Keep an UW stance on Autos as the sector premium is still too low

In line with mixed performance on the equity market, we finished the past week with roughly stable spreads in most credit segments apart from High Beta credits which definitely suffered last week (+6 to +7bp for €HY and AT1s). Although the macroeconomic newsflow was pretty supportive (Empire Manufacturing survey, Retail sales rebounding in the US, CPI still reassuring in June…), the tariff environment is starting to worry credit investors as the 1 st August deadline is approaching with no clear agreement in sight (with the EU preparing a retaliation plan in case of a no deal with the US ) . Moreover, as the earning season has started, it is triggering some discrepancy by sector. Autos were the clear underperformer of the week (see chart opposite) with more than 3bp widening overall while non-financial senior spreads tightened by 1.5bp over the week. We analyse in the following pages the details of that performance by ticker as well as the historical pick-up between Autos and the iBoxx index, to conclude that keeping an UW stance on the sector still seems justified, all the more as Stellantis ’ preliminary results published this morning br ought more bad news. Chemicals have also underperformed after Solvay cut significantly its guidance for the year (underlying Ebitda now expected in the region of €880-930mn vs €1-1.1bn previously), following similar profit warnings from BASF and Covestro the days before.