By Danilo Masoni and Alun John
MILAN/LONDON (Reuters) – A sell-off in the shares of some European carmakers and renewable energy companies entered a second day on Tuesday due to growing concerns about potential U.S. political risks after an assassination attempt raised the chances of Donald Trump in the presidential race.
Trump’s selection of JD Vance as his running mate for Washington’s top job has heightened concerns, prompting investors to sell stocks considered at risk.
European automakers and luxury stocks already looked fragile given the recent escalation of trade tensions between the European Union and Beijing.
Vance said in a television interview on Monday that China was “the biggest threat” to the United States right now, not Russia’s war in Ukraine.
Vance’s tough talk on China and opposition to more aid to Ukraine have reinforced the view that trade barriers would rise if he and Trump win, and Europe’s export-oriented economy appears vulnerable.
“It’s another step away from the Republican Party’s former ‘business-friendly’ image and one step closer to the possibility that the MAGA movement will continue after Trump, a movement previously considered to have a limited shelf life,” Lindsay James, strategist of Quilter Investors, he said.
“Commitment to NATO will be on even shakier ground, as will support for Ukraine, a risk that goes beyond financial markets but is captured by the notion of a ‘risk premium’ that will certainly increase in European equities as a result,” James said.
Among European car manufacturers, which rely heavily on exports for growth, Porsche AG was the biggest loser on Tuesday, falling as much as 5.7% in Frankfurt. Traders linked the drop to the view that a tougher U.S. stance toward China could create another drag on its economy, hurting companies doing business there. Investors are also worried about possible Trump tariffs on European vehicles, which are already at risk of retaliation from Beijing for EU tariffs on Chinese electrical imports. Barclays predicted that a 20% U.S. tariff on European automakers could hurt the euro. Volvo Car, Mercedes and parts suppliers Forvia and Valeo fell between 1.6 and 3.3%. “Given that Trump’s platform is to put America first, it’s hard to imagine that a Trump presidency would actually be good for non-U.S. asset markets,” said Michael Metcalfe, head of macro strategy at State Street. “And if we’re talking about massive tariffs on China, it’s hard to see that not being a bad thing for Europe,” he said.
Europe’s regional STOXX 600 index fell 0.4%. Over the past two months, STOXX has lost about 1% while the S&P 500 has gained more than 6%.
Some European clean energy stocks were also under pressure, adding to Monday’s declines on concerns that Trump would scale back support for renewables in favor of fossil fuels.
Wind energy companies Orsted and Vestas Wind fell 3.2% and 2.3% respectively. Both were down 5.5%-6% the day before.
On Tuesday, Citi dropped buy-rated Vestas from its focus list, saying recent polls could boost Trump’s chances.
(Additional reporting by Samuel Indyk in London; Zuzanna Szymańska in Berlin and Christoph Steitz in Frankfurt; Editing by Amanda Cooper and Arun Koyyur)
