Market Wrap - February 19, 2026

On February 19, 2026, global equities exhibited a defensive bias as investors reassessed the heightened geopolitical risks stemming from the potential for a US military strike on Iran. The US has reportedly concentrated significant military forces in the Middle East, raising concerns that any escalation could increase the geopolitical risk premium in oil markets and reignite global inflation pressures. This scenario could potentially delay anticipated interest rate cuts and, in extreme cases, revive rate-hike expectations in certain jurisdictions.

Market Overview

• Indices: DE40 down by 0.74% at 25,090.3
• EUR/USD: Trading at 1.17613, down by 0.19%
• Brent Crude: Up by 1.6%, nearing $71 per barrel
• US Index Futures: Down by 0.3% to 0.4% pre-market
• Gold & Silver: Gains losing momentum
• Bitcoin: Down to approximately $66,500
• European Indices: DAX down 0.8%, CAC 40 down 0.8%, FTSE 100 down 0.6%

Corporate Earnings Highlights

The current earnings reporting cycle in Europe has shown a mixed landscape, with some sectors demonstrating resilience while others face ongoing pressures:

• Rio Tinto: Reported flat earnings with declining iron ore profits, indicating pricing pressures.
• Repsol: Announced €1.9 billion planned for dividends and buybacks in 2026.
• Centrica & Mondi: Both companies missed expectations in adjusted operating performance.
• Drax: Signed a 15-year tolling agreement for a 200MW battery energy storage system, enhancing its energy transition exposure.

Sector Performance

Technology & Industrials

• SAP: Proposed a €2.50/share dividend for 2025.
• BE Semiconductor: Reported better-than-expected Q4 orders.
• Airbus: Forecasts approximately 870 deliveries in 2026, below market expectations.
• Schneider Electric: Emphasized AI-driven power savings potential.
• Nexans: FY adjusted EBITDA missed expectations.

Consumer & Services

• Pernod Ricard: Sales figures missed expectations, indicating declining demand.
• Nestlé: Guides for 2026 organic revenue growth at 3%-4%, aligning with consensus.
• Renault: Issued cautious guidance amid increasing competition.
• Air France-KLM: Remains optimistic about long-haul travel, supported by premium demand.
• Kinepolis & Nilfisk: Reported disappointing full-year results.

Financials & Real Estate

• Aegon & BAM: Both companies exceeded expectations in operating performance.
• Tikehau Capital: Reported AUM of €52.8 billion, up from €49.6 billion year-on-year.
• Zug Estates: Net income increased to CHF 85.2 million from CHF 58.7 million year-on-year.
• LSEG: Facing activist pressure as Elliott Management pushes for a £5 billion buyback and a portfolio review.

Analyst Actions

Upgrades

• DWS: Upgraded to Buy at UBS (Price Target: €70)
• Vonovia: Upgraded to Equal-weight at Morgan Stanley (Price Target: €30)
• Aramis: Upgraded to Overweight at Morgan Stanley (Price Target: €5)
• Capgemini: Upgraded to Equal-weight at Morgan Stanley (Price Target: €117)

Downgrades

• BASF: Cut to Underweight at Barclays (Price Target: €40)
• Freenet: Cut to Sell at UBS (Price Target: €28.50)
• Schroders: Cut to Neutral at UBS (Price Target: 590p)

Initiations

• 74Software: Initiated at Buy by Berenberg (Price Target: €44)

Consumer Staples Sector Performance

European consumer staples have shown a significant rebound, with the MSCI Europe Consumer Staples index breaking out of a two-year range and poised for its best relative monthly performance against the broader market since mid-2022. This movement appears to be driven by a flow-led rotation rather than a clear fundamental shift.

• Breakout: The MSCI Europe Consumer Staples index shows its best relative momentum since June 2022.
• Flow-driven: The rotation reflects reduced exposure to companies perceived as vulnerable to AI disruption.
• Valuations: The sector is trading in line with the broader market, rather than at its typical long-term premium.
• Fundamentals: Earnings and volume trends lack a clear catalyst for sustained acceleration.
• Sell-side stance: Some banks remain underweight, citing fading pricing power and limited EPS catalysts.

Conclusion

The market remains cautious amid geopolitical tensions and mixed corporate earnings, with a notable shift towards consumer staples as investors seek defensive positions. The outlook for various sectors continues to evolve as companies navigate these challenges.