EUROPEAN EQUITIES UPDATE: Stocks gain with the DAX 40 soaring after debt brake reform updates & Lutnick remarks

STOXX 600: +1.5%

• European bourses are entirely in the green, with sentiment boosted by several factors, which include; a) US Commerce Secretary Lutnick suggesting Trump will scale back Canada/Mexico tariffs, b) Germany agreeing to debt brake reform, c) China’s Official Work Report which maintained its annual growth target and pledged measures including a boost in spending.


• Price action today has really only been one way, and that’s upward; as it stands, indices generally reside at session highs.


• In terms of the data docket; there were a slew of EZ PMI revisions – but were ultimately incremental (Spain revised higher, as was Italy and France, whilst Germany was revised a little lower).

Sectors: Positive

• European sectors hold a positive bias, with the key movers today attributed to CDU’s Merz, the CSU and SPD leaders announced an agreement on the first phase of debt brake reform.


• Construction & Materials tops the pile, joined closely by Industrial Goods and Services, Autos and then Tech; the latter two, buoyed by the risk-tone given the optimism surrounding a rolling back of US tariffs on Canada/Mexico.


• Unsurprisingly, given the yield environment, Banks are strengthened whilst Real Estate is the clear laggard.

Majors: DAX 40 +3.4%, FTSE 100 +0.7%, IBEX 35 +2.4%

• The FTSE 100 is modestly firmer, in-fitting with peers. Barclays (+6.1%) amongst other banks are towards the top of the pile given the higher yield environment. Mining names such as Fresnillo (+5.5%) and Anglo American (+3.6%) are broadly higher, benefiting from a) the positive risk tone, b) China’s Official Work Report maintained its annual growth target of around 5% and pledged measures including a boost in spending. Flutter (+1.4%) is a little firmer post-earnings; the Co. reported strong headline figures, strong US guidance though its ex-US forecasts was a little short.


• The DAX 40 is the best performer in Europe today, with sentiment boosted by the latest updates regarding the German debt brake. To recap, the measures announced by Merz and others include a special EUR 500bln 10yr fund for infrastructure investments, changes to the debt brake to exempt defence spending of more than 1% of GDP, a loosening of the regional balanced budget requirement and a new instrument to provide EUR 150bln of loans. As such, Construction Names (Heidelberg Materials +10.8%), Banks (Deutsche Bank +8.4%), Defence (Rheinmetall +5.4%) all gain. There are only a handful of German Co’s in the red today; Vonovia (-3.8%) is pressured given the yield environment. Elsewhere, Adidas (-2.6%) edges lower after its FY Op. Profit guidance fell short of expectations; though the Co. did highlight that it has been gaining market share vs Nike. Bayer (+4.5%) opened lower after its results; the Co. beat on its headline metrics, but warns that 2025 could be the worst year from a financial performance perspective – optimism could stem from the Co. seeing an earnings rebound in 2026.


• On chips, US President Trump called for the termination of the USD 52bln semiconductor subsidy programme, known as the 'Chips Act'. Elsewhere, ASML (+1.5%) said “In 2024, some customers slowed capital spending due to export controls”.

US Equity Futures: ES +0.6%, NQ +0.7%, RTY +0.8%

• Futures are entirely in the green, with sentiment lifted after US Commerce Secretary Lutnick said Trump could potentially reduce tariffs on Canada and Mexico, perhaps as soon as Wednesday.


• Day ahead: The ADP will release its gauge of private payrolls, which is expected to print 140k from the prior 183k; attention will also be on the wages metrics (in January, the median change in annual pay for job-stayers rose to 4.7% Y/Y from 4.6%, while for job-changers it pared to 6.8% Y/Y from 7.1%). ISM services data for February is expected to show the headline slowing to 52.6 from 52.8. Weekly MBA mortgage applications data, January factory orders and durable goods revisions are also due. The Fed will release its Beige Book in later trade.

05 Mar 2025 - 10:20- ForexEU Research- Source: Newsquawk