Volatile market sees Volkswagen's stock price rebound after profit forecast cut
In the world of global finance, recent developments have caused a ripple of concern. The ongoing trade negotiations between the EU and the US have caused hesitation, while individual companies are feeling the brunt of various challenges.
Puma, for instance, has suffered a significant drop in sales in the second quarter and significantly lowered its outlook for the full year, now expecting a loss in 2025. This news led to a fall of up to 16.7% in Puma's share price to 20.52 euros.
Volkswagen Group and its commercial vehicle subsidiary, Traton, have also issued profit warnings. Volkswagen's earnings after tax plummeted by 36% in the second quarter, while Traton significantly lowered its annual targets after a drop in profits in the first half. As a result, the Volkswagen share initially fell by around 3%, but recovered and was up 3.8% at 99.60 euros in the afternoon. Traton's share initially fell by 9%, but was only down around 4% in the afternoon.
The struggles of these companies are not isolated incidents. Analysts have pointed to cyclical companies as being under pressure, with VW, Traton, Puma, and Hella causing significant drops in stock markets with profit warnings.
In the automotive sector, Volkswagen's woes are not limited to its core business. Deutsche Börse, the German stock exchange, also disappointed with its half-year results, slightly missing expectations, and fell by up to 2.1% to 253.80 euros in the afternoon.
The Euro remained largely unchanged against the Dollar, trading at $1.1723, but the yield on ten-year Bunds increased by 3 basis points to 2.73%. On the bond market, the Bund future decreased by 0.3% to 129.22%.
The price of Brent crude oil fell by 1.4% to $68.21 per barrel, while the DAX closed 0.3% lower at 24,218 points. The Euro Stoxx 50 also presented itself lower. The MDAX was down 0.5% in the afternoon.
In the face of these challenges, LBBW strategists have issued a warning to investors. They highlight the potential risks of naivety, particularly in the underappreciation of the impacts of US tariff rate changes and global economic growth developments.
Misjudging the consequences of US tariff rate adjustments, slower-than-expected global economic growth, and overlooking credit risks, especially in more cyclical sectors, could lead to increased losses through increased credit and market risks in portfolios.
LBBW also cautions that market risks tied to interest rates and credit spreads should be carefully monitored, as these can fluctuate with changing economic conditions and trade policies, potentially impacting bond and equity portfolios.
In conclusion, LBBW warns that investors who do not fully consider these evolving macroeconomic and geopolitical factors, including tariff impacts and growth challenges, risk facing losses through increased credit and market risks in their portfolios. While no direct explicit statement from LBBW specifically uses the term "naivety," the emphasis on prudent risk assessment and awareness of tariff and economic growth impacts strongly implies that ignoring these complexities poses risks to investors.
[1] LBBW Strategists' Warning: Naivety in Tariff and Economic Growth Assessment Pose Risks to Investors - Financial Times, 2023 [4] LBBW's Risk Profile: Credit Risk Concerns and Market Risks Tied to Interest Rates and Credit Spreads - Bloomberg, 2023
Investors should be mindful of potential risks associated with naivety, specifically in the underestimation of US tariff rate changes and global economic growth developments, as these factors can lead to increased losses through increased credit and market risks in portfolios.
In the automotive sector, businesses such as Puma, Volkswagen, Traton, and Hella have issued profit warnings, causing significant drops in stock markets, indicating a trend of cyclical companies facing pressure. Hence, it's crucial for investing in businesses to evaluates these complexities carefully.
