: "Including Autos" makes it all - We turn to MW on the sector

After several guidance cuts and notably 2 disappointing preliminary results from Renault and Stellantis (see the comment from our Auto analyst here: Stellantis – No Surprise from U.S. Tariffs… At Least ), the newsflow started to turn positive in the Auto sector thanks to the US-Japan trade deal, triggering a significant outperformance of the sector last week (see chart bottom left)… before the announcement yesterday night of the EU-US deal, cutting de facto US tariffs on European autos from 25% to 15%. The visibility given by VW (see VW – Celebrating visibility; MW>OW for more details) on the impact of US tariffs and by the EU-US trade deal are game changers for the Auto sector in the short to medium term, all the more as VW alone accounts for 26.7% of the iBoxx Auto index! For those reasons, we are changing our sector recommendation from UW to MW for the sector. Finally, the “ including autos and auto parts ” mentioned by the White House (see US-Europe trade deal ) is, in our opinion, a real game changer as the sector as a whole is no longer treated differently from the others (unlike the previous inclusion in the section 232). Overall, those trade deals have also triggered some further compression in credit risk premia : the chart top left shows that High Yield and AT1s have been the outperformers of credit markets globally, followed by US IG and € Corp Hybrids