EUROPEAN EQUITIES UPDATE: European indices gain, Defence stocks roar on EU spending talks

STOXX 600: +0.1%

• European bourses are mostly firmer in what has been a choppy session thus far; a significant sell-off was seen soon after the cash open, but with little fundamental driver at the time. As it stands, indices have rebounded from those earlier lows and have since climbed to fresh session highs.


• As a reminder, overnight APAC stocks traded mostly higher, rebounding from the hefty sell-off seen on Friday. The better-than-expected Chinese PMI data overnight seemingly outmuscled geopolitical jitters following the heated exchange at the Oval Office between Trump and Zelensky.


• The EZ docket today has included a slew of Manufacturing PMIs; the figures were generally incrementally better than expected (ex-Spain). The EZ report highlighted that "New orders are falling at the slowest pace since May 2022, and production is edging closer to stabilising”. EZ HICP Y/Y printed a touch above expectations at 2.4% (exp. 2.3%) but did moderate from the prior 2.5%; Services also fell to 3.7% from 3.9%. The metrics spurred some modest hawkish price action in EGBs and the EUR, whilst the equities complex was little phased.

Sectors: Mixed

• European sectors are mixed vs opening with a strong positive bias.


• Industrials take the top spot and is by far the clear outperformer, as Defence names prop up the industry. The likes of Rheinmetall (+8%), BAE Systems (+13%) and Rolls Royce (+5%) all gain for a number of reasons. Firstly, sentiment regarding a Ukraine-Russia peace deal has been hit after the recent bust-up between US President Trump and Ukrainian President Zelensky at the Oval Office on Friday. Secondly, French President Macron proposed to raise the EU's defence spending to 3.5% of GDP. And finally, Germany is reportedly considering defence-specific funds in the formation of a new government.


• Utilities are found at the foot of the pile, joined closely by Real Estate and then Chemicals.

Others: FTSE 100 +0.4%, DAX 40 +0.9%, CAC 40 +0.3%

• The FTSE 100 is a little firmer and performing a little better vs peers. Defence names such as BAE Systems (+13%) and Rolls Royce (+5%) top the pile (mentioned above). Gambling names are in the green, with Macau gaming rev. significantly recovered from its COVID-19 slump; Flutter (+1.7%). Elsewhere, Bunzl (-6.4%) sits at the foot of the index after significantly missing on EBIT figure, but did affirm guidance. The recent FTSE 100 reshuffle saw Coca-Cola Europacific Partners enter the UK’s top index whilst Hiscox left. UK Manufacturing PMI printed a touch above the prior - but ultimately had little impact on price action.


• The CAC 40 is a little firmer in-fitting with peers; stock-specific have been light but for France itself. S&P affirmed France at AA-; Outlook revised to Negative from Stable.


• Goldman Sachs Conviction List - Zealand Pharma (ZEAL DC), Saint Gobain (SGO FP), ISS (ISS DC), Glencore (GLEN LN), Coca Cola HBC (CCH LN), removed from European Conviction List. Additions: Volvo AB (VOLVB SS), Rio Tinto (RIO LN), Novo Nordisk (NOVOB DC), DNB (DNB NO), AstraZeneca (AZN LN).

US Equity Futures: ES +0.1%, NQ +0.1%, RTY +0.4%

• Futures are very modestly in the green, but with the RTY performing a little better vs peers.


• For Crypto stocks; Bitcoin rose c. 10% over the weekend after US President Trump announced a US Strategic Reserve for several coins; Coinbase +8.5% in the pre-market.


• The US Day sees the release of the February ISM manufacturing report, where the headline is seen easing slightly, but remaining above 50.0. US construction spending is expected to be unchanged in January. On the speaker's slate, Fed's Musalem (2025 voter) will give remarks on monetary policy.

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