EUROPEAN OPEN: Court exempts TTE FP, SHEL LN, EQNR NO from Brazil export tax; KER FP constructive mention in WSJ; China mulls aid for its airlines; EQNR NO upgraded, SHEL LN downgraded at Rothschild; LLOY LN and DBK GY upgraded at Citi

• EUROPEAN OPEN: European equities opened defensively, with stocks lower and oil higher as optimism over the US-Iran ceasefire faded after Tehran said several terms had already been breached; the FTSE 100 is outperforming given its commodity exposure. The US said Lebanon sits outside the ceasefire framework and a senior official downplayed the risks there, but that distinction came under greater scrutiny after Iran’s foreign minister described Israeli strikes on Lebanon as a grave violation of the deal. Traders said the ceasefire appears fragile after Trump threatened massive military escalation if Iran rejects the terms, while Iran’s Parliament Speaker Ghalibaf said three clauses of the 10-point plan had already been violated, making a bilateral ceasefire or negotiations unreasonable. Crude rebounded after Wednesday’s biggest one-day drop since April 2020, with June Brent back near USD 97/bbl after Wednesday’s 13% slump, as the Strait of Hormuz remained largely blocked and Israeli attacks on Lebanon raised concerns over the durability of the Middle East truce. Mizuho expects crude to remain near USD 90/bbl through Q2 before returning to pre-conflict levels, while CBA sees upside risks while the Strait remains largely closed and physical undersupply linked to the Iran war supports prices. Gold held near USD 4,710/oz after rising 1.5% over the prior two sessions, as traders weighed hopes for a diplomatic resolution against sporadic fighting that threatened the ceasefire, although some flagged a technical correction after the sharp rise in front-month Comex futures. Commerzbank said gold had been supported by lower oil prices easing inflation risks and pulling down rate expectations and bond yields, though the outlook still depends on whether a lasting US-Iran settlement emerges. In fiscal updates, French Budget Minister Amiel said France will keep its 2026 deficit goal at 5% for now, after the deficit narrowed to 5.1% in 2025 from 5.8% in 2024, helped partly by one-offs. In data, German industrial production fell -0.3% M/M in March (exp. +0.9%, prev. -0.5%), with ING stating that the economy was heading for contraction even before the Middle East war, and likely slipped back into contraction again; Germany’s trade surplus narrowed to EUR 19.8bln in February (exp. 18.5bln, prev. 21.2bln), with exports +3.6% M/M (exp. 1.0%) and imports +4.7% (exp. 4.0%). In the UK, RICS house price balance fell to -23% in March (exp. -18%, prev. -12%), with the report noting that homebuyer demand weakened sharply after the Middle East conflict disrupted the mortgage market, with new buyer enquiries at the lowest since August 2023, agreed sales softer, and estate agents expecting lower sales and falling prices as average fixed mortgage rates moved above 5%.
• STOCK SPECIFICS: In consumer sectors, of note for alcoholic beverage makers, Constellation Brands (STZ) shares fell 0.8% in extended US trading after it withdrew its FY28 outlook, and pointed to subdued demand and ongoing uncertainty in the operating environment. Danone (BN FP) said its construction unit is expanding in the Caribbean with two major education projects worth EUR 1.45bln over the next five years. Kering (KER FP) received a constructive mention in the WSJ, which said that CEO Luca de Meo, six months into his tenure, is making bold moves and scrutinising operations in detail across the group. British American Tobacco (BATS LN) appointed Dragos Constantinescu as CFO, effective 1st September. Evolution (EVO SS) said it is seeking to add Playtech (PTEC LN) and others as defendants in its defamation lawsuit. In energy, a Brazilian federal court exempted TotalEnergies (TTE FP), Repsol (REP SM), Sinopec, Galp’s Petrogal, Shell (SHEL LN) and Equinor (EQNR NO) from a 12% crude export tax, with a final ruling still pending; the judge said the measure may be unconstitutional. OMV (OMV AV) said higher oil and gas prices are expected to offset lower Q1 26 hydrocarbon production and sales; Q1 total hydrocarbon production fell to 288k boepd (from 310k boepd Y/Y), with E&P production and sales volumes impacted by Middle East conflict and unfavourable lifting schedules. Libya’s NOC Sonatrach partnered with Eni (ENI IM) North Africa on a Ghadames Basin oil and gas discovery; the well produces 13mln cubic feet of gas, and 327 bbls of condensates daily. In healthcare, Galderma (GALD SW) reported interim IIT data showing Sculptra and Restylane improved menopause-related skin measures, while separate data linked medication-driven weight loss to altered abdominal fat-cell composition. Grifols (GRF SM) minority shareholders are pushing the company to use share buybacks to counter short selling, Cinco Dias reports. In industrials, of note for airlines, China is reportedly considering financial aid for airlines, including subsidies, tax breaks and cheap loans. Andritz (ANDR AV) reported Q1 order intake +54% Y/Y at EUR 3.6bln (exp. 2.32bln), driven mainly by Hydropower; it also confirmed 2026 revenue and comp EBITA guidance. In financials, LSE (LSEG LN) has now begun its previously announced GBP 900mln share buyback. In notable broker updates, Rothschild upgraded Eni (ENI IM), Equinor (EQNR NO), downgraded Shell (SHEL LN); Unilever (ULVR LN) was upgraded at DZ Bank; Citi upgraded Lloyds (LLOY LN) and Deutsche Bank (DBK GY); Rexel (RXL FP) was upgraded at Jefferies; Aurubis (NDA GY) was upgraded at Morgan Stanley; Norsk Hydro (NHY NO) was downgraded at UBS; Wickes (WIX LN) was initiated with Buy at Berenberg; Bucher (BUCN SW) was initiated with Neutral at Oddo. Going ex-dividend today: Lloyds (LLOY LN), InterContinental Hotels (IHG LN), Centrica (CNA LN), Croda (CRDA LN), Haleon (HLN LN), Howden Joinery (HWDN LN), Rentokil (RTO LN), ITV (ITV LN), Harbour Energy (HBR LN), Serco (SRP LN) and Reckitt Benckiser (RKT LN).

