Live Markets: Auto parts suppliers pose inventory risk for EU semis

VAT AG

27/08/2024 12:10

* 
      STOXX 600 little changed
    

        * 
      Positive Ryanair update lifts airlines
    

        * 
      Autos, miners higher
    

        * 
      Wall St futures lower
    

  
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You
can share your thoughts with us at     

    AUTO PARTS SUPPLIERS POSE INVENTORY RISK FOR EU SEMIS 
    Eyes are on the semiconductor industry this week as AI-behemoth Nvidia  NVDA.O  is due to
report earnings on Wednesday, but JPMorgan analysts warn of a potential headwind for EU semis
heading into 2025, the struggling auto sector. 
    "The inventory at auto parts suppliers is of most concern to the semi ecosystem," JPM
analysts say in a note. 
    According to their analysis, inventory levels at auto parts suppliers are 24.7% more than in
2019 and 43% higher than the pre-COVID average seen from Q1 of 2010 to Q4 of 2019. 
    To normalise to average inventories, JPM says they would need to reduce absolute inventory
by circa 30%. 
    "With auto semis inventory already at a peak, this is a key issue for auto semi companies in
our opinion given that the end market has also seen weakness in EVs," JPM says. 
    "Considerable inventory reduction would be needed if inventory were to revert to pre-Covid
levels and this would likely seriously impact semiconductor revenue growth."
    "We believe that the market needs to remain cautious on auto semis exposure in particular as
it could be an overhang into '25."
    European companies with exposure to autos industry include Infineon  IFXGn.DE  and
STMicroelectronics  STMPA.PA . 
    Looking to the second half of the year, JPM therefore says ASML  ASML.AS , ASMI  ASMI.AS 
and VAT  VACN.S  remain top picks. 
    
    (Samuel Indyk)
    *****
    
    FOR TUESDAY'S OTHER LIVE MARKETS POSTS  
    GERMAN AUTOS - POP GOES THE DIESEL CLICK HERE
    MINERS AND AIRLINES LIFT STOXX CLICK HERE  
    LACKLUSTRE START IN STORE FOR EUROPE CLICK HERE
    RATE CUT RELIEF DOUSED BY GEOPOLITICS CLICK HERE

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
PCE, the shorter term view    https://reut.rs/3WXgbkd
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>