Before the bell: in government bonds, the U.S. is the mirror image of the eurozone

Sour beer once again for AB InBev. Many are called to sell diet pills, few are chosen.

Wall Street had a poor start yesterday, which pulled European markets down by around 0.75% in the final hours of trading. Interestingly, Donald Trump did not mention Europe or the eurozone as targets for increased trade tariffs. Instead, Mexico and Canada are in line for an immediate 25% tariff hike, while China faces a smaller-than-expected 10% increase (compared to the 60% discussed during his campaign). Asian markets remained unfazed, as did the bond markets. In the eurozone, 10-year yields fell to 2.19% for German bunds, while similar U.S. bonds rose by 4 basis points to 4.31%. While U.S. equities are far pricier than their European counterparts, the reverse is true for bonds. The minor rally in interest-sensitive stocks such as real estate investment trusts Cofinimmo (-1.6%) and Home Invest Belgium (-2.9%) failed to gain momentum. The biggest losers were companies most vulnerable to higher tariffs on Mexican goods, such as AB InBev (more on this below) or automakers like General Motors (-8.4%) and Stellantis (-4.8%). Proximus fell 3.2% after Member of Parliament Michael Freilich demanded an external audit regarding a management reshuffle and alleged manipulation of financial data at foreign subsidiaries. Meanwhile, EVS announced two major new contracts during its investor day.

This morning, Tokyo is down 0.75%, while Hong Kong is up more than 1%. In the U.S., the PCE inflation figures for October will be released today. These are key numbers for the Fed’s interest rate policy, with expectations of an increase from 2.1% to 2.3%, while core inflation is forecast to remain at 2.7%.

Another American hangover

AB InBev was the biggest Belgian casualty, falling 2.6%, amid concerns about the potential 25% U.S. tariffs on imports from Canada and Mexico. The beer giant would be directly impacted, as it derives three-quarters of its revenue from North, Central, and South America. Around 20% of AB InBev’s revenue comes from Mexico, with significant beer exports to the U.S. The company acquired Grupo Modelo, a major Mexican brewer, in 2012. Investors, however, seem to be taking the tariff threat with a grain of salt. The limited stock price reaction may also reflect the current low valuation of the stock, which has improved compared to the challenging past few years.

Biotech company swallows its own pill

Amgen, the world’s largest biotech company, dropped nearly 8% after disappointing test results for its weight-loss drug. Participants in a Phase II trial lost 20% of their body weight. However, rival drugs from Novo Nordisk (up 1.8%) and U.S.-based Eli Lilly (up 4.8%) already achieve 25% weight loss with minimal side effects. This is where Amgen struggles. Around 10% of participants dropped out of the trial early, with 40% experiencing nausea and vomiting, particularly in the early stages. While the market for weight-loss drugs is lucrative, only a few companies will emerge as leaders. Novo Nordisk and Eli Lilly continue to innovate, even as their shares trade 30% and 15% below their peak, respectively.

Did you know…

Warren Buffett revealed that he has already given away 56.6% of his shares in Berkshire Hathaway? After his passing, 99.5% of his shares will go to charitable foundations managed by his children.

This article was translated from Dutch and was originally published on Spaarvarkens.be.