EUROPEAN OPEN: MKS LN misses LFL sales expectations

EUROPEAN OPEN: MKS LN misses LFL sales expectations; TSCO LN sees FY profit in upper-end of guidance range; Trump aims at defence companies; AM FP deliveries above expectations

• European equities opened lower amid mixed global cues.
• Nvidia's potential chip sales in China and Trump's defence sector comments are key focal points.
• Gold and silver prices decline as traders anticipate commodity index rebalancing.

European equities began the trading session on a softer note, reflecting a cautious sentiment that followed a mixed performance in the Asia-Pacific region. This comes after Wall Street's recent pullback from record highs, with the S&P 500 and DJIA retreating. The market's attention is drawn to several key developments, including Nvidia's potential chip sales in China and President Trump's comments on the defence sector.

Nvidia (NVDA) is in the spotlight as reports suggest that China may approve the purchase of its H200 chips as soon as this quarter. This development is significant as it could open up a substantial market for Nvidia, although the chips will be restricted from use by state bodies and critical infrastructure. Nvidia's strategy to require full upfront payments from Chinese customers highlights the ongoing regulatory uncertainties in the region.

In the consumer sector, AB Foods (ABF LN) issued a profit warning, citing weak demand at Primark in continental Europe and subdued US demand in its food business. This reflects broader challenges in consumer markets, where softer conditions are impacting performance. Meanwhile, Tesco (TSCO LN) reported a positive outlook, expecting its full-year adjusted operating profit to hit the upper end of its guidance range, buoyed by a rise in UK sales over the Christmas period.

In the industrial sector, President Trump's recent comments have put defence stocks under scrutiny. He announced plans to block defence contractors from paying dividends or buying back shares until production improves, criticising the slow output and high costs. This move could impact companies like Lockheed Martin and Raytheon, as the administration pushes for increased military spending.

Gold and silver prices have declined for a second consecutive day, with traders bracing for the annual commodity index rebalancing. This process could trigger futures sales worth billions, impacting the precious metals market. Spot gold has slipped below USD 4,420/oz as passive funds adjust their holdings following last year's strong rallies.

In the energy sector, oil prices edged higher amid discussions about increased US control over Venezuelan oil flows. The Trump administration's strategy to manage 30-50 million barrels of Venezuelan crude could revive flows to US refineries, adding a layer of complexity to the global oil supply landscape.

Trader Insight:

• Traders are closely monitoring Nvidia (NVDA) for potential volatility as China considers approving chip sales.
• Defence sector stocks, including Lockheed Martin and Raytheon, are under scrutiny following Trump's comments on dividends and buybacks.
• Market participants are watching gold and silver prices for further declines amid the commodity index rebalancing.
• In the energy sector, WTI crude oil is being observed for price movements related to US-Venezuelan oil negotiations.

Disclaimer: This is not trading advice. For informational purposes only.