Business

Eurozone Inflation Rises to 2.5% in January as Markets React to US Tariff Threats

Published

1 month ago

February 3, 2025

RTX

Eurozone inflation exceeded expectations in January, rising to 2.5% from 2.4% in December, according to a flash estimate from Eurostat. Despite the increase, the euro weakened, and European stock markets tumbled, as investor concerns over potential US tariffs overshadowed expectations of a more aggressive monetary policy response from the European Central Bank (ECB).

Inflation Surpasses Forecasts

Economists had forecast inflation to remain steady at 2.4%, but the latest figures mark the highest rate since July 2024. Core inflation, which excludes energy and food prices, held firm at 2.7%, defying predictions of a slight dip to 2.6%.

Among the key inflation components:

Services recorded the highest annual price growth at 3.9%, down slightly from 4.0% in December.
Food, alcohol, and tobacco prices rose 2.3%, a slowdown from 2.6% the previous month.
Energy prices surged to 1.8%, rebounding sharply from 0.1% in December.
Non-energy industrial goods inflation remained unchanged at 0.5%.

Among Eurozone member states, Croatia posted the highest annual inflation rate at 5.0%, followed by Belgium (4.4%) and Slovakia (4.1%). Ireland (1.5%), Finland (1.6%), and Italy (1.7%) recorded the lowest inflation rates.

Markets React: Euro Under Pressure

Despite the stronger-than-expected inflation data, the euro remained under pressure, falling 1.2% on the day against the US dollar and briefly finding support at 1.0230. Earlier in January, the currency hit 1.0175, its lowest level since November 2022.

The weakness came amid renewed fears of US tariffs on European goods. US President Donald Trump reiterated threats to impose tariffs on the European Union, warning they could be implemented “pretty soon.” The US has already enforced 25% tariffs on Canadian and Mexican goods and 10% on Chinese imports, sparking fears that Europe could be next.

“Tariffs will continue to dominate the markets, and some traders still believe they could be reversed,” said BBVA’s Alejandro Cuadrado, warning that the full impact is not yet priced into FX markets.

ING’s Francesco Pesole also noted that the prospect of a global trade war remains a key downside risk for the euro, adding that an upcoming US trade report in April could keep EUR/USD under selling pressure.

European Stocks Tumble, Auto Sector Hit Hardest

European stock markets saw sharp declines, with the Euro STOXX 50 falling 1.9% and Germany’s DAX index dropping 2%. The auto sector suffered the steepest losses as fears of US tariffs on European cars rattled investors:

Volkswagen shares fell over 6%
Mercedes-Benz declined 4.9%
BMW lost 4.5%
Stellantis dropped 7% in Milan trading
Pirelli shares slid 5.5%

Investors Flock to Bonds Amid Uncertainty

The uncertainty surrounding US trade policy led investors to seek refuge in sovereign bonds, pushing yields lower across Europe.

German Bund yields fell 8 basis points to 2.40%
French OAT yields declined 6 basis points to 3.15%

As markets digest the latest inflation data and trade tensions escalate, all eyes remain on the ECB’s response and the US administration’s next move regarding tariffs on Europe.

Business

Rheinmetall Reports Record Profits as European Defence Spending Soars

Published

7 hours ago

March 12, 2025

RTX

German defence giant Rheinmetall has reported a 38% increase in net profit for 2024, as rising geopolitical tensions drive European nations to boost military spending.

The company’s operating profit surged by 61%, reaching a record €1.48 billion, while total revenue rose 36% to €9.8 billion—slightly below its earlier forecast of €10 billion. The bulk of this growth came from Rheinmetall’s defence division, where sales climbed 50%, now accounting for 80% of total revenue.

The company expects “major high-volume orders from military customers”, ensuring strong demand for years to come.

Strong Growth and Rising Orders

Rheinmetall’s earnings after taxes increased to €808 million, while its order backlog hit a record €55 billion, up 44% from the previous year.

The firm’s operating margin climbed to 15.2%, with its defence unit reaching an even higher 19%. To reward investors, Rheinmetall’s board has proposed a dividend of €8.10 per share, up from €5.70 last year.

These strong results boosted Rheinmetall’s Frankfurt-listed shares by over 7% around 1 p.m. CET on Wednesday.

Geopolitical Tensions Drive Defence Boom

Rheinmetall has positioned itself as “Ukraine’s most important defence industry partner”, supplying weapons and military equipment to counter Russia’s invasion.

As concerns grow over Europe’s security, especially amid warnings that former U.S. President Donald Trump could reduce American military support for NATO, EU countries are rapidly expanding their defence budgets.

In response, Rheinmetall has significantly expanded its production capacity. “We have massively increased our capacities already and will continue to do so,” said CEO Armin Papperger.

He noted that the company has invested nearly €8 billion in the past two years to build new plants, acquire businesses, and secure supply chains.

Looking Ahead: More Growth Expected

For 2025, Rheinmetall forecasts another 25%-30% increase in group-level sales, with its defence business expected to grow by 35%-40%.

The company’s global customer base includes the armed forces of Germany, the UK, the U.S., and Australia.

“With a 50% sales growth in the defence business, Rheinmetall is on its way from being a European systems supplier to a global champion,” Papperger stated.

As Europe continues to ramp up military spending, Rheinmetall is set to remain one of the biggest beneficiaries of the evolving security landscape.

