down 0.2 per cent and Frankfurt’s trade-sensitive DAX off 0.1 per cent.

Shares of planemaker Airbus dropped 2.5 per cent after the US Trade Representative proposed tariffs on a list of European Union products including large commercial aircraft and parts. Washington is seeking to retaliate for more than $11 billion worth of EU subsidies to Airbus that the World Trade Organization has found cause “adverse effects” for the United States.

Airbus suppliers such as Safran, Leonardo and Dassault lost between 0.7 per cent and 1.2 per cent.

Investors are also keeping a close eye on a trade summit between the European Union and China on Tuesday in which the bloc will try to coax Beijing to open up its markets.

The European Central Bank is expected to hold borrowing costs when its policymakers meet on Wednesday, the same day British Prime Minister Theresa May’s request to delay Brexit until June 30 will be formally discussed by EU leaders at a special summit.

Swiss drugmaker Novartis slipped over 2 per cent, among the biggest drags on STOXX 600, trading for the first day after completing the spin off its eyecare division Alcon.

Alcon shares surged 32 per cent in its debut.

Bechtle AG dropped more than 2 per cent and pulled the tech sector lower after Berenberg downgraded the German IT company’s stock to “hold”.

Merck KGaA dipped on winning the backing of Versum’s board for a sweetened $6.5 billion takeover bid, overturning an agreed merger with rival Entegris as it bets on a recovery in electronic materials markets.

Norwegian mobile operator Telenor slipped after agreeing to buy a 54 per cent stake in Finnish telecoms firm DNA for 1.5 billion euros ($1.69 billion).

Keeping losses in check were shares of Total SA, which rose after the French oil and gas major and its partners signed a long-awaited deal with Papua New Guinea that will allow initial work to start on a $13 billion plan to double the country’s liquefied natural gas exports.

The German exports and imports both fell more than expected in February, data showed, in the latest sign that Europe’s largest economy is likely to post meagre growth in the first quarter amid increased headwinds from abroad.

German exporters are suffering from a slowing world economy, trade disputes and Brexit angst. Leading economic institutes last week slashed their forecast for 2019 growth and warned a long-term upswing had come to an end.

The Federal Statistics Office said seasonally adjusted exports were down by 1.3 per cent on the month, the biggest drop in 12 months, while imports fell 1.6 per cent.

The trade surplus edged up to 18.7 billion euros ($20.99 billion) from a revised 18.6 billion euros the previous month.

A Reuters poll of economists had pointed to a 0.5 per cent decrease in exports and a 0.7 per cent decline in imports. The trade surplus was expected to narrow to 18.0 billion euros.

“There simply seem to be too many crises in global trade for the German export sector to defy all of them at the same time,” Carsten Brzeski from ING said.

He pointed to the trade dispute between the United States and China, growing fears of a no-deal Brexit, a possible cooling of the Chinese economy and problems in other emerging markets.

Data released last weak showed German industrial orders fell by the biggest margin in more than two years in February. However, industrial output rose slightly more than expected in the same month as mild weather helped a surge in construction.

Germany is in its 10th year of economic expansion, but narrowly skirted a recession at the end of last year and posted its weakest growth rate in five years in 2018.

The German government will update its growth forecast later this month. In January, Berlin said it expected the economy to grow by 1.0 per cent this year.

Reuters