European car stocks may not benefit from central bank easing due to underlying demand issues

From Investing.com: 2024-09-22 04:30:00

European auto stocks may not see an immediate boost post central bank interest rate cuts, as per Morgan Stanley. Lower rates might help affordability but won’t solve underlying demand issues. Analysts cautious about OEMs and foresee margin risks in the sector.

Morgan Stanley predicts the Fed will cut rates by 25 basis points in September, with three more cuts by year-end. Cheaper money may not fully ease auto sector pressures. Lower rates may lead to lower average selling prices, impacting margins in the industry.

European car stocks tend to underperform when bond yields drop rapidly. The sector’s risk-reward profile is poor for long-term investors. Weak demand and high margin estimates pose risks for OEMs. Rising bond yields historically support the auto sector more than falling yields.

Inflation pressures are affecting the auto industry, with prices facing downward pressure. Affordability remains a concern with weak underlying demand at current prices. BMW’s profit warning indicates challenges, especially in China. Analysts warn of continued risks for European carmakers amidst deteriorating fundamentals.



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