MyStratWeekly – October 22nd 2024

Topic of the week: The EU automotive sector in turmoil

• New car sales are sharply declining in the EU, and the outlook has significantly worsened. While cyclical factors are at play, structural factors are becoming increasingly significant;
• The automotive industry is undergoing its most significant structural transformation: by 2035, new cars must achieve carbon neutrality;
• EU manufacturers are lagging behind in the electric vehicle sector, particularly in terms of innovation;
• The EU is facing intensified competition from China, which has become the leader in this field. To protect itself from cheap Chinese imports, the EU has raised its customs tariffs;
• To remain a major player on the international stage, the automotive sector needs to quickly adapt to this new competitive environment. Mario Draghi's report specifically recommends developing a coordinated industrial action plan for the automotive industry at the EU level, covering all stages of the value chain.

Market review: ECB accelerates rate action

• The ECB cuts rates by 25 bps as expected as Christine Lagarde paints a gloomy picture of euro area activity;
• US retail sales point to 3%+ GDP growth in the third quarter;
• Credit and sovereign spreads weather the rebound in risk-free bond yields;
• US stocks up on bank earnings, European earnings hit by China and semiconductor industry outlook.

Axel Botte’s and Aline Goupil-Raguénès’ podcast :

• Topic of the week – US and Chinese growth in Q3;
• Theme – The European automotive sector in turmoil.

Chart of the week

The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016.

Heavy rains and drought have taken a toll on crop yields in several regions of the world. Prices have also increased due to a recent pickup in fertilizer prices in the US.

Tentative signs of an upturn in food prices must be monitored as regards the inflation outlook.