EUROPEAN EQUITY UPDATE: Stocks hold a positive bias despite tariff updates from Trump; BP surges as Elliott takes a stake

STOXX 600: +0.4%

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  European equities opened with modest gains, paring back some of the downside seen on Friday after the US jobs data. Tariffs remain in focus, with US President Trump set to announce 25% levies on all steel and aluminium coming into the US, while reciprocal tariffs will be announced on Monday and Tuesday - both will go into effect immediately.


• That being said, the European Commission said they have not received any official notification regarding the imposition of additional tariffs on EU goods, but the "EU will 'replicate' any tariffs imposed by the US", according to the French Foreign Minister cited by AFP.


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  For the autos sector, it was reported on Friday that the EU is offering to lower tariffs on US car imports to avoid a trade war with the US.


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  ECB de Guindos said it is very important to avoid a trade war and to have a prudent and intelligent approach regarding the latest tariff announcement


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  Meanwhile, China's retaliatory tariffs against the US took effect on February 10th and with officials also said to be building a list of US tech firms for potential probes - Chinese officials may target Broadcom (AVGO) and Synopsys (SNPS), according to WSJ.


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  On tariffs, Morgan Stanley warned that "Equity investors should consider new pressures on supply chains. There’s evidence that in recent years companies have invested in supply chain realignment to avoid rising trade and compliance costs...It may be particularly challenging in sectors such as IT Hardware, Autos, and in some Consumer sectors. However, it could be a boon for the US Industrial sector."


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  The data slate for Monday is quiet, but is set to pick up later in the week, with events including Fed Chair Powell's Testimonies to Congress; US and Swiss CPI, as well as NZ inflation forecasts; US Retail Sales; UK GDP.

Sectors: Mostly Positive

• Mostly positive trade across sectors with no overarching theme or bias.


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  Energy is the marked outperformer on the back of BP (more below)


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  Real Estate, Utilities, Technology are the next best performers.


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  Auto names also trade with gains as it was reported on Friday that the EU is offering to lower tariffs on US car imports to avoid a trade war with the US.


• On the downside, Basic Resources are hit by Trump's 25% levy on all steel and aluminium coming into the US.

Majors: FTSE 100 +0.4%, CAC 40 +0.2%, DAX +0.4%

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  FTSE 100: Propped up by BP (+7.2%) after activist investor Elliott Investment Management acquired a significant stake in BP, aiming to boost shareholder value through transformative measures. Elliott views BP as undervalued and underperforming; its exact stake size remains undisclosed., according to Bloomberg. Further, Housing names are towards the top of the bunch as Deputy PM Rayner has said there are “no excuses” not to build 1.5mln new homes, as promised in Labour’s manifesto.


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  CAC 40: Renault (+0.4%) sees modest gains as the Co. resumed talks with Foxconn over selling its Nissan stake after failed merger discussions with Honda, FT reported. Meanwhile, ArcelorMittal's French listing (-2.4%) suffers from the US steel and aluminium tariffs.


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  DAX 40: Holding modest gains with the auto sector propped up by reports the EU is offering to lower tariffs on US car imports to avoid a trade war with the US. Elsewhere, Germany's election front-runner Merz said he was open to reforming Germany's borrowing rules amid pressure regarding defence spending financing, according to the FT.

US Equity Futures: ES +0.3%, NQ +0.6%, RTY +0.3%, YM +0.2%

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  Trading with modest gains across the board but horizontally with more of a bias towards the tech sector, although US steel names are surging pre-market after Trump's tariff announcement.


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  Ahead of US CPI data on Wednesday, the NY Fed will release its monthly survey of consumer expectations (in the January update, median one-year ahead inflation expectations were unchanged at 3.0%, three-year ahead expectations increased to 3.0% from 2.6%, while the five-year ahead gauge eased to 2.7% from 2.9%). Elsewhere, the US employment trends data for January will be out.


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  Also this week Chair Powell's testifies to Congress in which he is likely to repeat what he said in the wake of the latest FOMC rate decision. As a reminder, Powell said that the Fed does not need to be in a hurry to adjust the policy stance and that policy is not on a pre-set course, something he reiterated throughout the Q&A, even when asked about a March cut. Further, Powell said the Fed got two good inflation readings in a row but still wants to see further progress, but he thinks the Fed can see the pathway for that to happen, particularly as shelter inflation is coming down pretty steadily.


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  This week's major US earnings reports include KO, SHOP, SPGI, and GILD on Tuesday; APP, CSCO on Wednesday; DE, AMAT, and PANW on Thursday; and MRNA on Friday.

10 Feb 2025 - 09:45- EquitiesResearch Sheet- Source: Newsquawk