EUROPEAN OPEN: GLEN LN CEO reignites hopes of RIO LN deal; BESI NA reportedly fielding takeover interest; ULTA slips on soft guidance; ADBE shares fall after it announces CEO to step down; ERICB SS upgraded

• EUROPEAN OPEN: European equities opened in the red; on the week, futures of the broad Stoxx 600 and the narrow Euro Stoxx 50 are on course for gains following last week’s sharp downside. Overnight, APAC stocks were mostly subdued amid the surge in oil prices, with Brent settling above USD 100/bbl for the first time since August 2022; Brent is trading above USD 100/bbl as the European day gets underway, after a volatile week; prices have remained elevated after Iran’s new leader said the country would keep the Strait of Hormuz effectively closed, while an IRGC official warned that if Iran’s energy infrastructure is attacked, it will burn the region’s oil and gas infrastructure. The US issued a second short-term waiver allowing buyers to receive Russian oil already at sea, expanding a previous India-only authorisation without materially benefiting the Russian government. Iron is set for its biggest weekly gain in more than a year after China state backed buyers expanded restrictions on BHP Group (BHP AT) products, and as Chinese mills moved BHP ore from port stockpiles to plants ahead of possible curbs. Aluminium fell from its highest level since 2022, with other metals also declining, as concern over the economic impact of a prolonged Middle East war weighed; despite supply disruption driven gains for the week, traders are also assessing the risk to metals demand if higher energy costs weaken global growth. Gold rose above USD 5,100/oz, but still remains on track for a second weekly decline, as the Middle East conflict keeps oil near USD 100/bbl. Bitcoin briefly topped USD 72k overnight. In trade news, the US opened a Section 301 probe into forced-labour practices across 60 economies including the EU, China, Japan, South Korea, Canada, Mexico, India, Taiwan and the UK. Elsewhere, the US, Japan and the EU plan a critical minerals trade agreement including a price floor and tariffs to counter Chinese market distortions; the announcement could reportedly be made in the coming weeks. In data, UK GDP was unchanged in January (exp. 0.2%, prev. 0.1%), printing 0.8% Y/Y on an annual basis (exp. 0.9%, prev. 0.7%); the UK stats agency said growth was still higher over the latest three months, helped by recovering car manufacturing and rebounding wholesale, but remained subdued with no monthly growth and another large fall in construction and housebuilding; analysts said that while the data was softer than expected, it does not change near term expectations, given the Middle East energy shock, and the data adds to recent dovish factors supporting the narrative that the BoE will still lower rates this year. Elsewhere, French and Spanish final inflation data for February were unrevised.
• STOCK SPECIFICS: In materials, Glencore (GLEN LN) CEO hopes higher coal prices will support a renewed merger talks with Rio Tinto (RIO LN) after talks on a USD 240bln combination ended in February over valuation, Reuters reports; under UK rules, talks cannot resume until August. Separately, workers at Glencore’s Australian copper refinery started a strike after last-minute talks failed to resolve a pay dispute. Rio Tinto (RIO) confirmed the death of a contract worker following an incident at the Bingham Canyon Mine in Utah; it has suspended all surface and underground mining operations, and is working with authorities on an investigation. In energy, Repsol (REP SM) and Venezuela signed strategic agreements, while Venezuela’s interim president Rodriguez stating that the deal can make Venezuela a gas exporter. In consumer sectors, Unilever (ULVR LN) reportedly plans to change CEO Fernandez’ pay to reward outperformance and attract more US talent; the proposal would reduce short term compensation, while increasing the potential payout from long-term incentives. Ulta Beauty (ULTA) shares fell over 8% in extended US trading after it issued FY guidance at the low end of expectations, including a cautious outlook for comp sales. In tech, BE Semiconductor (BESI NA) has attracted takeover interest from Lam Research (LRCX) and potentially Applied Materials (AMAT) amid rising advanced chip-packaging demand, with talks starting in mid-2025 before pausing earlier this year, according to Reuters. Adobe (ADBE) shares fell 8.6% in extended US trading after it announced that CEO Shantanu Narayen will step down; elsewhere it reported a Q1 EPS and revenue beat, and confirmed FY targets. In communications, Vivendi (VIV FP) reported FY25 revenue of EUR 307mln (exp. 306.1mln) and EBITA of EUR 45mln (exp. 59mln); net debt fell to EUR 1.5bln (from EUR 2.6bln), while the portfolio of listed holdings declined to EUR 5.53bln (from EUR 6.89bln) after sales of TIM (TIT IM) and Telefonica (TEF SM) stakes. In notable broker updates, Ericsson (ERICB SS) was upgraded at Nordea; Qiagen (QIA GY) was upgraded at Deutsche Bank; Admiral (ADM LN) was upgraded at RBC; Capita (CPI LN) was downgraded at Deutsche Bank.

TODAY’S AGENDA:

• DAY AHEAD: In Europe, industrial production data for January are due. In the UK, NIESR will release its GDP tracking estimate. Stateside, PCE inflation data for January are due, where the consensus expects core PCE to rise +0.4% M/M, matching the December print, while the annual rate of core PCE is seen rising to 3.1% Y/Y from 3.0%; headline PCE prices are expected to rise +0.3% M/M (prev. +0.4%), with the annual rate unchanged at 2.9% Y/Y. A second estimate of US GDP in Q4 is likely to remain near the advance estimate of 1.4%. US durable goods orders for January are expected at +1.2% M/M (prev. -1.4%). Prelim University of Michigan sentiment data are expected to show the headline easing to 55.2 in March from 56.6 prior; 1yr inflation expectations are expected to rise to 3.9% Y/Y (from 3.4%), and the 5-10yr gauge at 3.4% (prev. 3.3%). In energy, Baker Hughes will release weekly rig count data. On the CRA front, potential reviews are due from Scope Ratings on the UK (AA) and Spain (A); S&P may also review Spain (A+), and Fitch on Spain (A); Moody’s may review Germany (Aaa) and Greece (Baa3); Fitch may review Italy (BBB+)
• PRIMER - US PCE INFLATION (12:30GMT/08:30EDT): The consensus expects core PCE to rise +0.4% M/M, matching the December print, while the annual rate of core PCE is seen rising to 3.1% Y/Y from 3.0%; headline PCE prices are expected to rise +0.3% M/M (prev. +0.4%), with the annual rate unchanged at 2.9% Y/Y. Analysts note that the market reaction might be more sensitive to an upside surprise (given that would show price pressures were more elevated than thought even before the Middle East conflict, which has pushed up energy, base metals, and food crop prices) while any downside surprise could be easier to look through. After the January CPI and PPI reports, Reuters said forecasts for January core PCE ranged from 0.37-0.49% M/M, with Y/Y seen at 3.1% (though the WSJ Fed watcher Timiraos suggested the figure could be between 3.1-3.2%). Similar to the CPI data, the conflict in the Middle East has clouded the inflation outlook, and whether the higher energy costs prove a short-term one-off move or whether the conflict drags on and, by extension, uncertainty over higher energy prices persists. In terms of the underlying drivers, analysts at Barclays expect a hot report, given the upside PPI surprise, notably in domestic passenger air travel and brokerage services, with stronger core services more than offsetting softer core goods. Barclays writes that core services are seen accelerating to 0.5% M/M, led by transportation, healthcare and non-profit institutions, while core goods slow to 0.22% M/M. The bank still sees core PCE at 2.8% Q4/Q4 in 2026 and 2.1% in 2027, and expects core inflation to move towards target-consistent levels in H2 2026, though near-term annual prints should remain elevated. Barclays says the data is consistent with another FOMC hold in March.