UTILITY STRATEGY: YTD European Utilities are down 4.0% and underperformed the MSCI Euro (-8.9%). We see contradictory signals: Lack of inflation, Further earnings cut, Commodities weakness, Lower revenues vs. Earnings stabilization (for regulated), QE (?), Weaker € (less than hoped though). In a more unsettled market, the sector may be helped by healthy dividend flows (watch the DY vs. 10y spread) as well as rct retreat from historical valuation highs. Main risk is in further commodity weakness (2/3 of sector is exposed) (further impairment risk?). Key OP remain Iberdrola, Engie, Centrica, while UP are Gas Natural, National Grid, Verbund, Suez.