Precious metals erasing last days' gains

EU mid-market update: Alphabet lower as tech continues unwind; Precious metals erasing last days' gains; GBP sold on political risk of leadership flip; Bitcoin struggles to find support.

Notes/observations

- European markets opened mixed, with the prior tech-led risk-off tone still bleeding through. The “AI concentration risk / software disruption” narrative remained a drag, but there were signs of rotation into non-tech sectors as investors looked for a broader market leadership base. In single names, Shell disappointed on the quarter (lower prices, weaker marketing margins, higher opex), though it maintained a >$3B buyback for the 17th consecutive quarter.

- Central banks are the main macro event risk. ECB and BOE both widely expected to hold policy; Market attention centered on Chief Lagarde and whether she leans against euro strength (i.e., “monitoring FX closely” language) after the euro’s recent surge. In rates, eurozone yields edged higher on a surprise jump in German factory orders. UK gilts sold off modestly as politics injected a fiscal-risk premium into the curve.

- Alphabet’s balance sheet is morphing into a monument to "extravagant silicon," as a jaw-dropping $180 billion capital expenditure guide - nearly double 2025’s levels - signals a desperate scramble to build the physical cathedrals of the AI era. To justify this infrastructure binge, Mountain View is leaning on its custom TPU pipeline to industrialize intelligence, banking on a 750 million-strong Gemini user base to absorb the "astronomical" costs of frontier model development. It is a high-stakes gamble on "agentic commerce" where the search giant must outspend the competition just to remain the world's primary plumber for Apple and the global cloud.

- GBP softened as leadership-challenge chatter around Keir Starmer resurfaced; Markets interpreted the risk of a change in leadership as potentially looser fiscal policy and higher borrowing.

- European gas, TTF prices rose on late-winter cold-spell risk with inventories flagged as relatively low, though milder forecasts for China/Japan could reduce LNG competition for Europe. Industrial metals softened as copper slipped below $13,000/t on softer-demand signals.

- Bitcoin traded near the $70k handle, with commentary pointing to positioning stress and concerns around miners/forced liquidation dynamics if the drawdown extends.

- OpenAI CEO Altman has pivoted from defense to defiance, weaponizing Codex’s half-million-download debut as proof that OpenAI’s brand of utility is winning the hearts—and the IDEs—of the developer class. By dismissing Anthropic’s critique of his advertising strategy as a "dishonest" caricature, Altman is framing his rival not as a moral vanguard, but as a meddling gatekeeper obsessed with dictating the industry's business models and boundaries. The result is a sharpening ideological divide: a battle between OpenAI’s pursuit of frictionless scale and what Altman portrays as the restrictive, paternalistic ivory tower of "Constitutional" AI.

- Asia closed lower with KOSPI underperforming -3.9%. EU indices -0.1% to -0.7%. US futures -0.2% to +0.1%. Gold -2.2%, DXY +0.3%; Commodity: Brent -1.4%, WTI -1.4%; Crypto: BTC -6.5%, ETH -6.1%.

Asia

- Australia Dec Trade Balance (A$): 3.4B v 3.5Be; Exports M/M: 1.0% v -2.9% prior; Imports M/M: -0.8% v 0.2% prior.

- Japan 30-year bond auction was very well supported.

- PM Takaichi might back down on her unexpected offer to voters last month to put Japan's 8% sales on hold for 2 years.

Americas

- Treasury Sec Bessent noted that Fed lost peoples' trust when inflation ravaged the US; Fed independence was based on that trust that it lost.

- President Trump stated that Powell was 'respectful' in explaining renovations. Bondi, Pirro will make their own decision on Powell.

- Senate banking committee Chair Scott noted that Powell had not committed a crime, despite making a gross error in judgment and being unprepared for lawmakers’ questions on the headquarters renovation.

- Fed's Cook affirmed she would continue to carry out duties at the Fed; reiterated it is the right time to sit back and wait to see what happens, cites the long and variable lags.

- Fed's Bowman stated that Fed would not adjust large bank capital levels for the 2026 stress tests, as it considers other changes that seek to boost transparency.

Trade

- Pres. Trump posted that he had an excellent telephone conversation with China President Xi. China was considering the purchase of additional Agricultural products including lifting the Soybean count to 20M tons for the current season.

Energy

- Iran/US talks said to be taking place in Oman on Fri (Feb 6th).

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 -0.57% at 614.60, FTSE -0.46% at 10,354.90, DAX -0.76% at 24,464.62, CAC-40 -0.04% at 8,257.77, IBEX-35 -1.49% at 17,832.16, FTSE MIB -0.74% at 46,290.50, SMI -0.47% at 13,454.60, S&P 500 Futures -0.01%].

