Market wrap 🚩 Europe and EUR/USD retreat on elevated US–Iran geopolitical risk

Global equities are trading with a defensive bias, as investors reassess the risk of a potential US strike on Iran. With the US reportedly concentrating significant forces in the Middle East, any escalation would likely raise the geopolitical risk premium in oil and reignite global inflation pressures. That combination could delay rate cuts and, in an extreme scenario, even revive rate-hike expectations in selected jurisdictions.

• Brent crude (OIL): +1.6%, approaching $71/bbl

• US index futures: -0.3% to -0.4% pre-market

• Gold & silver: gains losing momentum

• Bitcoin: down to ~$66.5k

• Europe under pressure: DAX -0.8%, CAC 40 -0.8%, FTSE 100 -0.6%

This reporting cycle continues to show a non-uniform earnings landscape across Europe, with resilience in pockets of industry and finance, and ongoing pressure in commodities and consumer demand.

• Rio Tinto: flat earnings, as iron ore profits declined, highlighting segment-level pricing pressure

• Repsol: €1.9bn planned for dividends + buybacks in 2026

• Centrica, Mondi: misses at the level of adjusted operating performance

• Drax: signed a 15-year tolling agreement for a 200MW battery energy storage system (BESS), reinforcing energy transition exposure

Technology & Industrials

• SAP: proposed €2.50/share dividend for 2025

• BE Semiconductor: better-than-expected Q4 orders

• Airbus: sees ~870 deliveries in 2026, below market expectations

• Schneider Electric: highlighted AI-driven power savings potential, aligning with the structural energy-efficiency theme

• Nexans: FY adjusted EBITDA missed expectations

Consumer & Services

• Pernod Ricard: sales missed, pointing to worsening demand

• Nestlé: guides 2026 organic revenue growth at 3%–4% (broadly in line with consensus)

• Renault: issued cautious guidance amid intensifying competition

• Air France-KLM: remains upbeat on long-haul, supported by premium demand

• Kinepolis, Nilfisk: full-year results disappointed

Financials & Real Estate

• Aegon, BAM: beats on operating performance

• Tikehau Capital: AUM €52.8bn vs €49.6bn y/y

• Zug Estates: net income CHF 85.2m vs CHF 58.7m y/y

• LSEG: activist pressure as Elliott pushes for a £5bn buyback and a portfolio review

Analyst actions: upgrades and downgrades in focus

Upgrades

• DWS: upgraded to Buy at UBS (PT €70)

• Vonovia: upgraded to Equal-weight at Morgan Stanley (PT €30)

• Aramis: upgraded to Overweight at Morgan Stanley (PT €5)

• Capgemini: upgraded to Equal-weight at Morgan Stanley (PT €117)

Downgrades

• BASF: cut to Underweight at Barclays (PT €40)

• Freenet: cut to Sell at UBS (PT €28.50)

• Schroders: cut to Neutral at UBS (PT 590p)

Initiations

• 74Software: initiated at Buy by Berenberg (PT €44)

Are defensive stocks back in favor? Consumer staples rebound

European consumer staples have staged a notable rebound. The MSCI Europe Consumer Staples index has broken out of a two-year range and is set for its best relative monthly performance vs the broad market since mid-2022. The key driver appears to be flow-led rotation, rather than a clear fundamental inflection.

Key takeaways

• Breakout: MSCI Europe Consumer Staples shows its best relative momentum since June 2022

• Flow-driven: rotation partly reflects reduced exposure to names seen as vulnerable to AI disruption

• Valuations: sector trades in line with the broad market, rather than at its typical long-term premium

• Fundamentals: earnings and volume trends still lack a clear catalyst for sustained acceleration

• Sell-side stance: some banks remain underweight, citing fading pricing power and limited EPS catalysts

DE40 and EURUSD (D1 interval) charts

Source: xStation5

Source: xStation5