Graphic: What's at stake for Europe Inc in a trade spat with Washington
14/05/2019 01:01
* Graphics on company/sector breakdown of revenue exposure:
* Sector-wise breakdown interactive https://tmsnrt.rs/2W8vx4G
* Sector-wise breakdown 2 interactive https://tmsnrt.rs/2XXRWCr
* Sector-wise breakdown 3 interactive https://tmsnrt.rs/2We9U30
By Josephine Mason and Ritvik Carvalho
LONDON, May 14 (Reuters) - Europe's listed companies are
expected to generate 1.2 trillion euros ($1.3 trillion) in
revenue from the United States this year, highlighting what's at
stake as global trade tensions grow and earnings and economic
growth stall.
Analysts and investors say that based on revenues, European
companies are more vulnerable to a dispute than their
competitors in the United States.
U.S. President Donald Trump is due to decide by Saturday
whether to impose duties on car imports, potentially posing
another significant threat to global growth and denting Europe's
prized auto sector.
Washington's renewed tensions with Beijing may distract
Trump and delay a decision beyond the May 18 deadline, or he may
crank up his protectionist push with a global trade war on two
fronts. urn:newsml:reuters.com:*:nL5N22P0QN urn:newsml:reuters.com:*:nL2N22K1KN
Last month, he also threatened to impose tariffs on hundreds
of European goods, from cheese to ski suits, worth $11
billion. urn:newsml:reuters.com:*:nL8N21R41C
The impact on Europe's top firms could be profound -- with
slowing economic growth and some countries like Italy struggling
with bulging budget deficits, the region may not be as resilient
to a prolonged dispute as China has so far proven.
In the past six months, the Chinese government has launched
stimulus measures from tax cuts to boosting lending to shore up
the world's No. 2 economy as the trade spat rumbles on.
"I'm much more concerned about trade for Europe than I am
for China," said Christophe Donay, head of asset allocation at
Pictet Wealth Management.
According to Europe's top asset manager Amundi Asset
Management, U.S sales average about 20% of MSCI Europe
companies' aggregate turnover, while European sales average
about 14% of turnover for companies in MSCI's U.S. share index,
For an interactive version of the below graphic, click here
https://tmsnrt.rs/2VGtZSu.
AUTOS AND TECH
Typically, Europe's carmakers are considered particularly
vulnerable to Trump's protectionism.
A 25% tariff could result in a 0.2-0.3 percentage point loss
of export revenue and GDP for Germany, according to an analysis
by Moody's. The United States accounts for 13% of Germany's car
exports, the ratings agency has said.
Measured by revenue, there's a lot at stake for companies
like Fiat Chrysler FCHA.MI with $45.3 billion in U.S.
revenues. But many, like Fiat, have their own U.S. production
plants, sheltering them slightly from any outright tariffs.
For an interactive version of the below graphic, click here
https://tmsnrt.rs/2LCr9KG.
Caroline Simmons, deputy head of the UK investment office
of UBS Global Wealth Management, said she would expect the
technology, energy and industrial sectors to be worst-hit by any
further antagonism.
Average European company exposure to the United States in
those sectors ranges from 10 to 20% in terms of sales, compared
with 33% for healthcare.
UBS is underweight consumer discretionary in the euro zone,
which includes autos, partly because of the trade tariffs.
"The market is nervous about it and last year (the
U.S.-China spat) escalated more than people expected and the
effect on the market was bigger than people had anticipated,"
she said.
HEALTHCARE EXPOSED
Of pan-European STOXX 600 .STOXX index companies, those in
healthcare have the highest revenue exposure on average.
An analysis by Refinitiv based on companies' estimates of
2019 revenue shows they draw some 133.3 billion euros in revenue
from the world's No. 1 economy and top drug market.
For an interactive version of the below chart, click here https://tmsnrt.rs/2WwCixg.
While healthcare has not been implicated in the tit-for-tat
between Washington and Brussels so far, some investors worry
about the potential fall-out from souring relations between the
two economic powerhouses.
"As these sectors are in normal times regarded as defensive,
they may doubly disappoint if the U.S. and Europe also engage in
a tariff war," said Ibra Wane, equity strategist at Amundi, in a
note this week.
The European healthcare index has risen 8% .SXDP since the
late December low, underperforming most other industries and
lagging behind an 11% rise in the benchmark STOXX 600 .STOXX .
Pharma and medical equipment companies from BTG BTG.L to
BB Biotech BION.S and Fresenius Medical Care FMEG.DE are
among the most exposed individual companies, with 67-90% of
total sales derived from the United States.
Capital goods companies Ashtead AHT.L and Ferguson
FERG.L are also high up on the list, with more than 80% of
their sales made to the United States.
($1 = 0.8937 euros)
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
European companies' exposure to the United States https://tmsnrt.rs/2VFRIST
European autos and healthcare exposure to the United States
https://tmsnrt.rs/2LorXT4
Europe's revenue exposure to the United States https://tmsnrt.rs/2WxmNoP
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(Reporting by Josephine Mason and Ritvik Carvalho; Graphics by
Ritvik Carvalho; Editing by Catherine Evans)
((Josephine.Mason@thomsonreuters.com; +44 207 542 7695; Reuters
Messaging: josephine.mason.reuters.com@reuters.net))