European carmaker shares fall on tariff threat
Shares in European automakers are falling this morning after Donald Trump threatened to slap 25% tariffs on imports from the EU.
President Trump’s statement yesterday that new European tariffs will be announced “very soon” and fall “on cars and all other things” (see opening post) has hit Europe’s stock markets this morning.
Germany’s DAX index has dropped by 1.2%, with carmaker such as BMW (-2.9%), Porsche (-2.8%), Volkswagen (-2.75%) and Mercedes-Benz (-2.5%) leading the fallers.
Across Europe, car giant Stellantis are down 2.75% while Renault have lost 1.2%.
Li Xing financial markets strategist consultant to Exness, explains:
President Donald Trump’s announcement of a 25% tariff on EU cars and goods has reignited global trade worries, although the lack of clarity surrounding the policy may limit its immediate market impact.
Trump is hoping to close the US’s $208bn trade in goods deficit with the EU by imposing tariffs (which will make imports from Europe more expensive). That’s the second largest trade in goods deficit, following China’s $279bn.
Should Trump impose tariffs on the EU, some countries are likely to be hit harder than others. Germany has by far the most goods exports, worth €158bn (£131bn) in 2023. The Netherlands imports the most goods from the US, worth €76bn.
Trump also caused a stir by claiming that the EU “was formed to screw the United States”.
Carl Bildt, the former prime miniser of Sweden, points out there were other motivations….
President Trump 🇺🇸 has a seriously distorted view of history. Now he claims 🇪🇺 was set up ”to screw the United States”. It was actually set up to prevent war on the European continent. pic.twitter.com/czirI913IV
— Carl Bildt (@carlbildt) February 26, 2025
Key events
The oil price has risen today, after Donald Trump cancelled a license given to energy giant Chevron to operate in Venezuela.
US crude oil is up 0.9% at $69.23 per barrel, while Brent crude, the international benchmark, is up 1% at $73.22 per barrel.
Trump announced yesterday that a permit issued by the US government allowing Chevron to pump and export Venezuelan oil will be terminated this week, which will end a financial lifeline for the South American country.
The US president accused his Venezuelan counterpart, Nicolás Maduro, of not meeting democratic conditions.
Trump wrote on his Truth Social site:
“We are hereby reversing the concessions that Crooked Joe Biden gave to Nicolás Maduro, of Venezuela, on the oil transaction agreement.”
Kiel: Trump’s tariff threats on EU could trigger economic turmoil
Both the European and US economies would suffer from a new trade war, the Kiel Institute for the World Economy has warned today.
A simulation created by the Kiel Institute has calculated that there would be economic contraction in both the EU and the United States if the US imposed 25% tariffs on European goods.
The economic damage would be worse if Europe retaliated with its own tariffs.
The Kiel Institute says:
According to the simulations, the European economy would shrink by an average of 0.4 percent in real GDP terms within the first year, a significant impact for a short-run scenario.
The U.S. itself would not be spared, experiencing a contraction of 0.17 percent.
Should the EU retaliate with its own 25 percent tariffs, the economic damage to the U.S. would double and increase own costs for the EU by another 0.14 percentage points. Furthermore, price levels in the U.S. could increase by up to 1.5 percent due to higher costs for imported final goods and intermediate inputs, making domestic production more expensive and reducing overall competitiveness.
Kiel’s calculations show that European exports to the US would decline by 15% to 17% in the first year, including 20% plunge in Germany’s sales to the US.
In other trade news, France’s industry minister has called for more protection for Europe’s steel sector.
Marc Ferracci told a news conference on the future of the European steel industry that this could include stronger safeguard measures.
Ferracci says:
“The European industry and the steel sector need protection, which in the short term means beefing up safeguard measures.”
The existing safeguard measures include tariffs on steel imports over a set quote. Last summer they were extended until June 2026.
Polish prime minister Donald Tusk has responded to US president Donald Trump’s claim that the EU was formed “to screw the United States.”
In a social media post in English, Tusk said:
The EU wasn’t formed to screw anyone. Quite the opposite. It was formed to maintain peace, to build respect among our nations, to create free and fair trade, and to strengthen our transatlantic friendship. As simple as that. 🇪🇺🇺🇸
My colleague Jakub Krupa’s Europe liveblog has more details.
