EUROPEAN EQUITY OPEN: Stocks higher on trade and geopolitical optimism; Pharma lower on Trump pledge to cut drug prices; LLY's Zepbound outpferomed NOVOB DC's Wegovy in trial; UCG IM record Q1 profit; Spain open to SAB SM tie up with local bank

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  EUROPEAN OPEN: European stock indices are starting the new week on the front foot following reports of “substantial progress” in US-China trade talks. The two nations agreed on a new consultation platform and noted significant progress. In a joint US-China statement, both countries agreed to modify their duty rates. The US will suspend 24 percentage points of its rate on Chinese goods for 90 days, maintaining the remaining 10%. China will similarly suspend 24 percentage points of its additional ad valorem duties for the same period; both sides reciprocal tariffs will move lower to 115%. US futures rallied; Chinese stocks have now reversed losses from US President Trump’s “Liberation Day” tariff announcement, reflecting signs of improving trade relations between the two. Gold prices eased, and crude prices picked-up. However, Asian pharmaceutical stocks still came under pressure after US President Trump announced plans to reduce US prescription drug prices to align with other countries. Meanwhile, defence stocks are coming under pressure amid reports of potential ceasefires between India-Pakistan, Russia-Ukraine, and Israel-Gaza; additionally, the Kurdish separatists PKK agreed to end its 40-year conflict with Turkey, disarming and disbanding after declaring a ceasefire in March, a historic move that may ease tensions between Ankara and Washington. Today’s docket is thin, ahead of some key releases due later in the week. Traders will be looking for further details on the US-China talks, with Treasury Secretary Bessent due to deliver remarks in early European trading.


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  STOCK SPECIFICS: In healthcare, Pharma names are under pressure after US President Trump pledged to slash US drug prices by 30-80%, introducing a “most favoured nation” policy to match the world’s lowest prices; Trump vowed to defy pharmaceutical industry resistance, despite prior failed attempts and lawsuits. Eli Lilly’s (LLY) SURMOUNT-5 trial for Zepbound showed superior results versus Wegovy at 72 weeks; Zepbound achieved a 20.2% weight reduction (50.3 lbs lost) vs Novo Nordisk’s (NOVOB DC) Wegovy’s 13.7% (33.1 lbs); Zepbound also led in secondary endpoints, with greater weight loss and waist circumference reduction. Separately, Novo Nordisk announced positive results from its REAL8 Phase 3 study. In consumer sectors, Stellantis (STLAM IM) is reportedly nearing a decision on its new CEO, with Americas boss Antonio Filosa considered a leading candidate, Bloomberg reports; however, the situation remains fluid, and the board may ultimately select someone else, the report adds. Nestle (NESN SW) US unit will raise prices on certain chocolate products, including Toll House morsels, baking cocoa, and fudge kits, starting June 23rd, due to rising commodity costs. In materials, a US judge temporarily blocked the land transfer for Rio Tinto’s (RIO LN) Resolution Copper mine, citing Apache Stronghold’s likely success in its Supreme Court appeal. In industrials, Evonik (EVK GY) reported Q1 adj. EBITDA of EUR 560mln (exp. 543mln), driven by cost discipline and strong Nutrition & Care performance; CEO warned of risks from escalating US tariffs and a possible economic slowdown, and it maintained its FY25 outlook. In financials, UniCredit (UCG IM) reported Q1 net income of EUR 2.77bln (exp. 2.38bln); the record profit level highlights solid performance in Q1, reinforcing the bank’s strategic direction, and strengthens CEO Andrea Orcel’s position as he explores potential acquisitions. Elsewhere, total revenue was EUR 6.55bln (exp. 6.05bln); the bank sees FY25 net profit above EUR 9.3bln, and backed FY25 ROTE above FY24 levels. In M&A news, Spain’s government is open to a Banco Sabadell (SAB SM) tie-up with another local bank as an alternative to an unsolicited BBVA bid (BBVA SM), Bloomberg reports; it would support a deal with a Spanish rival, though any agreement is unlikely to occur soon. Man Group is reportedly in talks to acquire credit firm Bardin Hill Investment Partners, with a potential deal expected to be signed as soon as this month. Danone (BN FP) is to acquire a majority stake in Kate Farms; no terms were disclosed. PPF announced an offer to increase its stake in ProSiebenSat.1 (PSM GY) to up to 29.99%. In notable broker updates, Morgan Stanley downgraded the European Energy sector to ‘Cautious’ from ‘In Line’; the bank expects oil to enter a “meaningful surplus” after the summer; it downgraded BP (BP/ LN) and Equinor (EQNR NO), upgraded TotalEnergies (TTE FP) and Repsol (REP SM).

TODAY’S AGENDA:

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  DAY AHEAD: There is not a lot by way of scheduled data releases on today’s docket, aside from the US Federal Budget. On the speakers’ front, BoE officials will be appearing at the central bank’s watchers’ conference; remarks are due from BoE’s Taylor, Mann, Lombardelli, and Greene. From the Fed, Kugler (voter) will be delivering further remarks. For the crypto watchers, SEC Chair Atkins will give a keynote address at the SEC crypto roundtable discussing tokenisation.


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  WEEK AHEAD: Highlights include US & China CPI; US retail sales; UK & Aus jobs data, Japan & UK GDP; Banxico policy announcement. Earnings season winds down, but this week’s highlights include CSCO, DE, WMT, AMAT, BABA.


• Click here for Newsquawk’s Week Ahead preview 


• Click here for Newsquawk’s Weekly US Earnings Estimates 


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  RECAP - CHINA INFLATION: China CPI rose +0.1% M/M in April (prev. -0.4%), with the annual rate remaining at -0.1% Y/Y (exp. -0.1%, prev. -0.1%), as consumer deflation continued into April, for a third consecutive month, with weak domestic demand and US-imposed tariffs contributing to the price pressures. Factory deflation also persisted for the 31st month, with the producer price index declining by 2.7% -2.7% Y/Y from -2.5% (exp. -2.8%).

12 May 2025 - 08:03- EquitiesResearch Sheet- Source: Newsquawk