Trump-Driven Dollar Rally a Silver Lining for Europe’s Exporters

(Bloomberg) -- For some of Europe’s biggest exporters, the prospect of a stronger dollar offers a silver lining in the uncertain outlook arising from Donald Trump’s election victory.

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While any tariffs from a second Trump term are expected to pressure regional equities, stocks such as drugmaker Roche Holding AG and industrial firm Ashtead Group Plc may be shielded by greenback strength. They make 46% and 86% of their revenue in dollars, respectively, according to data compiled by Bloomberg.

A Goldman Sachs Group Inc. basket of European stocks with high revenue exposure to the US jumped Wednesday, outperforming the benchmark Stoxx Europe 600 Index, as the greenback hit a one-year high on bets that Trump’s policies could be inflationary.

“A stronger dollar will boost the margins of Europe’s exporters and their currency competitiveness globally,” said Christophe Boucher, chief investment officer at ABN Amro Investment Solutions.

Overall, Stoxx 600 companies generate 25% of their total revenues from the US, according to Goldman Sachs strategists, and the most exposed sectors are media, health care and food, beverages and tobacco.

The index has pulled back from a record high as the third-quarter earnings season proved largely underwhelming. While data compiled by Bloomberg Intelligence show MSCI Europe companies posted a better-than-expected 3.4% increase in profits, the Stoxx 600 has fallen nearly 4% since a September peak.

Trump’s proposals to impose tariffs as high as 60% on some foreign-made goods have further soured investor sentiment. German automakers — among the groups most at risk from potential levies — sank Wednesday before rebounding Thursday.

Currency Swings

While the dollar gave back some of its gains on Thursday, such moves underline the impact from currency swings that have been a prominent feature this earnings season. Companies ranging from luxury goods maker LVMH to tobacco firm Imperial Brands Plc and Swedish retailer Hennes & Mauritz AB have warned about pressure from foreign exchange-related volatility.

But Barclays Plc strategist Emmanuel Cau said he expects European dollar earners as well as sectors exposed to the US consumer to be some of the biggest beneficiaries over the coming weeks.

A Goldman Sachs basket of regional firms with high US exposure derives 55% of its revenues from across the Atlantic. It includes stocks such as biotech UCB SA, health care firms Sanofi SA and Roche, industrials CRH Plc and Ashtead, and consumer-oriented stocks Ahold Delhaize NV, InterContinental Hotels Group Plc and British American Tobacco Plc.

Data compiled by Bloomberg show that trailing earnings for the index’s constituents are closely related with movements in the dollar.

Overall, though, market participants still expect US stocks to outperform Europe both in terms of share prices and earnings growth as the country prepares for Trump’s “America First” policies that include re-shoring and lower corporate taxes.

Data compiled by BI show analysts expect S&P 500 profits to jump 13% in 2025, while Stoxx 600 earnings are projected to rise by 8%.

“Not all exporters are equal — some like the auto industry have structural issues but others like semiconductors should benefit from the FX tailwind,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “The tariff threat makes things more complicated so that’s why many investors will hide in industries such as banks and insurance companies.”

--With assistance from Meg Short and Julien Ponthus.

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