The New Economics Foundation (NEF) has warned that growing Gatwick airport will not create economic growth.
Dr Alex Chapman, senior economist at NEF, says:
“Growing Gatwick will not magic up the economic growth the government so desperately wants. Business air travel has collapsed while expansion will see three times as many tourists leave the country as come in.
“Voters living outside London and the south east will not thank the government for this decision. Expanding airports like Gatwick doesn’t create new jobs – it displaces jobs from the wider UK regions, and particularly the domestic tourism industry which is a key source of spending outside London and the south east.
“The UK is small country with a remarkably high number of international airports. People are already perfectly able to catch cheap flights on holiday or travel for business. If this government is so desperate for growth, it should focus on investing properly in the vital public services upon which the health of our economy really depends.”
The Unite union have welcomed the goverment’s decision to say it is ‘minded to approve’ the expansion of Gatwick.
Unite, which represents 7,000 workers at the airport, believes the expansion should boost highly skilled, well-paid, unionised jobs.
Unite general secretary, Sharon Graham says”
“Unite welcomes the announcement of the expansion of Gatwick but it needs to come with guarantees of well paid, unionised jobs and proper facilities for workers.
“It is also ever more urgent with every airport expansion that we ensure domestic production of sustainable aviation fuel (SAF) to offset carbon emissions and meet the government’s own targets on net zero.
Unite is also pushing for the Grangemouth refinery in Scotland to be upgraded to produce SAF, rather than being closed this summer.
Deadline for the final Gatwick decision extended by nine months
A final decision on Gatwick’s push to open a second runway will not come for several months, though, even though a ‘minded to approve’ letter was released today.
Transport minister Heidi Alexander has extended the deadline for deciding for certain whether Gatwick can turn its back-up emergency runway into a second runway until 27 October.
Alexander says:
The decision to set a new deadline is without prejudice to the decision on whether to give development consent…
Donald Trump’s enthusiasm for tariffs is creating economic uncertainty, and volatility in the finaancial markets.
Dan Ivascyn, group CIO at bond-trading giant PIMCO, explains:
“You do not only have uncertainty here in the United States, but you have a lot of uncertainty in terms of relationships with other countries, impact on markets. And that’s creating not only a lot of localized volatility but volatility across countries, across sectors, across yield curves and that’s a great opportunity as well.
So I think the key theme going into this year is to have a healthy degree of humility around the uncertainty. Acknowledge the uncertainty, but look to take advantage of the full global opportunity set, both within the liquid higher quality areas of the market, as well as in some of the more credit sensitive areas as well.”
Here’s our news story about Gatwick being given qualified consent to operate a second runway after the government “set out a path to expansion” for London’s second biggest airport.
PA: Minister has ‘set out path to approving’ Gatwick expansion
UK transport secretary Heidi Alexander has reportedly “set out a path to approving” Gatwick airport’s expansion project, to open a second runway.
That’s according to PA Media, who are citing a Government source.
They explain:
This comes after the Planning Inspectorate initially rejected the West Sussex airport’s application to bring its emergency runway into routine use.
The Planning Inspectorate then recommended that Ms Alexander should give the project the go-ahead if adjustments are made on issues such as the proportion of passengers who travel to and from the airport by public transport, and noise mitigation.
It is understood to be the first time the body has recommended an alternative plan when assessing a project.
Gatwick has until April 24 to respond to the new proposals, shortly after which Ms Alexander is expected to make a final decision.
European carmaker shares fall on tariff threat
Shares in European automakers are falling this morning after Donald Trump threatened to slap 25% tariffs on imports from the EU.
President Trump’s statement yesterday that new European tariffs will be announced “very soon” and fall “on cars and all other things” (see opening post) has hit Europe’s stock markets this morning.
Germany’s DAX index has dropped by 1.2%, with carmaker such as BMW (-2.9%), Porsche (-2.8%), Volkswagen (-2.75%) and Mercedes-Benz (-2.5%) leading the fallers.
Across Europe, car giant Stellantis are down 2.75% while Renault have lost 1.2%.
Li Xing financial markets strategist consultant to Exness, explains:
President Donald Trump’s announcement of a 25% tariff on EU cars and goods has reignited global trade worries, although the lack of clarity surrounding the policy may limit its immediate market impact.
