Germany stocks lower at close of trade; DAX down 1.50%

Investing.com -- Deutsche Bank initiated coverage on Payoneer Global Inc with a "Buy" rating and a $13 price target, citing the company’s strong positioning in cross-border fintech services for small and medium-sized businesses (SMBs).

The brokerage said Payoneer, which operates in 190 countries and serves over 2 million active customers, benefits from key fintech trends and has the potential to accelerate core revenue growth beyond 2025. However, risks include its ability to meet long-term revenue targets and exposure to macro-sensitive micro-SMBs in emerging markets.

Deutsche Bank (ETR:DBKGn) also initiated Shift4 Payments Inc (NYSE:FOUR) with a "Hold" rating and a $120 price target, citing concerns over its long-term organic growth profile and reliance on acquisitions. The firm also flagged uncertainty around CEO Jared Isaacman’s upcoming departure, which could impact the company's strategic direction.

While acknowledging Shift4's strong execution, Deutsche Bank said it would wait for more clarity, particularly at the company's investor day on Feb. 18, before turning more constructive on the stock.

Investing.com -- According to Deutsche Bank (ETR:DBKGn) strategists, European equities will maintain their lead over US stocks, although the pace may slow down due to factors such as DeepSeek, German elections, and tariffs.

The team, led by Maximilian Uleer, states that while their overall outlook remains unaltered, the ongoing discussions around tariffs are expected to put more pressure on equity markets.

The strategists point out that the majority of US sales by large European companies are local-for-local. They also anticipate that DeepSeek will continue to impact the Magnificent 7 and US exceptionalism.

The bank has downgraded retail and staples to neutral, reflecting the impact of tariffs. Despite this, the strategists remain optimistic about the potential for more market-friendly politics emerging from the German elections, such as tax cuts or increased fiscal spending.

However, they also note that growing divisions among political parties could create short-term political uncertainty, making the formation of a government more challenging.

The Euro Stoxx 50 Index, which has risen by 6.1% year-to-date (YTD), continues to outperform the S&P 500, which has seen a 2.7% increase over the same period.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- Knorr-Bremse (ETR:KBX) has been upgraded to a "buy" rating by analysts at Jefferies, who cited improving earnings momentum and stronger growth prospects for the rail and truck divisions. The price target has been raised to €91, reflecting an expected total shareholder return of 23%.

Jefferies analysts pointed to a more favorable operating environment for Knorr-Bremse's rail and truck segments, highlighting strong tailwinds that could drive margin expansion and earnings growth through 2026.

The analysts noted that rail operations are benefiting from robust order intake and increased regulatory and investment support, particularly in Europe, the U.S., and India.

With organic growth expected to reach about 7% annually through 2027, Jefferies believes the market is underestimating the division’s mid-term potential.

Additional growth opportunities could arise from Alstom’s U.S. signaling business, which may be announced in 2025.

As volume leverage improves and legacy backlogs clear, the segment’s EBIT is projected to grow at an 11% annualized rate through 2027.

In the truck division, Jefferies sees signs of an inflection point in the cycle. After a downturn over 2023-2024, the analysts expect a shorter and shallower dip, with demand beginning to recover in 2025.

Customers have signaled increased capital expenditure plans, and freight rates are improving. Truck manufacturers in Europe have reported rising orders, while in the U.S., new emissions standards set for the second half of 2025 could drive demand.

China is also expected to contribute to growth. The return of pricing power for original equipment manufacturers (OEMs) is another positive sign for suppliers like Knorr-Bremse.

According to Jefferies, truck order volumes likely bottomed out in the third quarter of 2024 and should see a recovery, particularly in the second half of 2025.

The analysts estimate Knorr-Bremse’s truck EBIT to be 3-7% ahead of consensus expectations for 2025-2026.

Knorr-Bremse has also been making changes to its portfolio under its new CEO, completing several disposals that have bolstered margins.

Additional disposals are anticipated in both the truck and rail divisions over the next two years, contributing to further efficiency gains.

The company’s cost-cutting program, BOOST, is expected to deliver additional margin improvements, with rail already approaching its 2026 profitability targets.

Trucks will need both market recovery and cost adjustments to reach those targets, but overall, Jefferies projects about 200 basis points of margin expansion by 2026, keeping them roughly 50 basis points ahead of consensus estimates.

In revising its valuation model, Jefferies moved its sum-of-the-parts (SOTP) analysis to 2026 estimates and slightly raised the multiple for the rail division to 15x EV/EBIT, up from 14x, reflecting stronger operational performance and a recovery from COVID-era challenges.