TODAY'S AGENDA:

• DAY AHEAD: In data, BoE’s Q1 credit conditions survey, and the BBA mortgage data are due. Stateside, weekly initial jobless claims (exp. 210k vs prev. 202k) and continuing claims (exp. 1.84mln vs prev. 1.841mln); February’s PCE data (exp. +0.4% M/M vs prev. +0.3%) and core PCE (exp. +0.4% M/M vs prev. +0.4%); final Q4 GDP stats; February’s wholesale inventories; the Atlanta Fed will update its Q1 GDP tracking estimate after today’s data releases, which is currently modelling growth of 1.3%. In central banks, Poland’s NBP is expected to keep rates at 3.75%; all 32 economists surveyed by Bloomberg see no change after the MPC cut rates at its previous meeting and adopted a wait-and-see stance. Banxico will release its March meeting minutes, where it cut rates by 25bp to 6.75% in a split decision, though analysts said that rising inflation, external risks and tighter domestic conditions limit scope for further easing. In supply, Spain will sell EUR 5-6bln of 2029, 2031 and 2036 debt, as well as EUR 0.25-0.75bln of 2036 linkers; UK will sell GBP 4bln of 2033 debt; the US Treasury will auction USD 22bln of 30yr bonds. In energy, the EIA will release weekly natgas stocks data.
• PRIMER - US PCE INFLATION (13:30BST/08:30EDT) - February’s PCE data is expected to show the headline rising +0.4% M/M (prev. +0.3%), and core PCE rising +0.4% M/M (prev. +0.4%). Analysts note that the PCE data is for February, so it is overshadowed by events in the Middle East, which have stoked energy prices and raised the cost of key industrial metals and materials since then. Bloomberg’s monthly economist survey raised year-end PCE estimates to 3.1% (from 2.6%), while lowering spending, growth and employment forecasts as the war in Iran lifts fuel costs. Analysts expect February PCE to print on the firm side and keep the Fed firmly in its ‘higher for longer’ stance, noting that the February CPI and PPI reports imply headline and core PCE rose +0.4% M/M in February, with the annual core reading easing only slightly to around 3.0% Y/Y (from 3.1%). As a possible read-through, the February CPI report looked relatively benign on the surface, but the underlying details point to hotter core PCE, while February PPI reinforced that message through stronger pass-through from hotel and motel rooms, transportation and warehousing, and some financial services. Accordingly, analysts have said inflation still looks sticky, particularly across services, and a third straight 0.4% M/M core reading would remain well above any pace consistent with a return to 2%. Such an outcome could validate traders’ view that the Fed stays cautious for longer, with any upside surprises pushing further back on rate cut expectations; a reading below 0.4% M/M would offer some relief but could easily be dismissed as stale given events in the Middle East.