Trump is hoping to close the US’s $208bn trade in goods deficit with the EU by imposing tariffs (which will make imports from Europe more expensive). That’s the second largest trade in goods deficit, following China’s $279bn.
Should Trump impose tariffs on the EU, some countries are likely to be hit harder than others. Germany has by far the most goods exports, worth €158bn (£131bn) in 2023. The Netherlands imports the most goods from the US, worth €76bn.
Trump also caused a stir by claiming that the EU “was formed to screw the United States”.
Carl Bildt, the former prime miniser of Sweden, points out there were other motivations….
President Trump 🇺🇸 has a seriously distorted view of history. Now he claims 🇪🇺 was set up ”to screw the United States”. It was actually set up to prevent war on the European continent. pic.twitter.com/czirI913IV
— Carl Bildt (@carlbildt) February 26, 2025
Another loss at Ocado
Grocery delivery firm Ocado’s shares are also sliding, down 13% this morning, after it reported another annual loss.
Ocado made a statutory loss of £373m in the 12 months to 1 December 2024, lower than the £387m it lost in 2023. Total revenues rose 14%.
City investors may be disappointed that Ocado hasn’t announced any fresh deals for its robotic warehouses this morning.
It launched three of these customer fulfillment centres (CFCs) last year, in Sydney, Melbourne and Madrid, and is planning at least seven more over the next three years, starting with Warsaw this year.
But the opening dates of two of those CFCs, in Charlotte, North Carolina, and Phoenix, Arizona, has slipped to early 2026, following a “new Auto Freezer order”.
Adam Vettese, market analyst at eToro, says:
“A familiar story from Ocado’s results: on the surface there is plenty to be optimistic about – the loss has narrowed, on track to be cash-flow-positive, fastest growing UK grocer. Unfortunately, optimism isn’t going to pay the bills.
“The trouble is that while all of these things are great, the sticking point is that operationally there are still some issues. The rollout of robotic grocery warehouses to partners isn’t where the firm would want it to be, and of those confirmed in the pipeline, we are seeing them kicked back towards 2026.
“The firm insists more warehouse deals are coming. But just how much longer will they have to burn cash for is the question investors eagerly await to be answered. Shares are trading at less than half of what they were at the beginning of last year, some investors might be looking at this as a cheap play with things seemingly only able to improve. If the orders don’t come and there are more delays on what Ocado does have then this may not be the case.”
Ocado’s shares are down 15%, the worst performer on the FTSE 250 index, at 281p
WPP shares slide after results
While Rolls-Royce’s shares soar to the top of the FTSE 100 leaderboard, advertising group WPP have slumped 18% to the bottom of the pack.
WPP missed sales forecasts this morning, reporting a 0.7% drop in reported revenues in 2024.
The slowdown worsened in the last quarter of the year, when revenues fell in North America, the UK, and China, although they rose in Western Continental Europe.
Mark Read, chief executive officer of WPP, says Q4 was hit by “weaker client discretionary spend”.
We did see growth from our top 25 clients of 2.0% and an improving new business performance in the second half of the year with wins from Amazon, J&J, Kimberly-Clark and Unilever reflecting the strength of our integrated offer.
“The actions we are taking across WPP will strengthen our existing client relationships and drive our new business results. We expect some improvement in the performance of our integrated creative agencies in the year ahead. At the same time, we have comprehensive efforts underway to improve our competitive positioning through new leadership at GroupM, with further investment in AI, data and proprietary media.
“Though we remain cautious given the overall macro environment, we are confident in our medium-term targets and believe our focus on innovation, a simpler client-facing offer and operational excellence will support our growth and deliver greater value for our shareholders.”
On the UK specifically, WPP reports:
The United Kingdom declined in 2024 reflecting a strong comparison (2023: +5.6%) and the impact of slower client spending in Q4 with further weakness in project-based work across creative and specialist agencies exacerbated by an uncertain macro outlook, only partially offset by growth in GroupM and Ogilvy.
Rolls-Royce shares soar
BOOM! Shares in Rolls-Royce are soaring at the start of trading, as investors hail its financial recovery.
Rolls-Royce’s stock has jumped by over 15% to 735p per share, a new all-time high.
The City will be impressed with Rolls’s upgraded forecasts for profit growth (see 7.48am), as well as relieved that the dividend has been restored (as had been expected).
They’ve taken off, and are powering higher!
