EUROPEAN OPEN: Stocks lower in risk-off trade; China lowers final dairy duties; RR/ LN halts moon plans; BAER SW 2025 profits fall; AAL LN upgraded at Citi

• EUROPEAN OPEN: The risk tone is cautious at the start of the week, driven by a partial US govt shutdown, soft official China PMI data, as well as some tech concerns following reports that Nvidia's (NVDA) plans to invest up to USD 100bln in OpenAI has stalled after internal doubts. A partial US government shutdown entered a third day as Democrats blocked a Senate bill; House Speaker Johnson said he is confident that the House will pass the Senate-approved package by Tuesday without relying on Democratic support. China’s factory activity accelerated in January, with RatingDog PMI rising (which is weighted towards private companies and exporters), while NBS manufacturing and non-manufacturing PMIs fell into contraction; ING said weak domestic demand persists despite export-led sector resilience. Gold and silver extended sharp losses alongside stocks after a violent market reversal; the yellow metal tumbled to below USD 4,500/oz, while silver slid by almost 15% following its 25% drop on Friday. Bloomberg suggested that traders were unwinding crowded bullish bets on the metals. CME on Friday raised margin requirements on Comex gold and silver futures, increasing gold margins to 8% (from 6%) for non-heightened risk profiles, and to 8.8% (from 6.6%) for heightened risk profiles. Copper extended its slump as traders waited for Chinese buyers to return; LME prices fell to below USD 12.5k/ton, after spiking above USD 14.5k last week. The USD has stabilised, amid the fall in gold and silver prices; traders will be attentive to this week's jobs data, while policy meetings from the ECB (where it could downplay the EUR's recent moves, though it complicates inflation forecasts), while there are risks that the RBA could hike rates when it meets on Tuesday amid higher inflation. The JPY fell after PM Takaichi said at a campaign rally event that a weak currency can benefit exporters, reducing speculation of government intervention; USDJPY rose towards 155.50, reversing about half of last week’s gains driven by intervention expectations, before resuming downside; on Sunday, Takaichi clarified her remarks, stating that she was not advocating for a strong or weak currency, but for building an economy resilient to FX fluctuations. BTC fell to a fresh 10-month low overnight after a weekend sell-off amid fragile sentiment, with prices slumping to sub-USD 75k. OPEC+ agreed to keep oil output unchanged for March, extending a pause in planned hikes amid Iran-US tensions that has lifted prices. The group offered no guidance beyond March, and reiterated the need for full compliance. Oil prices slipped early this week amid signs of US-Iran negotiations easing supply risks; President Trump said Iran was negotiating seriously, and US airstrikes were not imminent. WTI for March fell below USD 62/bbl, while Brent for April dropped below USD 66/bbl; analysts cited by the WSJ suggest that further downside remains possible if geopolitical risk premiums fade. US natgas futures plunged as warmer weather forecasts erased Friday’s gains; front-month prices fell as much as 17% to USD 3.620 per million British thermal units in APAC trade, having risen by over 10% on Friday ahead of cold weather conditions.
• STOCK SPECIFICS: In industrials, of note for UK defence stocks PM Starmer said he still wants the UK to join the EU’s flagship defence fund after failed talks last year; the UK seeks access to the EUR 150bln Security Action for Europe programme, which supports joint military equipment purchases as Europe accelerates rearmament. Rolls-Royce (RR/ LN) has halted a plan to deploy a nuclear micro-reactor on the Moon after failing to secure partners, The Telegraph reports; the government provided GBP 9mln via the UK Space Agency, with a 2029 target; the project is now on ice, however, although it remains resumable. Airbus (AIR FP) is reportedly still in discussions with RTX (RTX) about engine deliveries; Airbus is finalising its aircraft delivery goal to tight engine supply. In materials, Glencore Canada (GLEN LN) confirmed that it has maintained ongoing discussions with the Government of Quebec; certain key elements still remain unresolved, however. In autos, BYD (BYDDF) led a selloff in Chinese EV stocks overnight after weak January sales signalled cooling demand, with shares fell as much as 5.1% after a 30% Y/Y sales drop, while Xpeng (XPEV) and Nio (NIO) each declined more than 6%. Closer to home, French new car registrations fell 6.6% Y/Y, industry body PFA said, indicating cautious consumer demand amid a weak economic backdrop; Toyota (TM) and Stellantis (STLAM IM) recorded lower registrations, while Renault (RNO FP) posted a rise in sales at the start of the year. In consumer sectors, and of note for dairy names, an EU industry association said on Friday that China proposed final anti-subsidy duties on EU dairy products at lower levels than provisional measures, with final tariffs set to reach up to 11.7% (vs a max 42.7% under provisional duties); separately, France has lowered the allowable limit for cereulide in infant formula, warning the move may trigger further recalls; the tighter threshold applies to French producers ahead of EFSA advice due on 2nd February, with the agency backing stricter limits. In financials, Intesa Sanpaolo (ISP IM) set a 2029 net profit target above EUR 11.5bln, and plans to return about EUR 50bln to investors over five years; it posted a profit of EUR 9.3bln 2025, targets net income of over EUR 10bln in 2026, and pledged to pay out 95% of its profit in 2026-2029. Julius Baer (BAER SW) reported a sharp decline in 2025 profits, citing previously flagged one-offs including credit write-downs and the sale of its Brazilian unit; it posted a net profit of CHF 764mln (prev. 1.02bln Y/Y; exp. 664.2mln); said it was firmly on track to deliver on its medium-term targets. In healthcare, GSK (GSK LN) is mulling future cost savings in Europe, aiming to unlock funds to launch potential new blockbuster drugs, The Times reports, citing City analysts, who suggest the drugmaker could undertake a GBP 1bln efficiency programme. Sanofi (SAN FP) Sanofi said venglustat met all primary endpoints in a phase 3 study of type 3 Gaucher disease. In the PERIDOT phase 3 Fabry disease study it failed to show superiority on the patient-reported primary endpoint, while a CARAT phase 3 study continues; LEAP2MONO showed significant neurological improvements in GD3 patients. In notable broker updates, Anglo American (AAL LN) was upgraded at Citi; Elisa (ELISA FH) was upgraded at SEB and Nordea; Nokia (NOKIA FH) was upgraded at Santander; Sage Group (SGE LN) was upgraded at Canaccord; Balfour Beatty (BBY LN) was downgraded at JPMorgan; Lloyds (LLOY LN) was downgraded at Shore Capital

