EUROPEAN OPEN: TSM Q4 profits jump to record; CFR SW sales top expectations; VOW3 GY heavy diesel unit attracts PE interest; TW/ LN sees lower profit margins in 2026; FLTR LN downgraded, EL FP upgraded

• EUROPEAN OPEN: European equities have started mixed, but not too far off flat, following an APAC session where stocks traded mostly higher. Equity futures were lifted in premarket trade after an update from semiconductor contract manufacturer TSMC (TSM) (see below). Oil fell for the first time in six days after President Trump signalled the US may hold off attacking Iran, adding that Iran has no plan to execute protesters, but did not rule out future US military action. Brent prices fell below USD 65/bbl, and WTI traded sub-USD 60/bbl, amid easing concerns over supply disruptions. Analysts noted that WTI traded at its deepest discount to Brent in 15 months as geopolitical shifts disrupted global supply flows; the arb widened to the most since October 2024, reflecting changes linked to Venezuela, the Black Sea and other regions. Silver slid after profit taking, and as the US held off imposing tariffs on critical minerals, retreating from an all-time highs following a surge of more than 20% over the last four sessions. Gold prices also declined, with some analysts suggesting a likely technical correction and profit-taking after futures hit record highs; WSJ adds that downside may be limited by persistent geopolitical risks linked to Iran and unresolved tensions in Eastern Europe. Nickel steadied near its highest since mid-2024 after Indonesia flagged lower ore supply; Indonesia may issue 250–260mln tons of ore quotas this year versus a 379mln-ton target for 2025, Bloomberg reported. Overnight, South Korea’s central bank held its benchmark 7-day repurchase rate at 2.5% for a fifth straight meeting, removing language signalling a possible rate cut and effectively shifting to a neutral stance as it monitors KRW weakness and financial imbalance risks. The KRW resumed its slide toward a 17-year lows, as demand for dollars persisted from investors buying US stocks and importers making payments. In trade news, the White House said President Trump may soon impose broader tariffs on semiconductor imports and derivatives, after its 25% tariff on advanced chips including Nvidia's (NVDA) H200 and AMD's (AMD) MI325X, but will exclude chips imported for US technology supply. Chinese state media said Trump’s conditions on sales of Nvidia H200 chips to China were discriminatory, and targeted China. Elsewhere, Trump is delaying new tariffs on critical mineral imports after a Commerce Department security review, opting instead to pursue negotiations with foreign countries to secure supplies and address supply chain vulnerabilities. In data, UK growth was up +0.3% M/M in November (exp. 0.1%), lifting the annual rate to 1.4% Y/Y (exp. 1.1%, prev. 1.1%); Pantheon Macroeconomics said it expects UK growth to improve to 0.4% Q/Q in Q1 as Budget uncertainty fades, seasonality lifts the New Year, and September’s cyber-attack volatility limits spare capacity, keeping MPC cautious.
• STOCK SPECIFICS: In tech, TSMC (TSM) reported a 35% jump in Q4 profit to a record, driven by surging AI chip demand, marking a seventh consecutive quarter of double-digit growth. Net profit for October–December reached TWD 505.7bln (exp. 467bln), revenue was at TWD 1.046tln (exp. 868.46bln), and capex was USD 40.9bln (exp. USD 40-42bln). The company plans a USD 100bln US investment, alongside USD 65bln pledged for three Arizona plants. It guided Q1 revenue between USD 34.6-35.8bln (exp. 33.2bln), and sees gross margin between 63-65% (exp. 59.6%); 2026 capex seen between USD 52-56bln (vs 40.9bln in 2025), noting that capex will be higher over the next three years. In materials, Rio Tinto (RIO LN) and BHP (BHP AT) said they will collaborate to extract up to 200mln metric tons of iron ore from adjoining Pilbara sites in Western Australia, developing Yandicoogina, Yandi and Wunbye deposits under a 2023 agreement. In consumer sectors, Richemont (CFR SW) said holiday-quarter sales rose +11% (exp. +7.5%), with revenue at EUR 6.4bln (exp. 6.25bln); jewellery division sales climbed 14%, driven by strong demand for Cartier in the final months of last year; sales in China, Hong Kong, and Macau combined were +2% Y/Y, mostly led by solid activity in Hong Kong. In autos, private equity firms are showing interest in a majority stake in Volkswagen’s (VOW3 GY) heavy diesel engine unit Everllence SE, valued at about EUR 6bln, as part of the automaker’s asset disposals, with EQT, GIC, CVC, Advent, Bain, KPS and Clayton Dubilier & Rice cited as potential bidders, Bloomberg said. In industrials, Swiss plumbing materials maker Geberit (GEBN SW) reported a 4.4% rise in Q4 sales, in line with expectations, helped by volume growth in most regions; in 2026, sees Europe growing slightly, but still sees no market recovery yet; in China, it said a continued decline in market demand is expected due to the collapse in new construction activities. Of note for the UK housing sector, estate agents became more optimistic in December as lower borrowing costs and reduced budget uncertainty lifted sentiment. RICS said its expected home sales index rose to 22 (from -4), the highest since October 2024, indicating more agents anticipate rising sales over the next three months. Taylor Wimpey (TW/ LN) reported 11.2k home completions in 2025 (vs 10.5k Y/Y), with revenue at GBP 3.8bln (prev. 3.4bln Y/Y); exec said that while it is too early to predict the outcome of the Spring selling season, it is seeing a good level of enquiries consistent with last year, though expects operating profit margins to be lower in 2026 than vs 2025 and, given the lower opening order book, for performance to be more H2 weighted. Of note for weight-loss drug makers, Bloomberg reports that generic versions of Ozempic are set to expand global access to weight-loss drugs, challenging Novo Nordisk’s (NOVOB DC) dominance; cheaper, regulated alternatives are emerging after eight years of Ozempic’s US presence, potentially reshaping the obesity market as limited access in many countries begins to ease. In financials, UniCredit (UCG IM) said rumours related to a potential stake purchase in BMPS (BMPS IM) were speculative. Of note for German utilities and energy companies and industrials, Chancellor Merz said the EU has approved its plan to subsidise new gas-fired power plants, allowing the country to proceed, and added that the approval also clears a EUR 12bln package aimed at cutting electricity prices for Germany’s struggling industrial sector. In notable broker updates, Flutter (FLTR LN) was downgraded at Wells Fargo, though its analysts are generally positive on the digital gaming sector; Pearson (PSN LN) was downgraded at Deutsche Bank; ASML (ASML NA) was initiated with an Outperform rating at RBC; EssilorLuxottica (EL FP) was upgraded at Kepler.

