EU AUTOMOTIVE: Week in Review
Tariff threats towards Japan and S Korea remain elevated with 25% threatened in the latest letters. Both countries will hope for an agreement before the 1st of August deadline, with autos a key export for both. An “offsetting mechanism” for auto export quotas was reportedly part of EU-US trade discussions.
- Spreads tightened 3bp this week, fractionally ahead of aggregate moves. PCIM (-11) was the top performer.
- Volkswagen reported 1.2% volume growth in 2Q, with North America down 16% on tariffs, China up 2.8%, and core brands outperforming.
- Traton posted 1% volume growth in 2Q, with Scania down 5%. International Motors (US) grew 10% on a weak comp.
- BMW reported 0.4% volume growth in 2Q; Europe was strong (+10%), China fell 14%, and Americas rose 2%, helped by local manufacturing.
- Toyota Motor issued a 3.5Y 2bp wide to our FV.
- Volkswagen priced a GBP 6Y 5bp wide to our FV.
Nissan brought 4 and 8Y notes alongside USD issuance. Both tranches priced 0.125% wide to our FV.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
CROSS ASSET: Markets Look Through Mixed China Statement On U.S. Trade Matters
E-minis slightly lower since the Chinese readout following trade talks with the U.S. crossed, but the moves are tiny.
- It doesn't look like any meaningful agreements have been struck, with Chinese language a mix of constructive and reaffirming the country's ability to act to defend its interests.
- CNH FX unmoved.
BONDS: BTP/Bund spread edges below 91bps
- US Tnotes/Bund spread has again found resistance at the noted level of ~195.73bps, this is providing the first upside hurdle, which also coincide with the 76.4% retracement of the February/April range at ~196.3bps.
- The spread is now close to 1bps tighter, below 194bps.
- The BTP/Bund has also reversed the small widening move, now back to flat, and tilting on the tighter side, just below 91bps, the 90bps level is key, its lowest since Mid March 2015.
US-CHINA: China VP-Two Sides Should Safeguard 'Hard Won Outcome' From Talks
(MNI) London - Reuters reporting comments from Chinese Vice Premier He Lifeng, who led China's delegation in the talks with the US that took place in London over 9-10 June. VP says: "China's stance on trade issues with the US is clear and consistent." Says that the "Two sides should enhance consensus, strengthen cooperation, and jointly safeguard the hard-won outcome from the dialogues." He Lifeng: China and US "should maintain communication" and "push for table and long-term China-US trade and economic ties." The VP says "China is sincere in trade and economic consultations, but has its principles."
- US Commerce Secretary Howard Lutnick confirmed after the talks concluded on 10 June that a 'framework deal' would be presented to President Donald Trump. Li Chenggang, from the Chinese delegation, said the same would be presented to President Xi Jinping. This framework would implement agreements reached during previous face-to-face talks in Geneva, and from the Trump-Xi call last week.
- The main topic of the talks was not the imposition of tariffs that has dominated the global news and economic cycle for the past two months, but Chinese export controls on rare earth metals that are crucial for US supply chains and US restrictions on the export of semiconductors and other related technologies linked to artificial intelligence (AI) to China.
