EUROPEAN OPEN: VOW3 GY higher than expected cash flow

EUROPEAN OPEN: VOW3 GY higher than expected cash flow; ML FP free cash flow tops guidance; GLE FP confirms will cut 1,800 jobs; ABF LN’ Primark LFL sales fall in Xmas quarter; DB1 GY to acquire Allfunds (?? SM) for EUR 5.3bln

• European equities rise as President Trump withdraws tariff threats on the EU.
• Commodities see mixed reactions; copper gains, gold stabilises after recent highs.
• Key corporate developments include Volkswagen's cash flow beat and Deutsche Boerse's acquisition plans.

European markets opened higher today, buoyed by US President Donald Trump's decision to withdraw tariff threats against EU members. This move has alleviated some geopolitical tensions, particularly concerning the US's interest in Greenland, which Trump confirmed would not involve force. The easing of these tensions has positively impacted risk sentiment, with Asian markets also trading in the green overnight.

In commodities, copper prices have risen, reflecting improved risk appetite following the tariff news. Conversely, gold, which had reached record highs amid recent market uncertainties, has stabilised and is trading around flat. Goldman Sachs has adjusted its long-term outlook for gold, raising its December 2026 price forecast by over 10% to USD 5,400/oz, citing strong demand from private investors and central banks.

Oil markets are experiencing a balancing act; while the easing of geopolitical tensions has steadied prices, supply concerns persist. Brent crude is trading below USD 65/bbl, and WTI is near USD 61/bbl. Recent API data indicated larger-than-expected builds in crude and gasoline inventories, which could weigh on prices if confirmed by the upcoming DoE data.

In corporate news, Volkswagen reported a 2025 automotive net cash flow of approximately EUR 6bln, surpassing forecasts due to strategic delays and investment cuts in its electric vehicle transition. This has increased the company's net liquidity to over EUR 34bln. Michelin also reported better-than-expected free cash flow, driven by disciplined capital expenditure and operational efficiencies.

Deutsche Boerse has announced plans to acquire Allfunds for EUR 5.3bln, aiming for significant cost synergies and capex savings. The acquisition is expected to complete in the first half of 2027. Meanwhile, Societe Generale is accelerating its business simplification efforts, planning to reduce its workforce by 1,800 positions.

In the financial sector, EQT's acquisition of Coller Capital marks a strategic entry into the secondaries market, with the deal valued at USD 3.2bln in shares and up to USD 500mln in contingent cash. This acquisition is expected to close in the third quarter.

Today's economic calendar is packed, with key data releases including the final Q3 US GDP, PCE inflation figures, and weekly jobless claims. The ECB will release minutes from its December meeting, and the Norges Bank is expected to maintain its interest rate at 4%. Market participants will also be closely monitoring commentary from the Davos forum, where President Trump and other notable figures are scheduled to speak.

Trader Insight:

• Some traders may consider monitoring EUR/USD for movements following the ECB minutes and US economic data releases.
• Market participants are watching WTI crude for potential price adjustments based on the upcoming DoE inventory data.
• Observers in the equities market are assessing Volkswagen (VOW3 GY) and Michelin (ML FP) for potential investment opportunities following their positive financial disclosures.
• In the financial sector, Deutsche Boerse (DB1 GY) and EQT (EQT SS) are under scrutiny as traders evaluate the implications of their recent acquisition announcements.

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