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[MARKET ANALYSIS] European bourses pull back as ceasefire begins to crack, Citi reinforces its OW stance on Banks; US equity futures soft

The pullback in European bourses reflects growing uncertainties as the ceasefire in the region shows signs of fracturing, particularly with U.S.

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An Iran embassy official in Islamabad said the earlier post was removed “because of some issues,” and declines to say whether the delegation was still expected tonight, Al Arabiya reports citing AFP

Spain sells EUR 5.778bln vs exp. EUR 5-6bln 2.35% 2029, 2.60% 2031 and 3.30% 2036 Bono & EUR 0.676bln vs exp. EUR 0.25-0.75bln 1.15% 2036 I/L Bono

[MARKET ANALYSIS] European bourses pull back as ceasefire begins to crack, Citi reinforces its OW stance on Banks; US equity futures soft

Iran's Atomic Energy Organisation says the enemy will not be able to limit the nuclear programme

German Economic Minister Reiche is reviewing Klesch Group's planned purchase of BP (BP/ LN) refinery assets within Germany, Der Spiegel reports

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  • European bourses (STOXX 600 -0.7%) have pulled back from Wednesday's ceasefire-related surge after cracks appeared in the agreement. US President Trump announced that the military will remain in and around Iran until a real agreement is fully complied with. Furthermore, the IRGC announced a new Hormuz corridor, effectively raising risks of disruption and bottlenecks. The IBEX 35 outperforms, with the index trading near flat. On the other hand, the DAX 40 is the underperformer.
  • Sectors echo the above bias, with the majority in the red. Energy and Chemicals are amongst the sectors in the green, highlighting its defensive characteristics, while Consumer Products and Services and Technology sit at the bottom of the pile.
  • There were a lot of broker moves. Citi analysts continue to reaffirm their overweight stance on European banks, upgrading Lloyds and Deutsche Bank. The analyst at Citi notes that "the largest increase in our EPS forecasts is for UK domestic banks, and most notably Lloyds, as the UK has also seen a shift higher in the long-end, which is important for reinvestment of the structural hedge." Other notable broker moves include Eni, upgraded to buy from neutral at Rothschild, Unilever, upgraded to buy from hold at DZ Bank and Norsk Hydro, downgraded to neutral from buy at UBS.
  • US equity futures follow their European peers, with losses of between 0.4-0.7%. Despite equities pulling back from Wednesday's gains, the space could remain supported if bond volatility continues to pull back and the VIX remains below the 22 handle.
Context

military commitments remaining in Iran. This geopolitical tension has market implications, especially for risk-sensitive sectors, while Citi's reaffirmation of its overweight stance on banks suggests a selective confidence amid overall market weakness. Keep an eye on energy stocks, which are showing resilience and could be a defensive play in this environment.

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