EU CONSUMER CYCLICALS: Trump threatens tariffs on European alcohol (x2)
Mar-13 13:27
(SXXP unch)
We would caution Campari the most and Pernod somewhat. Remaining we don't see impact on. Our Political risk analyst sees the 200% typical of a starting point for negotiations only (i.e. likely to come lower). Re. read-through to other goods (including luxury) our political analyst notes these tariffs are reciprocal to recently announced European tariffs - those have not been detailed but Reuters reported that it included tariffs on US "boats, bourbon and motorbikes" with consultation ongoing to pick other product categories.
- Pernod (RIFP: Baa1/BBB+) US is 18% of sales (eequities -3%)
- estimated €200m/yr in total tariff impacts, €140m from measures in China, and remaining on 25% US tariffs on Canada/Mexico and 10% on Europe. Co does about ~€3b in EBIT, above is a 6-7% headwind.
- estimated €200m/yr in total tariff impacts, €140m from measures in China, and remaining on 25% US tariffs on Canada/Mexico and 10% on Europe. Co does about ~€3b in EBIT, above is a 6-7% headwind.
- Campari (CPRIM; unrated) US is 28% of sales (equities -4%)
- estimated 25% US tariffs on Mexico, Canada AND Europe would be €90-100m/yr hit (eqv. 16% of FY24 EBIT)
......
- Diageo (DGELN: A3/A-) North America is 40% of sales (US itself not disclosed) (equities unch)
- UK based so some may assume less impact from above. As aside US has praised UK for not retaliating on recently announced steel and aluminium tariffs.
- As an aside it has still been impacted by Mexico/Canada Tariffs (Tequila and Canadian Whiskey) with 45% of US sales exposed to either.
- Unclear if it still has any Europe sourced exposure in US sales.
Brewers:
- AB-Inbev (ABIBB; A3/A-) (equities -1%)
- 25% exposure to North America but has told analyst minimal impact given 90% of US business on locally sourced inputs
European brewers
- Heineken (HEIANA; A3/BBB+) (equities -1%)
- US <5% of revenue and volume and hence does not expect big impact
- Outside US, most countries source 80-90% of inputs locally.
- Carlsberg (CARLB: Baa1/NR/BBB+ Neg) (equities -1%)
- no US exposure, can trade through it
- no US exposure, can trade through it
- LVMH (MFCP: Aa3/AA-) 25% of sales in US (equities -1.2%)
- 7% of group is wines & spirits which means tariffs on alcohol itself not a mover but some may see risk of it shifting into luxury goods
- it has been considering shifting production into US (unclear which part of group operations)
- Arnault's are family friends with the Trump's.
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Historical bullets
US: MNI POLITICAL RISK - Trump Adjusts Tariff Rate For Metals
Feb-11 13:21
- US President Donald Trump adjusted tariffs on all steel and aluminium products entering the United States to a flat 25%. The new tariff rate will go into effect at midnight tonight.
- China may look to target US tech companies to leverage a position ahead of expected negotiations with the US over trade policy.
- Trump indicated he may provide Australia with a tariff exemption.
- Japanese Prime Minister Shigeru Ishiba is confident an FDI pivot from China to the US can help Tokyo avoid tariffs.
- European Commission President Ursula von der Leyen said the action would trigger "firm and proportionate" countermeasures.
- House Speaker Mike Johnson (R-LA) is expected to outline his budget resolution at a Republican Conference meeting this morning.
- Congressional Republicans are willing to turn Elon Musk's DOGE spending cuts into legislation.
- Analysts are divided over whether Democrats are likely to use a government shutdown as leverage to oppose Trump’s agenda.
- The Senate is expected to confirm Tulsi Gabbard as Director of National Intelligence as soon as today.
- Federal Reserve Chair Jerome Powell will appear before the Senate Banking Committee at 10:00 ET 15:00 GMT.
- President Trump will meet with King Abdullah of Jordan at the White House today amid hardline rhetoric from Trump over the future governance and reconstruction of the Gaza Strip.
- Poll of the Day: Republican voters believe GOP lawmakers should push back against Trump when they disagree.
Full article: US DAILY BRIEF
EQUITIES: Commerzbank outright put buyer
Feb-11 13:19
Single stock Bank Option, Commerzbank:
CBK (20th Jun) 17p, bought for 0.74 in 10k.
GILTS: /SWAPS: Pricing Of Fiscal & Issuance Risks Off Extremes But Still Evident
Feb-11 13:15
Although long-dated UK swap spreads have recovered from cycle lows, they still operate near/below levels that were driven by the initial Budget-induced sell off linked to fiscal and issuance worry.
- This shows that while those risks have moderated from extremes, they still remain elevated when compared to the pre-Budget status quo (all else equal).
- While issuance risks don’t seem to represent a major immediate (intraday) concern for the conventional gilt market, as today’s record-sized syndication and orderbook show, the combination of slowing economic growth and already limited fiscal headroom will result in continued attention on fiscal matters in the coming months and years, as evidenced by current swap spread pricing.
Fig. 1: UK 10- & 30-Year Swap Spreads (bp)
Source: MNI - Market News/Bloomberg
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