*ROLLS-ROYCE SHARES RISE 16% AFTER GUIDANCE INCREASE, BUYBACK
— Michael Brown (@MrMBrown) February 27, 2025
In another sign of confidence, Rolls-Royce has lifted its mid-term financial targets.
It tells shareholders:
Upgraded mid-term targets of £3.6bn-£3.9bn underlying operating profit, 15%-17% operating margin, £4.2bn-£4.5bn free cash flow, and 18%-21% return on capital based on a 2028 timeframe.
The company is also aiming for between £2.7bn and £2.9bn underlying operating profits this year, up from the £2.5bn in 2024.
This shows that CEO Erginbilgiç’s turnaround plan – dubbed “the most astonishing turnaround at a major FTSE 100 company in decades” by my colleague Nils Pratley – is continuing to pay off.
Rolls-Royce restarts dividend payments
UK engineering firm Rolls-Royce is resuming payouts to shareholders for the first time since the Covid-19 pandemic hit its operations.
Following “strong results” in 2024, Rolls-Royce has announced it will pay a dividend of 6.0p per share to investors. It also plans to spend £1bn on a share buyback scheme – another way of returning cash to shareholders.
The news comes as Rolls-Royce annouces that earnings rose by over 50% last year – with underlying operating profit up to £2.5bn, from £1.6bn in 2023.
Chief executive Tufan Erginbilgiç says Rolls-Royce is being transformed into a “high-performing, competitive, resilient, and growing business”.
All core divisions delivered significantly improved performance, despite a supply chain environment that remains challenging.
We are moving with pace and intensity. Based on our 2025 guidance, we now expect to deliver underlying operating profit and free cash flow within the target ranges set at our Capital Markets Day, two years earlier than planned.
Significantly improved performance and a stronger balance sheet gives us confidence to reinstate shareholder dividends and announce a £1bn share buyback in 2025.
It’s quite a turnaround since Covid-19 buffeted Rolls-Royce, which makes and services jet engines, runs a defence arm, and produces a range of power and propulsion products, including nuclear propulsion plants for the Royal Navy’s nuclear submarines. It is also developing small modular nuclear reactors.
Rolls suspended dividend payments in April 2030, as its airline customers kept flights grounded due to the pandemic.
The crisis, drove its share price down below 40p in October 2020. Last night they closed at 631p, having hit a record high earlier this month.
The company has been cutting costs under Erginbilgiç, and also reported record-breaking orders amid mounting military tension around the world.
Gatwick second runway decision expected today
We’re expecting to learn later today whether Gatwick airport will be allowed to open a second runway.
The Transport Secretary, Heidi Alexander, is due to announce today whether she has granted a development consent order which could allow more than 100,000 extra flights a year at the West Sussex airport.
Gatwick wants to modify an emergency runway and taxiway to allow it to be used alongside its existing main runway.
The BBC reports that on Tuesday Alexander told the annual dinner of trade body Airlines UK in London that she had “no intention of clipping anyone’s wings,” and said aviation was good for growth, adding:
“I am not some sort of flight-shaming eco warrior. I love flying – I always have.”
Introduction: EU facing fresh US tariffs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The spectre of tariffs is stalking Europe today after Donald Trump announced last night he will soon hit goods made in the European Union with tariffs of 25%.
Trump told his first cabinet meeting, on Wednesday, that he will soon release details of the latest tariff threat, declaring:
“We have made a decision and we’ll be announcing it very soon. It’ll be 25%.”
Trump did not give further details but mentioned carmakers and said the levies would be applied “generally”, adding:
“And that’ll be on cars and all other things.”
European stock markets are expected to open in the red, as investors anticipate a new front opening up in Trump’s tradae wars.
Traders were already bracing for the looming March 4 deadline for US tariffs against Canada and Mexico, and for the steel and aluminum duties set to drop on March 12.
Each of these points could rattle markets, warns Stephen Innes, managing partner at SPI Asset Management, adding:
For now, markets are still fixated on tariff risk, not the impact. Absolute volatility begins when investors fully price these tariffs’ inflationary and/or growth ripple effects. The dollar, bonds, and equities are about to enter the trade war vortex again, and positioning will be everything.
The agenda
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12.30pm ECB minutes from Jan meeting
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1.30pm US GDP (1st revision) for Q4
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1.30pm US initial jobless claims data
