EU AUTOMOTIVE: Stellantis (STLA Baa1[N]/BBB+[N]/BBB+[N]): S&P Downgrade
When S&P moved to outlook negative in October, we described meeting margin requirements as an “uphill struggle”; FY24 results and FY25 guidance confirming that. S&P’s assumptions remain more optimistic than the market’s which is a concern.
- S&P downgrades Stellantis one notch to BBB, with outlook from negative to stable.
- Adj. EBITDA margin for FY24 came in 80bp below S&P’s expectations. It acknowledges that the miss was the result of inventory reductions completed ahead of schedule.
- It expects a 70bp margin improvement this year, with pricing constrained by timing of new models and intense competition. As a result, it sees 6.5% margins, well short of the 10% BBB+ threshold. It expects 8% for FY26. Consensus has just over 100bp of cumulative EBIT margin improvement through FY26, so risks to rate remain elevated. It has an 8% threshold for BBB.
- A net cash position and 3% FOCF/sales ratio are further rating thresholds, which S&P expects for FY26.
- S&P assumes 5-7% negative volume impact from tariffs, with 75% pass-through.
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MNI EXCLUSIVE: MNI Looks at the EU's Response to US Tariffs
- MNI looks at the EU's likely response to U.S. tariffs -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
US: MNI POLITICAL RISK - China Retaliates As Tariffs Go Into Effect
- President Donald Trump held last-minute calls with his Mexican and Canadian counterparts to avert a North American trade war.
- No agreement was struck to prevent a 10% baseline tariff on Chinese imports going into effect at midnight. In response, China announced a raft of retaliatory measures.
- Trump is expected to hold a call with Chinese President Xi Jinping in the coming days, leading to optimism a deal can prevent further escalation. However, Trump's administration is populated by China hawks, suggesting China tariffs are likely to be more durable.
- European Commission President Ursula von der Leyen said the bloc is "ready for tough negotiations" with Washington.
- Trump directed officials to create a sovereign wealth fund.
- The Senate confirmed Chris Wright as energy secretary. The Senate Intelligence Committee will vote today to advance DNI nominee, Tulsi Gabbard.
- The House Budget Committee delayed a crucial first step to unlocking budget reconciliation.
- Trump named Treasury Secretary Scott Bessent as acting head of the CFPB.
- Trump’s cryptocurrency and AI czar, David Sacks, will deliver a Capitol Hill press conference on crypto regulation.
- Israeli Prime Minister Benjamin Netanyahu will meet Trump at the White House today amid concerns over phase two of the Gaza ceasefire deal.
- Danish PM Mette Frederiksen hinted the US military could have a larger presence in Greenland.
- Trump suggested a deal with Ukraine to provide rare earth minerals.
- Poll of the Day: Trump's approval rating tracker is live.
Full article: US DAILY BRIEF
GERMANY: CDU Falls To Lowest Forsa Poll Score Since Sep '23 Amid AfD Furore
The latest opinion poll from Forsa shows the main opposition centre-right Christian Democratic Union (CDU) and its Bavarian sister party the Christian Social Union (CSU) recording 28% support. This is the lowest backing for the Union in a Forsa poll since September 2023. While generic polling shows the Union is still in pole position to emerge as the largest party in the 23 Feb federal election, the fallout from two high-profile Bundestag votes in late January could yet have an impact on vote shares.
- Forsa: Union: 28% (-2), AfD: 20%, SPD: 16%, Green: 15% (+1), LINKE: 5% (+1), FDP: 4%, BSW: 4% (+1), Others: 8% (-1). 28 Jan-3 Feb, chgs w/21-27 Jan. 2,503 respondents.
- The far-right Alternative for Germany (AfD) voted alongside the CDU (and others) in votes on 28 and 31 Jan that sought to restrict migrant entries into Germany.
- Merz reiterated at a party congress on 3 Feb that he would never countenance going into gov't with the AfD post-election. These comments came as thousands protested in Berlin against the AfD and the CDU for breaching the 'firewall' that has for years seen all other parties avoid voting with the AfD.
- Political betting markets continue to see a Union-Social Democrat 'grand coalition' as the most likely outcome of the election, with data from Polymarket showing a 55% implied probability of that outcome. A Union-SPD-Green 'Kenya' coalition has a 12% implied probability of coming to fruition, with 8.6% for a Union-SPD-FDP 'Germany' coalition, 7% for a Union-Green 'black-green' coalition, and 6.3% for a Union-AfD gov't.
Chart 1. Federal Election Opinion Polling, % and 6-Poll Moving Average
Source: Forsa, FGW, Allensbach, Infratest dimap, Verian, YouGov, Wahlkreisprognose, Civey, GMS, Democracy Institute, INSA, MNI
