EUROPEAN OPEN: VOW3 GY to shift one factory to missile defence; NOVOB DC obesity drug shows 9.8% weight loss; META/EL FP delay EU smart glasses rollout; RIO LN secures Boyne deal partnership; DGE LN upgraded, SHEL LN downgraded

• EUROPEAN OPEN: European equities opened higher, tracking a firmer APAC session as risk sentiment improved on hopes of a diplomatic resolution to the Middle East conflict. Reports said the US has sent Iran a 15-point plan to end the war, while Iranian representatives reportedly told the Trump administration that the bar for returning to ceasefire talks remains high. There are also efforts to begin talks as soon as Thursday. The reports of US diplomatic drive has driven cautious optimism that the conflict may ease, helping lift equities and weigh on crude. Brent prices, trading below USD 96/bbl, while WTI traded a little beneath USD 89/bbl, despite the continued disruption in the Strait of Hormuz and additional US troop deployments to the Middle East. APAC equities were up, though some of that sentiment faded into the European open. In China, AI-related names outperformed overnight after state media highlighted a sharp increase in domestic AI model adoption and token usage, while data centre operators also gained on expectations of sustained capacity demand. Gold extended its rebound after snapping a nine-session losing streak, and is trading around USD 4,555/oz; the move was also supported by a softer USD; analysts at Pictet said the longer-term gold outlook remains intact, and viewed recent pullbacks as a buying opportunity. Copper also advanced as improving sentiment around Washington’s diplomatic push boosted cyclical appetite. In data releases, UK February CPI rose 0.4% M/M, in line with expectations, while the annual headline rate held at 3.0% Y/Y; core CPI rose 0.6% M/M (exp. 0.5%), lifting the annual core rate to 3.2% Y/Y (from 3.1%); the ONS said inflation was broadly steady, with clothing prices the main upside driver and lower motor fuel prices providing some offset. Beneath the surface, the data pointed to sticky underlying inflation, although services inflation eased slightly and goods inflation was unchanged. Analysts noted the release may already look stale given the Middle East backdrop and the risk of renewed inflation pressure from March onwards, reinforcing the UK’s stagflation narrative. Elsewhere, Denmark’s PM Frederiksen saw her Social Democrats win around 22% of the vote (vs 27.5% in 2022), its worst result since 1903, leaving her short of a centre-left majority, and facing tough coalition talks to secure a third term.
• STOCK SPECIFICS: In healthcare, Novo Nordisk (NOVOB DC) said its experimental obesity and Type 2 diabetes drug with The United Bio-Technology showed up to 9.8% mean body-weight reduction after 24 weeks; it paid up to USD 2bln for rights to the treatment. Grifols (GRF SM) is evaluating a potential US IPO of part of the parent of its US Biopharma business, subject to approvals, requirements and market conditions. Of note for EssilorLuxottica (EL FP), Meta (META) delayed the EU rollout of display-equipped Ray-Ban smart glasses due to battery and AI regulations and supply constraints, with insufficient supply hindering launch. Merck (MRK) is nearing a roughly USD 6bln all-cash deal to acquire Terns (TERN), with talks in advanced stages, and an agreement possible within days. In consumer sectors, Volkswagen (VOW3 GY) will reportedly shift production to a missile defence at one factory in a deal with an Israeli company. Heineken (HEIA NA) will scale back large-scale beer production in Singapore by 2027, shifting output to Malaysia and Vietnam, while Tuas becomes a regional logistics hub and product development brewery. Diageo (DGE LN) is to sell Royal Challengers Bengaluru to a Blackstone (BX)-backed consortium for INR 166.6bln. Asos (ASC LN) affirmed its FY26 outlook. In financials, BNP Paribas (BNP FP) is reportedly looking to grow in the buyout market in Japan, creating competition for deal financing in the region. In energy, Repsol (REP SM) exec said it plans to triple its Venezuela crude oil production, to 150k BPD, over the next two years. Valero (VLO) is said to be preparing a restart of its Port Arthur refinery (385k BPD). In communications, Orange (ORA FP) has entered into exclusive negotiations with Verdoso, with a view to a possible divestment of Globecast. In materials, Rio Tinto (RIO LN), Queensland and the Commonwealth agreed a partnership to secure Boyne smelter operations through at least 2040, with AUD 2bln government support and AUD 7.5bln in Rio-backed renewable energy and storage. BHP Group (BHP AT) expects the global potash market to tighten, with demand rising 2-3% annually, limited supply growth beyond Jansen, a deficit by 2035 and geopolitical risks straining fertiliser supply chains. In notable broker updates, the European energy sector was upgraded at Morgan Stanley; Kingspan (KGP LN) was initiated with an Outperform rating at RBC; Croda (CRDA LN) was upgraded at Morgan Stanley; Diageo (DGE LN) was upgraded at BNP Paribas; Novonesis (NSIB DC) was upgraded at Citi; Shell (SHEL LN) was downgraded at Morgan Stanley; Vinci (DG FP) was downgraded at Erste Group.

TODAY’S AGENDA:

• DAY AHEAD: In Europe, the German Ifo is seen paring back in March (conditions seen at 86 from 86.7, climate seen at 86.1 from 88.6, expectations seen at 86 from 90.5). The Riksbank meeting minutes will be published; at the meeting, it held its key rate at 1.75% for a fourth straight meeting, and reiterated no moves this year as the Iran war clouds the outlook. The SNB will release its quarterly bulletin for Q1. Stateside, Import/export prices for February are due (imports seen +0.5% M/M from 0.2%, exports seen at +0.5% M/M, from 0.6%). Weekly MBA mortgage applications data will also be released today. On the speakers’ slate, ECB President Lagarde will give an address at the ECB Watchers conference; ECB chief economist Lane will participate on a panel at the ECB Watchers conference; BoE’s Greene (hawkish) will participate on a panel at Jefferies Mid-cap conference; Fed’s Miran (voter, dovish dissenter; no text expected, but there will be a Q&A) will speak at the Digital Asset Summit. In supply, Italy will sell EUR 1.75-2.0bln of 2028 BTPs, and EUR 1.5-2.0bln of 2031 and 2036 BTPei; Germany will sell EUR 2.0bln of 2041 and 2052 debt; the US Treasury will auction USD 28bln 2yr FRNs, and USD 70bln 5yr notes. In energy, API weekly energy inventory data reportedly showed headline crude stocks posting a surprise build of +2.3mln bbls (exp. -1.4mln), Cushing +4.0mln bbls, distillate posting a surprise build of +1.4mln bbls (exp. -1.4mln), and gasoline stocks posting a surprise build of +0.5mln bbls (exp. -1.9mln). The more widely followed DoE weekly energy inventory report will be published later today. The White House is preparing to waive US volatility requirements for E15 gasoline this summer, expanding sales of the higher-ethanol blend; the EPA is due to brief industry stakeholders on the planned approach today. Notable corporate earnings due today include: PDD Holdings (PDD), Cintas (CTAS), Paychex (PAYX), Jefferies (JEF).