EUROPEAN EQUITIES UPDATE: Stocks benefit from a flurry of US-EU trade updates into US PCE

STOXX 600: +1%

• European bourses opened with a strong positive bias and continued to trudge higher as the morning progressed – currently trading at session highs.
• Sentiment over the past couple of days has been boosted by; 1) Thursday’s report that Trump is looking to announce Powell’s replacement early, 2) WSJ reports that the EU is considering lowering tariffs on US imports in a bid to woo US President Trump, 3) von der Leyen suggesting the EU had received the latest US trade proposal – stressing that whilst they are ready for a deal, they have made preparations for no deal, 4) US-China have agreed to to an additional understanding to implement the Geneva agreement.
• In terms of what has happened today, markets have had to digest a hotter-than-expected French inflation report; this sparked some modest two-way action in contracts. The Spanish metrics thereafter were broadly in-line, but headline Y/Y was a touch hotter than expected.

Sectors: Positive

• European sectors are entirely in the green, although with the breadth of the market fairly narrow.
• Autos & Parts takes the top spot, benefiting from the risk tone and the EU-US trade-related updates mentioned earlier. Consumer Products and Services follows closely behind with particular strength in Adidas (+4%), JD Sports (+6%) and Puma (+5%); the trio are benefitting from significant post-earnings strength in Nike (details in US section below).

Stories:

• Pearson (+3%) upgraded to Outperform from Neutral at BNP Paribas.
• Mediobanca (+0.5%) targets EUR 4.9bln shareholder payout and looks for strong revenue/profit, as the Co. aims to fend off BMPS bid.
• Babcock (-2.9%) downgraded to Hold from Buy at Deutsche Bank.
• Knorr Bremse (-5.4%) downgraded to Neutral from Overweight at JPMorgan.

US Equity Futures: ES +0.2%, NQ +0.3%, RTY +0.3%

• Futures are modestly firmer across the board, taking impetus from a strong European session but with gains capped ahead of the US PCE later today.
• On that, consensus for PCE is for a gain of 0.1% M/M, matching the prior pace, with the Y/Y seen ticking up to 2.3% from 2.1%; expectations are in a narrow range between 2.2-2.3%. The core rate is expected to rise by 0.1% M/M, matching the prior pace, with the annual rate seen rising to 2.6% Y/Y from 2.5% (forecasts range between 2.4-2.6%).
• Final University of Michigan sentiment data is also due today, where there will be particular focus on the 1yr and 5-10yr inflation expectations (currently 5.1% and 4.1%, respectively). On the speaker slate, Fed’s Hammack and Williams are scheduled.
• Key mover today is Nike, which is currently higher by 9.5% in the pre-market. The Co. signalled that the sales slump is bottoming out, and CEO's turnaround strategy gained investor support following an upbeat earnings call, reversing some of the stock’s recent declines.