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Germany’s Economic Sentiment Wanes as Political Stalemates and Global Tensions Weigh Heavy

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Germany’s economic sentiment has taken a notable dip in November as analysts attribute the decline to political stagnation within the country and rising uncertainties on the global stage, especially following the election of Donald Trump in the United States.

The ZEW Economic Sentiment Index, which captures the outlook of around 300 financial experts in Germany, dropped to 7.1 points in November from 13.1 in October. This reading is well below market expectations of 13 points and significantly under the one-year average of 25 points, making it the index’s second-lowest level in 2024. Additionally, views on Germany’s current economic state weakened, with the ZEW current situation index falling by 4.5 points to -91.4.

According to ZEW President Achim Wambach, this shift reflects mounting concerns over internal political struggles and external economic risks. “Economic expectations for Germany have been overshadowed by Trump’s victory and the unresolved issues within Germany’s coalition government,” Wambach noted, adding that while sentiment for the U.S. is increasingly optimistic, outlooks for China and the eurozone remain less certain.

The Federal Statistical Office corroborated the economic concerns with recent inflation data, showing that Germany’s annual inflation rate rose to 2% in October, up from 1.6% in September. The increase aligns with earlier projections and hints at potential inflationary pressures as Germany grapples with global economic challenges.

Eurozone Sentiment Mirrors German Concerns

The eurozone’s economic sentiment also declined, reflecting broader apprehensions across Europe. The ZEW Economic Sentiment Index for the eurozone slipped to 12.5 points in November from 20.1 points in October, missing analyst expectations. In parallel, views on the current eurozone situation also fell, with the index dropping by 3 points to -43.8.

Germany’s struggles are compounded by geopolitical uncertainties, particularly as Trump’s trade policies could threaten Europe’s open-market benefits. Trump’s agenda to raise tariffs and cut corporate taxes in the U.S. could incentivize European companies to shift production to America, further straining European exports.

“Europe relies on open trade,” Wambach remarked, “but Trump’s policies are likely to increase pressure on European economies, pushing companies to consider relocating operations.” He emphasized the need for Germany to implement proactive investment strategies, urging that fiscal conservatism alone won’t be enough to address Germany’s structural issues. He called for a government capable of investing in infrastructure and fostering resilience to counterbalance the economic strain from international tensions.

Market Reactions: Stocks and Euro Tumble

Financial markets responded to these developments with a decline in major European indices. Germany’s DAX fell 0.7% during early Tuesday trading, in line with similar declines across Europe. The broader Euro STOXX 50 also dropped 0.7%, with France’s CAC 40 leading the losses, down by more than 1%. Luxury goods companies like Kering and LVMH faced substantial losses amid investor concerns over Trump’s trade stance, which could hurt European exports to significant markets, including China.

Meanwhile, the euro fell 0.4% against the U.S. dollar, reaching a seven-month low of 1.06 USD. The single currency has depreciated in seven of the last eight weeks, largely influenced by concerns that Trump’s policies could bolster the dollar by curbing imports and enhancing U.S. growth prospects.

Investor anxiety was further amplified by speculation that U.S. Senator Marco Rubio, known for his strong stance on China, may join the Trump administration, potentially escalating trade tensions further.

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EV Boom Powers EU Auto Market Amid Broader Industry Challenges

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Electric vehicle (EV) sales in the European Union surged in the first quarter of 2025, helping offset broader weakness in the automotive sector amid ongoing global trade tensions and economic uncertainty, according to data released by the European Automobile Manufacturers’ Association (ACEA).

Between January and March, EV sales rose by 23.9% year-on-year, totaling 412,997 units across the EU. The battery electric vehicle (BEV) market share edged up slightly to 15.2%, compared to 15% at the start of the year.

Three of the bloc’s four largest auto markets—Germany, Belgium, and the Netherlands—led the electric surge. Germany posted a significant 38.9% jump in EV sales, while Belgium saw a 29.9% rise and the Netherlands recorded a 7.9% increase. France, however, bucked the trend with a 6.6% decline in EV sales.

Hybrid-electric vehicles (HEVs) also performed strongly, with sales increasing by 20.7% to reach 964,108 units in the first quarter. France led this segment with a 47.5% spike in registrations, while Spain, Italy, and Germany also reported double-digit growth. HEVs now represent 35.5% of the EU’s car market.

Plug-in hybrid electric vehicles (PHEVs) saw modest growth of 1.1%, buoyed primarily by rising demand in Germany and Spain.

Despite the green energy gains, the overall EU car market experienced a slight setback. New car registrations across the EU declined by 1.9% year-on-year in Q1, with March showing a marginal 0.2% dip. ACEA attributed the slowdown to ongoing global economic pressures and trade-related disruptions affecting supply chains and market confidence.

Traditional fuel segments continued their downward trajectory. Petrol car registrations dropped 20.6% compared to the same period in 2024, with France experiencing the steepest decline at 34.1%. Diesel vehicle registrations plummeted 27.1% across the EU.

Among automakers, Volkswagen Group recorded a 4.8% increase in EU registrations, buoyed by strong demand for its Cupra models. Renault Group also performed well, with a 9.5% rise in registrations. Meanwhile, BMW posted marginal growth of 0.4%, while Mercedes-Benz and Stellantis saw declines of 6.2% and 14%, respectively.