TODAY'S AGENDA:

• DAY AHEAD: In Europe, the BoE's credit conditions survey, and Eurozone industrial production (seen easing to 1.6% Y/Y from 2.0%). The US Day sees the release of weekly jobless claims (initial claims expected to rise to 215k from 208k, continuing claims seen easing to 1.89mln from 1.91mln), import prices (seen rising +0.1% M/M) and export prices (also seen rising +0.1% M/M), Empire Fed (analysts expect the headline to improve to 1 from -3.9) and Philly Fed manufacturing surveys. On the speakers' slate, remarks are due from: Fed's Barr (voter, neutral; no text expected, Q&A expected) will speak on Stablecoins, Fed hawkish dissenter Schmid (2028 voter; text and Q&A are expected), Fed's Bostic (2027 voter, hawk; no text expected, Q&A expected), Fed's Barkin (2027 voter, neutral) is due to speak again, but is unlikely to add anything new to the narrative given his recent remarks, and Fed's Goolsbee (2027 voter, hawkish) will give remarks to CNBC; elsewhere, ECB Vice President de Guindos (no text expected), and Riksbank's Bunge will give remarks. On the supply front, Spain will sell EUR 5-6bln of 2029, 2041, and 2071 debt; US will announce sizes for next week's 10yr TIPS and 20yr bond auctions. In energy, the EIA will publish its weekly natgas storage change data. On today's US corporate earnings slate: BLK, GS, MS, JBHT, FHN.