MARKET WRAPS
European stocks fell Friday, losing ground against Thursday's higher close, as the trading week began winding down.
The region's leading bourses declined at the start of the opening bell when banks slipped though defense stocks would gain as concerns grow over President Trump's repeated position that the U.S. needs Greenland for security purposes.
London-listed miners, meanwhile, weighed on the FTSE 100 following falls in metal prices. Eased geopolitical tensions have tempered demand for safe-havens.
The movements come as concerns over AI deals, leverage and delayed returns on investment remained at the top of tech investors' minds, according to Swissquote.
As earnings season intensifies, U.S. tech results will face closer scrutiny as rising electricity, metals costs, higher memory-chip prices, and the risk of supply disruptions are weighing on outlook.
"Big Tech's ability to impress is diminishing, a risk that matters given its outsized weight in equity indices."
Elsewhere, European and NATO allies demonstrated support for Denmark with troop deployments to Greenland.
U.S. markets will be closed Monday as the country observes Martin Luther King Jr. Day.
Market Insight
Trump's ambitions for Greenland could trigger orders for European arms makers , with BAE Systems, Dassault Aviation, Rheinmetall and Thales the best-positioned to capture orders from European members of NATO and Denmark, Bernstein said.
U.S. bank results bode well for European peers and showed encouraging trends in trading, according to Keefe, Bruyette & Woods, adding that UBS looks best positioned among European banks to gain from these trends.
"Overall, despite the mixed share-price reactions, we believe the U.S. results reinforce our more constructive stance on the EU banks sub-sector, with [Barclays] remaining our top pick."
Stocks to Watch
A tie-up between Glencore and Rio Tinto looks increasingly likely to go ahead , RBC Capital Markets said. The companies last week said that they were in talks to create the world's largest miner.
A merger that was until recently dismissed as unserious "has now found its sweet spot after a strong copper rally, heightened resource scarcity fears and an Argentina turnaround."
U.S. Markets:
Stocks appeared poised to finish the week on a high ahead of industrial production and capacity utilization figures for the month of December, with futures pointing to further gains after chip stocks rallied in Thursday's session.
Forex:
The euro looks range-bound versus the dollar and the one-month implied volatility for the exchange rate remains near 5%. It is being favored as a funding currency in carry trades, where investors borrow in low interest-rate currencies to invest in higher-yielding ones, ING said.
The dollar pulled back slightly against a basket of currencies after reaching a six-week high Thursday, as the Japanese yen strengthened on the prospect of interventions to prop up the currency. Japan's Finance Minister Satsuki Katayama said Friday the country wouldn't rule out any options to counter the yen's recent sharp falls.
Bonds:
Eurozone government bond yields rose slightly in relatively quiet trading, with little in the way of impulse from economic data.
"The domestic macro backdrop gives investors faith to buy the new 10-year Bund above 2.8% or spread products above this level," Commerzbank said.
Eurozone government bond yield spreads have continued to trade with a tightening bias despite the already tight starting point and the busy issuance slate so far, Barclays said, adding there is a strong case for spreads to tighten further.
"In part, this reflects political/fiscal challenges in core/semi-core economies while the erstwhile peripheral bloc continues to keep political noise to the minimum with fiscal improvements."
Yields on U.K. government bonds rose, reversing some of their recent falls.
Gilt investors now await next week's U.K. inflation and jobs data for insights on the potential timing of the next BOE rate cut.
Yields on U.K. 10-year government bond yields were likely to fall by the end of 2026, according to ING.
Bond yield spreads of eurozone peripheral countries over Bunds tightened further, with Italian and Spanish spreads hitting levels unseen since 2008.
"[We] remain positive on Italy and Spain versus Germany," Jefferies said.
The outperformance of government bonds of eurozone peripheral countries will likely remain the dominant theme in 2026 , supported by stronger economic fundamentals, improving credit ratings and resilient flows, Societe Generale said, adding that France and Germany particularly will face headwinds.
Long-dated Treasury yields rose, while short-end yields edged lower in Asian afternoon trade, causing the curve to steepen .