TODAY'S AGENDA:

• DAY AHEAD: Final Eurozone manufacturing PMI data are due, where the Eurozone, German and French gauges are expected to be revised up. The US ISM manufacturing survey is seen rising slightly, but the headline is expected to remain under 50.0. ahead of the Treasury's refunding announcement on Wednesday, it will publish financing estimates in afternoon trading. Today's speakers include BoE's Breeden (neutral), and Fed's Bostic (non-voter, hawkish, retiring). Key US corporate earnings due today include DIS, TSN, PLTR, NXPI, IDXX.
• WEEK AHEAD: This week's economic highlights include: policy announcements from the ECB, BoE, RBA, RBI, Banxico; US & Canada jobs data; EZ flash inflation; PMI data; ISM surveys; Treasury QRA. Notable US corporate earnings due this week include: Alphabet (GOOGL), Amazon (AMZN), Eli Lilly (LLY), AMD (AMD), AbbVie (ABBV), Palantir (PLTR), Philip Morris (PM), Merck (MRK), PepsiCo (PEP), Disney (DIS), Amgen (AMGN), Uber (UBER), Qualcomm (QCOM), Pfizer (PFE), Eaton (ETN), Boston Scientific (BSX), ConocoPhillips (COP), Chubb (CB), Arm (ARM), Bristol-Myers (BMY), CME (CME), KKR (KKR), McKesson (MCK).
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