China’s SAIC Motor emerged as a major winner, posting a 52.3% jump in registrations—reflecting growing consumer interest in Chinese EV brands. In contrast, Tesla saw EU registrations plunge by 45% in the first quarter, marking a significant setback for the U.S. electric carmaker in the European market.

Despite the mixed results, the surge in EV and hybrid sales highlights a clear shift in consumer preferences and signals a pivotal moment for Europe’s car industry as it accelerates toward electrification.

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Thales Reports Strong Q1 Sales Driven by European Defence, Despite Dip in New Orders

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French aerospace and defence group Thales posted strong sales growth in the first quarter of 2025, buoyed by rising defence spending across Europe. The company reported €5 billion in total sales, a 9.9% increase compared to the same period last year. However, new orders fell sharply due to a challenging comparison base, particularly in the defence sector.

The surge in sales was largely driven by a 15% rise in defence revenues, as several European countries increased military budgets amid heightened geopolitical tensions. Aerospace sales also saw healthy growth of 8.4%, while the cyber and digital segment declined slightly by 2.1%.

Organic sales growth reached 9.7% in mature markets, with the UK leading the charge at 14.9%. In emerging markets, sales increased by 10.5%. Despite this strong performance, total order intake dropped 27% to €3.8 billion, largely due to a decline in defence orders, which fell by 59%. In contrast, aerospace orders jumped 45%, and cyber and digital orders edged up 1%.

Thales attributed the decline in new orders to the high benchmark set in the first quarter of 2024, when the company secured two major defence contracts each worth over €500 million, in addition to several other significant deals.

In emerging markets, order intake fell 61%, while mature markets remained relatively stable, recording only a 1% drop. Analysts had projected quarterly sales of €4.8 billion and expected order intake to reach €4.9 billion, according to consensus figures compiled by Thales.

“In the first quarter of 2025, Thales recorded organic sales growth of nearly 10%, demonstrating the strong momentum of our Defence and Avionics activities,” said Patrice Caine, Chairman and CEO of Thales. He emphasized that the decline in order intake was expected, given the unusually high results in the same quarter last year.

Looking ahead, Thales has initiated a review of the impact of rising tariffs on its operations. While the company maintains a positive long-term outlook, it is developing mitigation strategies, including rerouting production, adjusting supply chains, implementing surcharges, and using customs programs like duty drawbacks.

The company reaffirmed its 2025 financial guidance, forecasting organic sales growth of 5% to 6%, and an adjusted EBIT margin between 12.2% and 12.4%. Despite global economic uncertainties, Thales remains confident in the resilience and visibility of its core operations.

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Musk Refocuses on Tesla After Profit Slump, Pledges Major Push on Autonomy

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Elon Musk has announced he will reduce his involvement in government-related work and shift his attention back to Tesla, after the electric vehicle giant reported a sharp fall in profits and revenue for the first quarter of the year.

Speaking to analysts on a conference call Tuesday, Musk said he plans to spend “far more” time on Tesla starting in May, now that the initial phase of work on the Department of Government Efficiency (DOGE) is complete. “I’ll be allocating just a day or two per week to government matters,” Musk said, following months of public scrutiny over his role in the controversial agency.

Tesla’s financial results reflected the challenges Musk now faces. The company posted a 71% drop in profits, with net income falling from $1.4 billion to $409 million. Revenue declined 9% to $19.3 billion, missing Wall Street expectations. Tesla shares, which are down over 40% this year, rose more than 5% in after-hours trading following Musk’s remarks.

“Investors wanted to see him recommit to Tesla,” said Dan Ives, senior equity analyst at Wedbush Securities. “This is a big step in the right direction.”

Autonomous Future Still the Focus

Despite the weak earnings, Tesla reaffirmed ambitious plans for autonomous driving. The company confirmed it will launch a budget version of its Model Y SUV in the coming months and aims to begin a commercial robotaxi service in Austin by June. Musk claimed “millions of Teslas” could be operating autonomously by year-end.

“Can you go to sleep in our cars and wake up at your destination? I’m confident that will be available in many U.S. cities by the end of this year,” he said.

However, industry experts remain skeptical. “The system is not robust enough to operate unsupervised,” said Sam Abuelsamid, an analyst at Telemetry Insight. “It still makes far too many errors.”

U.S. regulators are also watching closely. Tesla’s Autopilot system and “Full Self-Driving” software are both under investigation by the National Highway Traffic Safety Administration over safety concerns.

Rising Global Pressure and Tariff Concerns

Tesla is also contending with fierce competition from Chinese automakers like BYD and growing backlash in Europe, where Musk’s political statements have alienated potential buyers. At home, new tariffs introduced by the Trump administration could affect Tesla’s supply chain and energy storage business, though the company emphasized its mostly domestic manufacturing footprint as a buffer.

Tesla has also halted orders for two models in mainland China amid trade tensions. Nonetheless, it saw a boost from regulatory credit sales, which brought in $595 million for the quarter—up from $442 million a year ago. Positive free cash flow of $2.2 billion provided one bright spot in an otherwise turbulent period.

Looking ahead, Tesla will need to deliver on its autonomy promises and win back market share in a rapidly evolving EV landscape.

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