Business

Battery Maker Northvolt Files for Bankruptcy, Dealing Blow to Europe’s EV Ambitions

Published

7 hours ago

March 12, 2025

RTX

Swedish battery manufacturer Northvolt has filed for bankruptcy, marking a significant setback for Europe’s electric vehicle (EV) battery production. The company cited rising costs, supply chain disruptions, and shifting market demand as key factors behind its financial collapse.

In a statement, Northvolt acknowledged that it had faced “significant internal challenges” while ramping up production, describing the situation as a mix of expected and unforeseen difficulties in a highly complex industry.

The company had made an “exhaustive effort” to secure a sustainable financial and operational future but was ultimately unable to overcome compounding challenges, including geopolitical instability and higher capital costs.

Failed Turnaround Efforts

Northvolt had previously sought Chapter 11 bankruptcy protection in the United States in November 2023, hoping to restructure and regain financial stability. However, despite the temporary relief, the company was unable to reverse its financial struggles.

Now, a court-appointed trustee will oversee the sale of Northvolt’s assets in Sweden.

A Setback for Europe’s Green Transition

Founded in 2016, Northvolt was considered a key player in Europe’s push for clean energy and EV battery production, positioned to compete with Chinese and South Korean battery giants. The company had secured around $15 billion (€13.8 billion) from governments and investors, underscoring its importance in Europe’s green transition.

However, declining EV demand, partially linked to reductions in government subsidies, led some investors to pull back funding. In 2023, the Swedish government also declined to offer major subsidies, further limiting Northvolt’s financial flexibility.

Northvolt had ambitious expansion plans, with production capacity expected to rise nearly sixfold by 2030, from 192GWh to 1,142GWh, according to Benchmark Minerals Intelligence. Now, with its collapse, Europe faces a greater reliance on foreign battery manufacturers, particularly from China and South Korea, while homegrown companies struggle to build capacity.

Northvolt’s failure highlights the challenges facing European battery production, as the continent strives to establish a competitive supply chain in the global EV market.

Business

Global Markets React to Trade Tensions as Investors Weigh Trump’s Tariff Moves

Published

1 day ago

March 11, 2025

RTX

Global stock markets remained volatile on Tuesday as investors responded to escalating trade tensions and economic uncertainty following recent remarks by US President Donald Trump. Concerns over potential tariffs and economic slowdown have sent Asian, European, and US markets into a downturn, with tech stocks and major indices experiencing sharp losses.

European Markets Open Mixed Amid Tariff Concerns

European markets opened with mixed performances on Tuesday, as investors assessed the potential impact of Trump’s tariff policies on global trade and company earnings.

FTSE 100 (UK) dipped 0.10% in early trading.
DAX (Germany) rose 0.6%, while CAC 40 (France) gained 0.4%.
The pan-European STOXX 600 fell 0.2%, reflecting broader market unease.

Market analysts suggest that Trump’s comments about a “period of transition” have raised fears of an economic slowdown, leading investors to adjust their expectations and pricing strategies.

“Trump’s willingness to endure short-term economic pain for long-term structural gains is being priced into the markets. Investors can no longer assume his policies will always favor stock market performance,” said Kyle Chapman, an FX analyst at Ballinger Group.

Asian Markets See Extended Sell-Off

Asian markets followed Wall Street’s lead, with stock indices experiencing losses overnight amid growing fears of a prolonged US-China trade war.

Nikkei 225 (Japan) dropped 0.6% to its lowest level in six months, though it recovered from an earlier 2% decline.
Shanghai Composite (China) rose 0.4%, buoyed by government measures aimed at stabilizing the slowing economy.
Hang Seng (Hong Kong) remained flat at 23,782.14.
S&P/ASX 200 (Australia) declined 0.9%, while Kospi (South Korea) fell 1.2%.

According to IG analysts, the global market sell-off is being exacerbated by recession fears linked to Trump’s tariff rhetoric.

Wall Street Suffers Steep Decline

The US markets closed sharply lower on Monday, with tech stocks leading the downturn.

Nasdaq Composite plummeted 4%, marking its biggest single-day loss since 2022 and wiping out $1.1 trillion (€710 billion) in market value.
S&P 500 declined 2.7%.
Dow Jones Industrial Average fell 2.1%.

Goldman Sachs also cut its US growth forecast for 2025, revising expectations from 2.4% to 1.7%, adding to investor concerns.

The “Magnificent Seven” tech stocks—including Apple, Microsoft, and Tesla—were among the hardest hit, as analysts warned that higher tariffs could erode profit margins and slow earnings growth.

“Markets are now facing weaker earnings prospects, alongside the added cost burden created by tariffs,” said Kyle Rodd, a senior analyst at Compital.com Australia.

Commodities and Currency Markets React

Oil Prices:
- US crude oil rose 0.42% to $66.31 per barrel.
- Brent crude climbed 0.3% to $69.50 per barrel.
Gold Prices:
- Gold increased 0.5% to $2,900.4 (€2,661.6) per ounce, hovering near record highs.
Currency Markets:
- EUR/USD pair rose 0.6%.
- EUR/GBP edged up 0.2%.

Corporate Earnings Updates

Volkswagen shares gained 1.6% on Tuesday morning after the company released its full-year 2024 earnings, despite reporting a 15% drop in annual profits. The German automaker remains optimistic about revenue growth in 2025.

Other major earnings reports expected today include Lego, Persimmon, and Leonardo.

Outlook: Volatility Expected to Continue

With global trade uncertainty, inflation concerns, and weaker growth forecasts, analysts anticipate that market volatility will persist in the coming weeks. Investors will closely watch further developments in US trade policy, corporate earnings reports, and central bank moves for clues on economic stability.