The truck division’s multiple remains unchanged at 10x. This results in an implied multiple of 13x for the overall company, up from the previous 12x valuation, supporting the new price target of €91.

With stronger growth expectations, margin expansion, and favorable cyclical trends in both rail and trucks, Jefferies has taken a more positive stance on Knorr-Bremse’s earnings potential over the next two years.

Investing.com - European stock markets fell sharply Monday, after US President Donald Trump imposed trade tariffs on three of its major trading partners, and threatened to do something similar with the European Union and the UK.

At 06:25 ET (11:25 GMT), the DAX index in Germany dropped 1.6%, the CAC 40 in France slipped 1.7% and the FTSE 100 in the UK fell 1.2%.

Trump’s tariffs hit sentiment

President Trump announced over the weekend that the US would levy 25% tariffs on imports from Mexico and Canada and 10% on goods from China, with the tariffs set to come into effect Tuesday.

The US tariffs will affect $1.3 trillion of goods, or more than 40% of all U.S. imports.

Canada and Mexico immediately vowed retaliatory taxes, while China pledged to challenge the tariffs at the WTO.

Additionally, in an interview with the BBC, Trump indicated that similar tariffs with the European Union “will definitely happen.” He didn’t rule out imposing levies on UK goods but added that the situation “can be worked out.”

Although the newly-installed president had threatened such moves during his campaigning, investors had expected that Trump would water down his rhetoric when the decisions were actually made.

Eurozone inflation rises

The eurozone's beleaguered manufacturing industry showed some signs of stabilisation at the start of the year.

The HCOB's final eurozone manufacturing Purchasing Managers' Index, compiled by S&P Global, climbed to 46.6 in January, ahead of a preliminary estimate for 46.1 and closer to the 50 mark separating growth from contraction.

Additionally, eurozone inflation accelerated last month, with the region's CPI accelerating to 2.5% in January from 2.4% in December, just above expectations for 2.4%, as sharply higher energy costs added to price pressures.

The ECB lowered borrowing costs for the fourth straight time last week and hinted at even more policy easing since inflation could be back at its 2% goal by late summer, economic growth is anaemic and a trade war was a distinct possibility.

Julius Baer sees jump in AUM

In the corporate sector, Julius Baer (SIX:BAER) stock slumped 11% after the Swiss wealth manager announced plans to cut its work force by 5%, even as it posted a jump in its 2024 net profit, benefiting from a 16% surge in assets under management to a record $545 billion.

Stellantis (NYSE:STLA) announced changes on Monday aimed at simplifying its structure and speeding up processes, as the automaker presses ahead with a reorganisation it started after former CEO Carlos Tavares left in December.

The auto sector will be in focus Monday, as companies like Volkswagen (ETR:VOWG_p) and Stellantis have operations in Mexico which leaves them exposed to the impact of the US tariffs.

Crude rises on supply disruption concerns

Oil prices rose Monday as President Trump’s announcement of tariffs on imports from two of the US’s major suppliers raised concerns about potential disruptions in oil supply chains.

By 06:20 ET, the US crude futures (WTI) gained 2.5% to $74.33 a barrel, while the Brent contract rose 1.5% to $76.83 a barrel.

The US imports approximately 4 million barrels of Canadian oil and nearly 500,000 barrels of Mexican oil daily.

The newly imposed tariffs are expected to increase costs for US refiners, especially those in the Midwest and Gulf Coast regions, potentially leading to higher fuel prices and potential production cuts.

Investing.com -- The Stoxx 600 autos and parts index has recorded a 4.3% decline as of 11:13 a.m. in Frankfurt, outpacing the broader market's drop of 1.4%.

Leading the downturn are Stellantis (NYSE:STLA), Mercedes, and Volkswagen (ETR:VOWG_p), which have seen significant losses in index points.

Analysts, including RBC's Tom Narayan, indicate that a permanent tariff on certain regions could have a substantial effect on earnings, particularly if original equipment manufacturers (OEMs) do not transfer these costs to consumers.

Despite this, analysts predict that OEMs will likely pass these tariffs onto consumers, which could result in lower sales volumes and a smaller hit to earnings before interest and taxes (Ebit).

The team of analysts also notes that OEMs could potentially shift production to the U.S. to mitigate the impact of these tariffs, although this move would be considerably more challenging for suppliers.

Many investors anticipate that these tariffs will be temporary, expecting a deal to be struck between the affected countries. However, if U.S. tariffs on the European Union (EU) proceed, German OEMs under the analysts' coverage could face an amplified impact.

This follows recent market trends, where Europe's car shares have experienced a decline as Volkswagen and Stellantis grapple with potential tariff challenges.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.