Potential drivers for Treasury yields include industrial production and capacity utilisation data for December, as well as Federal Reserve speakers Michelle Bowman and Philip Jefferson.
Compensation to hold a longer-dated bond rather than a shorter one is expected to rise in both the U.S. and Europe in the next 12 months as bond issuance is set to increase significantly, according to Danske.
"Therefore, we expect long-term U.S. rates to move higher over the coming year even if the Federal Reserve continues to cut its policy rate target."
Danske forecasts the 10-year Treasury yield at 4.30% and 4.45% on six- and 12-month horizons, and the 10-year Bund yield at 2.90% on both six- and 12-months horizons.
Energy:
Oil prices were mixed as traders weighed risks of supply disruptions even as concerns over imminent U.S. military action in Iran fade.
"While risks have eased somewhat, they remain significant, keeping the market nervous in the short term. However, the longer this goes on without any U.S. intervention, the risk premium will continue to fade, allowing more bearish fundamentals to dominate," ING said.
Gas
European natural-gas prices extended their rally, hovering near 35 euros a megawatt hour as forecasts of colder weather across parts of Europe raised supply concerns. The benchmark Dutch TTF contract is up 5.2% and is headed for a weekly gain of 23%.
Metals:
Gold prices slipped in early trading after the latest U.S. data showed unemployment claims dropped last week, lowering probabilities of imminent interest-rate cuts by the Federal Reserve.
That said gold was still on track for a weekly gain of more than 2%.
Silver prices were on track for a weekly gain of 15% after hitting a fresh record earlier this week
"Silver continues to attract speculative interest, increasingly from both buyers and sellers, resulting in erratic price swings and challenging trading conditions," Saxo Bank said.
Copper prices fell back below the $13,000 mark as investors booked profits after they hit a fresh record last week.
"This week the market was reminded of the strong demand dynamics in China, with imports remaining near record highs. However, a surge in investor appetite for real assets such as commodities in recent weeks has raised concerns that recent gains have been driven by speculators," ANZ Research said.
EMEA HEADLINES
Porsche Deliveries Fall on China Woes and Model Gaps
Porsche car deliveries fell 10% in 2025 as demand was hit by a slowdown in luxury spending in China and as it ceased production of its 718 Boxster and 718 Cayman models through the year.
The German luxury sports-car maker said Friday that it delivered 279,449 cars in the year, down from 310,718 in 2024.
Trump Was Told Attack on Iran Wouldn't Guarantee Collapse of Regime
WASHINGTON-President Trump was advised that a large-scale strike against Iran was unlikely to make the government fall and could spark a wider conflict, U.S. officials said, and for now will monitor how Tehran handles protesters before deciding on the scope of a potential attack.
The U.S. would need more military firepower in the Middle East both to launch a large-scale strike and protect American forces in the region and allies such as Israel should Iran retaliate, the advisers told Trump, the officials said.
Equinor Can Resume Work on Offshore Wind Project Trump Tried to Halt
Work on New York's Empire Wind project can resume after a federal judge on Thursday said he wasn't convinced construction had to stop immediately.
At a hearing in Washington, D.C. on Thursday, U.S. District Judge Carl Nichols said Empire Wind-being developed by Norwegian company Equinor-proved it would "suffer irreparable harm" by the current hiatus the Trump administration ordered last month. He said the harm from the suspension "outweighs the harms laid out by the government in this stage" of the construction.
Investors Flock to Buy Eurozone Government Bonds Even as Supply Jumps
Investors have shown great appetite for a heavy supply of eurozone government bonds so far in 2026, driven by large cash availability and as investors continue to diversify away from U.S. assets.
Gross eurozone bond supply is set to rise to a record high this year as Germany proceeds with substantial fiscal stimulus, with many other countries following suit as they seek to boost defense spending.
British American Tobacco to End South African Manufacturing
British American Tobacco's South African subsidiary said it would close its only factory in the country by the end of the year, citing a booming black market.
BAT South Africa said it would cease cigarette production in South Africa because of "the devastating impact of the illicit cigarette trade" in the country. The move comes after the company decided to close its Mozambican operations in December.
GLOBAL NEWS
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01-16-26 0512ET
