EUROPEAN EQUITY UPDATE: Risk-off continues but sentiment off lows ahead of PCE

STOXX 600: -0.4%

• European bourses began the session entirely in the red, continuing the down-beat and risk-off mood seen in US and APAC hours. The risk-off sentiment seemed to stem from the jump higher in jobless claims, significant NVIDIA pressure and most importantly tariff fears; on the latter, US President Trump announced an additional 10% tariff on imports from China.
• As the morning progressed, there has been an upward bias, attempting to pare back some of the early morning pressure; indices still generally reside in the red.
• The docket today has been packed with key data today. On the inflation front; French inflation printed below expectations, whilst the state German figures printed broadly in-line with what German mainland expectations (exp. Y/Y to remain in-line ; M/M to jump). Elsewhere, German Import Prices jumped higher; and the region’s Unemployment Rate remained unchanged as expected. Ahead, Italian CPI and then the German mainland figures at 13:00 GMT.

Sectors: Negative

• European sectors hold a strong negative bias, given the risk-off sentiment.
• Construction & Materials sits at the top of the pile, lifted by post-earning strength in Holcim; Optimised Personal Care follows closely behind, and then Travel & Leisure thereafter – the latter benefiting from IAG results (details in the FTSE 100 section).
• Basic Resources sector is the underperformer today, given the risk-tone which has weighed on underlying metals prices. It is also no surprise that Tech is amongst the laggards, following the significant losses in NVIDIA in the prior session; ASML (-2.5%)

Majors: FTSE 100 U/C, DAX 40 -0.3%, IBEX 35 +0.2%

• The FTSE 100 is flat and performing a little better vs peers. IAG (+4.7%) shares soar to the top of the pile after reporting record annual profit and launched a EUR 1bln share buyback. Focus elsewhere has been on US/UK trade, and particularly on PM Starmer who met with US President Trump on Thursday; Trump said a deal with the UK could come “rather quickly”, as he praised the UK leader for being a tough negotiator. On the monetary policy front, BoE’s Ramsden spoke today; he highlighted the two-sided risks to inflation and the importance of sticking to a data-dependent approach.
• The DAX 40 is also on the backfoot, in-fitting with peers. Allianz (-0.6%) is a little lower despite reporting strong Q4 metrics and a new EUR 2bln share buyback. BASF (+0.4%), initially opened lower after reporting a mixed set of results and highlights that the Petrochemicals divisions will be impacted by rising fixed costs.
• The IBEX 35 is a little firmer, amid a slew of earnings today. Amadeus (+6.8%) tops the pile after reported strong results and a share repurchase. Puig (-4%) is towards the foot of the pile after reporting a Net Profit miss, whilst Revenue was in-line.

US Equity Futures: ES +0.2%, NQ +0.4%, RTY U/C

• Futures are mixed, with the ES/NQ attempting to make back some of the hefty losses seen in the prior session.
• The highlight of the US Day is the release of January PCE metrics (see below for primer), while the rate of personal income is expected to slow to 0.3% M/M from 0.4% prior, and consumption is seen rising +0.1% M/M vs the prior +0.7%. The US advance trade stats will be released at the same time. Elsewhere, the Chicago PMI data will be published.