Auto makers put European stocks on track to record close

The DAX chart of the German stock index is pictured on the stock exchange in Frankfurt, Germany on July 12, 2021. REUTERS / StafF

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  • Nestlé tumbles on Jefferies downgrading
  • Valneva falls for the seventh day
  • Auto manufacturers set records

Jan. 5 (Reuters) – Auto stocks helped European stocks hit new highs on Wednesday, even as a New Year’s rally appeared to run out of gas amid COVID-19 concerns and slowing growth.

The continent-wide STOXX 600 Index (.STOXX) rose 0.1% to 494.35 points, its third consecutive record closing.

But a recent rally appeared to be losing ground, amid concerns over the omicron variant of the coronavirus, rising interest rates and mixed economic data.

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The European auto sub-index (.SXAP) was the best performer, surging 2.7% to a record high as investors expected production to return from a semiconductor shortage, sales cars are also likely to improve.

German BMW gained 2.2% after achieving record sales of its BMW brand in 2021. read more

But JPMorgan has taken a cautious stance for the industry in 2022, citing consumer uncertainty about electric vehicles in Europe.

“We (…) a sharper recovery in 2H22 with the release of additional chip capacity,” the investment bank analysts wrote. The bank is also overweighted on car manufacturers such as Daimler (DAIGn.DE) and Renault (RENA.PA), as well as on tires Michelin (MICP.PA) and Nokian.

Renault jumped 5.3% to the top of the French CAC 40 (.FCHI) after Qualcomm (QCOM.O) announced deals to supply chips to automakers, including the French automaker.

Mining stocks (.SXPP) rose 1.6%, following higher commodity prices, with investors betting demand would recover from a COVID-induced lull.

Other economically exposed sectors also gained, with banks (.SX7P) up 0.2% on expectations of higher interest rates.

Tech stocks (.SX8P) fell 0.5% as the prospect of higher rates made the sector less attractive.

“There are swings in global equity markets due to rising US Treasury yields and concerns about the Chinese tech sector,” said Sébastien Galy, senior macro strategist at Nordea Asset Management.

“We should see the fear ebb to leave us the shape of a reality that is less clear-cut than the post COVID-19 shock.”

The data also painted a mixed picture for the euro area economy, as a survey showed that a recovery weakened in December due to a resurgence in COVID-19 infections. Read more

Among other players, Nestlé (NESN.S) slipped 2.7% and was among the main drag on the STOXX 600 after Jefferies downgraded the company’s rating on expectations that its margins would remain under pressure from inflation of raw material costs.

Valneva (VLS.PA) fell for the seventh day in a row amid uncertainty over its COVID-19 vaccine candidate.

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Reporting by Sruthi Shankar in Bangalore; Editing by Subhranshu Sahu, Aditya Soni and Alexander Smith

Our Standards: Thomson Reuters Trust Principles.

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