[MARKET ANALYSIS] European bourses mostly lower on geopolitical risk; Autos lag as Trump threatens a 25% tariff on EU cars

European bourses opened tentatively on either side of the unchanged mark, and have gradually moved lower, alongside a pick-up in energy prices. The DAX 40 (+0.3%) is the outperforming major this morning, whilst the IBEX 35 (-0.4%) lags vs peers. As a reminder, the FTSE 100 is closed on account of the UK’s May Bank Holiday. The focus this morning has been on a) geopols and b) trade.
In a bit more detail, the geopolitical situation is showing little sign of easing. Over the weekend, President Trump announced plans to guide neutral ships safely through the Strait. Unsurprisingly, this was met with resistance by the Iranians, with an official this morning spurring some mild risk off, after he said that the US would be attacked if they approach and enter the Strait of Hormuz.
On the trade front, Trump once again took all the attention, after he threatened the EU with 25% tariffs on European cars/trucks, after suggesting that the bloc is not complying with the trade deal. The White House said that it would implement the tariffs through Section 232, which are typically subject to long due process/probes. The Autos sector in Europe this morning has been mildly hit following Trump’s threat, with the likes of BMW (-1.3%) and Mercedes (-1.2%) on the backfoot, whilst Stellantis (-0.1%) remains fairly resilient. The divergence is explained by BMW/Mercedes importing many of their cars into the US through European factories, whilst Stellantis has a higher industrial presence within the region.
European sectors are mixed. Media and Tech take the top two spots, whilst Autos and Media are the clear laggards. The Tech sector gains follow the strength seen in APAC trade overnight, whereby SK Hynix shares rallied 12%, as the sector reacted to continued optimism surrounding strong spending for AI data centres. As for key movers, Thyssenkrupp (+1.6%) reversed initial losses after the Co. and Jindal International Steel mutually agreed to pause talks regarding a stake in ThyssenKrupp Steel. Elsewhere, Evotec (+4%) benefits after it announced the nomination of a small molecule preclinical development candidate.
US equity futures are currently flat/firmer (ES/RTY U/C, NQ +0.2%), following the tentative action seen in Europe. The US docket today includes factory orders, with focus also on Fed speak via Fed’s Williams later; President Trump is also set to speak. As for key stories this morning, GameStop (-0.8%) is offering to purchase eBay (+8%) for USD 56bln, GameStop CEO says, according to WSJ. Elsewhere, Manchester United (+2.1%) secured Champions League football for next season, after defeating Liverpool on Sunday.