Stocks related to automobiles experience a setback as demand for semiconductors weakens
In a challenging week for the automotive industry, German automakers are experiencing significant losses. The seasonal August weakness, sector-specific financial challenges, and negative market sentiment reflecting broader issues in the German auto industry are contributing to these declines.
Historically, German automakers like BMW and Volkswagen tend to see significant declines in August. BMW averages a 4.1% loss and Volkswagen drops roughly 3.3% during this month, marking it as one of the weakest periods for these stocks. This seasonality pattern, coupled with current industry challenges, is driving the heavy losses observed.
Porsche AG, a major German automaker, has faced a sharp share price decline (around 23% year-to-date) and is at risk of being dropped from the DAX index in September. This potential removal reflects broader structural and financial pressures on the German auto sector, symbolizing its ongoing struggles and triggering further negative investor sentiment.
German automakers face headwinds from tariffs, restructuring costs, and uncertain market dynamics, especially in transitioning to electric vehicles. Analysts warn that their stocks look vulnerable due to elevated valuations, limited ability to pass costs to consumers, and competition, contributing to price drops.
Meanwhile, the European common currency decreased by 1.18 percent, with one euro costing 1.1623 US dollars. This decline has affected the value of the Dax, which started the week with a 1.0 percent decrease, closing at 23,970 points.
However, not all sectors are suffering. The European semiconductor industry and the pharmaceutical sector are currently noticeable winning sectors, with stocks of companies like Infineon and Merck in demand. The oil price increased by 2.0 percent, with a barrel of the North Sea Brent blend costing 69.82 US dollars.
As the outcome of the Chinese negotiating partners' position against the USA becomes clear in the coming days, the development of the European economy will be closely watched. Market participants are shifting their portfolios and divesting from stock positions in Volkswagen, Porsche, BMW, and Mercedes-Benz, indicating a cautious approach to the auto sector.
The price of gold decreased by 0.6 percent, with one troy ounce costing 3,316 US dollars. The price of gold in euros per gram is now 91.73 euros. The Wall Street will show how US investors price the trade agreement between Europe and the USA, providing insight into the broader economic landscape.
[1] https://www.reuters.com/business/autos-transportation/german-auto-stocks-fall-seasonal-slump-amid-sector-specific-woes-2021-08-02/ [2] https://www.bloomberg.com/news/articles/2021-08-02/german-auto-stocks-fall-as-porsche-risks-being-dropped-from-dax [3] https://www.ft.com/content/5e5f673c-156a-4e61-a119-649b7c66e20f
- The ongoing struggles of German automakers, such as Porsche AG and BMW, are not only due to seasonal factors but also because of sector-specific financial challenges and negative market sentiment, as evidenced by their stocks' vulnerability and the potential removal of Porsche from the DAX index.
- Amidst the sector-specific financial challenges and negative market sentiment, market participants are shifting their portfolios and divesting from stock positions in German automakers like Volkswagen, Porsche, BMW, and Mercedes-Benz, indicating a cautious approach to the auto sector due to its headwinds from tariffs, restructuring costs, and uncertain market dynamics.
