EUROPEAN OPEN: Citi downgrades European equities; Trump threatens 200% tariff on French wine and champagne; GSK LN to buy RAPT for USD 2.2bln; Musk floats RYA ID buy after CEO criticised Starlink; AZN LN downgraded at Nordea, SAP GY initiated at HSBC

• EUROPEAN OPEN: European equities have opened lower, following an overnight APAC trading sessions where stocks mostly declined. US Treasuries fell as President Trump’s tariff threats linked to Greenland weighed on US assets and raised inflation concerns; longer maturities led losses after trading resumed following a US market holiday on Monday. Japan’s 20yr bond auction drew weaker demand than average after proposed food tax relief unsettled the debt market; 40yr yields hit the highest on record. Oil prices steadied as markets weighed the US push to take control of Greenland and concerns over a global surplus; Brent trades just under USD 64/bbl, while WTI traded sub-USD 60/bbl, as geopolitical tensions raised fears of a US-EU trade war. Gold hit a record high as tensions over Trump’s push on Greenland; spot gold topped USD 4,700/oz, while silver rose above USD 94.50/oz, as markets awaited Europe’s response to potential US tariffs. Chinese Copper prices fell amid concerns that record price levels are hurting demand in China; BBG notes that Chinese fabricator demand weakened and the Yangshan import premium halved over the past month to its lowest since mid-2024. In central banks, Croatia’s Vujcic is set to become ECB Vice President, succeeding Luis de Guindos when he leaves at the end of May, marking the first Executive Board appointment from Eastern Europe. US President Trump said he knows who he wants to be Fed Chair, and that will be announced sometime; Treasury Secretary Bessent said there were four good candidates, and an announcement could come next week. Elsewhere, Bessent said the US is seeing a capex boom that will drive employment, dismissed reports of EU plans to sell USTs as false, and urged countries not to escalate trade tensions. In data, the UK economy added 82k jobs in November (exp. 27k), though the unemployment rate remained at 5.1% (exp. 5.0%); average earnings (including bonuses) were unchanged at 4.7% Y/Y after revisions in the three-months to November (exp. 4.6%), while excluding bonuses, eased to 4.5% Y/Y (exp. 4.5%, prev. 4.6%). The more timely claimant count for December showed 17.9K (exp. 15.6K), while the December HMRC payrolls change was -43K (vs a prior -38K). Analysts said that markets still see BoE easing through 2026, with June cuts more likely than April. German PPI fell by -0.2% M/M in December (exp. -0.2%), and the annual rate slipped to -2.5% Y/Y (exp. -2.4%, prev. -2.3%).
• STOCK SPECIFICS: Citigroup downgraded European equities citing worsening transatlantic tensions and tariff uncertainty linked to President Trump’s push over Greenland; strategists said the dispute with Washington weakens the near-term investment case and earnings outlook for European companies. Of note for UK small- and mid-cap stocks, Norway’s SWF has begun selling a significant number of London-listed small- and mid-cap stocks in recent weeks, according to Sky News; the fund is retaining large-cap positions, however. In financials, Allianz (ALV GY) Global Investors secured USD 690mln for its new Allianz Credit Emerging Markets fund, aimed at blending public and private capital for climate projects, around 70% toward its USD 1bln target. In materials, BHP (BHP AT) raised FY26 group copper production guidance to 1.9–2.0mln metric tons (from 1.8–2.0mln), citing strong operational performance across assets; Escondida achieved record throughput, Antamina lifted guidance, and other copper operations tracked to plan, supporting strong momentum into the H2. Wendel (MF FP) confirmed it is in non-exclusive discussions with Henkel (HEN3 GY) regarding a potential transaction involving Stahl; it added that there was no cerainty of a deal, and will not make any further comments unless appropriate. In consumer sectors, of note for French alcoholic beverage producers, US President Trump said he could impose a 200% tariff on French wines and champagne after French President Macron declined to join his proposed Board of Peace on Gaza. Renault (RNO FP) will help France develop a domestic drone industry after being approached by the Ministry of the Armed Forces, contributing its expertise as Europe responds to rising geopolitical tensions linked to US threats over Greenland. Elsewhere, Renault reported FY25 vehicle sales +3.2% Y/Y at 2.37mln, while EV vehicle sales +767% Y/Y at 194k. Mercedes (MBG GY) has started production of its fully electric GLB compact SUV in Hungary, concentrating output at its Kecskemet plant; the model is shifting from Mexico as Mercedes cuts costs amid tariff risks and Chinese competition. In healthcare, GSK (GSK LN) agreed to acquire RAPT Therapeutics (RAPT) for around USD 2.2bln equity value, with USD 1.9bln upfront net of cash, adding the Phase IIb anti-IgE antibody ozureprubart to its Respiratory, Immunology & Inflammation pipeline; the deal is expected to close in Q1 2026. AstraZeneca (AZN LN) will withdraw its ADSs and US debt securities from Nasdaq and complete a direct listing of its ordinary shares and debt securities on the NYSE after market close on 30th January, following a plan announced in September to harmonise its global listing structure. In industrials, Elon Musk replied to a Ryanair post, asking “how much would it cost to buy you?”, adding that “I really want to put a Ryan in charge of Ryan Air. It is your destiny.” The remarks follow Ryanair CEO Michael O’Leary criticising Starlink. Analysts said EU ownership rules and Ryanair’s EUR 20bln market value make a takeover unlikely, despite online polls and prediction markets assigning low odds. In notable broker updates, SAP (SAP GY) was initiated with a Hold rating at HSBC; AstraZeneca (AZN LN) was downgraded at Nordea; Goldman Sachs downgraded Carl Zeiss Meditec (AFX GY) and Fresenius (FME GY); SEB downgraded Norsk Hydro (NHY NO) and SSAB (SAABB SS); Alcon (ALC SW) was upgraded at Deutsche Bank.

TODAY'S AGENDA:

• DAY AHEAD: In Europe, Germany's ZEW survey for January is expected to see the headline sentiment gauge fall to 42 from 45.8; current conditions are expected to improve. Stateside, the ADP's weekly job figures are due (last week, it was averaging 11,750/week). Afterhours, the API will report its weekly energy inventory figures. Speakers today include: China Vice-Premier He Lifeng will speak at Davos; BoE's Bailey and Ramsden, who will speak on the December FSR; ECBʼs Nagel will speak at Davos; SNBʼs Schlegel will speak at Davos. Today's US corporate earnings includes: DHI, FITB, KEY, MMM, USB, FAST, UAL, IBKR, NFLX, ZION.