Market focal points/key themes: European indices open generally lower and remained under pressure through the early part of the session; tech sell off seen weighing on risk appetite; better performing sectors include financials and communication services; among sectors leading the way lower are industrials and real estate; reportedly Jaeger-LeCoultre CEO interested in buying Richemont’s watch brand; Meituan to acquire Dingdong’s China business; focus on ECB and BOE rate decisions later in the day; earnings expected in the upcoming US session include Amazon, ConocoPhillips, Bristol-Myers Squibb and Intercontinental Exchange.

Equities

- Consumer discretionary: Pandora [PNDORA.DK] +4.0% (earnings; silver prices slump).

- Energy: Vestas Wind Systems [VWS.DK] -6.5% (earnings), Shell [SHEL.UK] -2.5% (earnings; buyback).

- Financials: BNP Paribas [BNP.FR] +3.0% (earnings).

- Industrials: Maersk [MAERSKB.DK] -5.5% (earnings; guidance and CEO comments), Volvo Cars [VOLCARB.SE] -22.0% (earnings), SAAB [SAABB.SE] -3.0% (earnings).

- Technology: STMicro [STM.FR] +2.5% (Google Capex guidance).

- Materials: ArcelorMittal [MT.NL] +3.5% (earnings).

-Telecom: Vodafone [VOD.UK] -5.5% (trading update).

Speakers

- Russia govt spokesperson Peskov: New START treaty ends today (Feb 5th).

- More reports circulated that Japan LDP seen winning majority by "large" margin in election.

- India Trade Ministry official noted that the 1st part of US-India trade agreement almost ready; joint agreement to be signed virtually by mid-March.

Currencies/fixed income

- USD was mixed against the major pairs with focus on key EU rate decisions.

- EUR/USD hovering the 1.18 level. Today’s rate decision expected to be a nonevent as ECB had consistently stated it is in a good place on rates. Dealers to focus on any FX comments related to inflation impact.

- GBP/USD slumped to est below 1.3560 with UK political turbulence resurfaces as PM Starmer engulfed in leadership speculation as he backtracked over Mandelson papers. Markets interpreted the risk of a change in leadership as potentially looser fiscal policy and higher borrowing. BOE seen moving back to its pause phase under the current easing cycle. Focus on the vote on the decision which was expected to be 7-2 (risk of 6-3) with the dissenters voting for a 25bp cut. GBP currency facing some headwinds as PM Starmer’s grasp on power seemed to be again in focus.

- USD/JPY drifted above the 157 level during the session. Dealers noted that OIS chance of a BOJ rate hike fell slightly for March, down to 24.5% (vs 27.5% day before), April edged down to 74.5% (vs 76.5% day before) and June ticked down to 104% (vs 106% day before).

- Precious metals remain volatile as a ‘flash crash’ in Asia sent silver back to $73/oz. The metal climbed back above the $80 level by early EU.

- 10-year German Bund yield last at 2.86%, France 10-year Oat at 3.45% and 10-year Gilt yield at 4.58% 10-year Treasury yield: 4.26%; 10-year JGB: 2.22%.

Economic data

- (DE) Germany Dec Factory Orders M/M: +7.8% v -2.2%e; Y/Y: 13.0% v 1.2%e.

- (NO) Norway Q4 Average Monthly Earnings Y/Y: 4.4% v 4.8% prior.

- (FI) Finland Dec Preliminary Trade Balance: -€0.2B v -€0.3B prior.

- (HU) Hungary Dec Retail Sales Y/Y: 3.5% v 4.0%e.

- (FR) France Dec Industrial Production M/M: -0.7% v +0.2%e; Y/Y: 1.7% v 2.3%e.

- (FR) France Dec Manufacturing Production M/M: -0.8% v +0.5% prior; Y/Y: 2.1% v 2.2% prior.

- (CZ) Czech Jan CPI M/M: 0.9% v 0.8%e; Y/Y: 1.6% v 1.6%e.

- (CZ) Czech Dec Retail Sales (ex-auto) Y/Y: 1.8% v 3.4%e.

- (TW) Taiwan Jan CPI Y/Y: 0.7% v 1.2%e; CPI Core Y/Y: 1.2% v 1.2%e; PPI Y/Y: -2.0% v -2.0% prior.

- (TW) Taiwan Jan Foreign Reserves: $604.5B v $602.6B prior.

- (DE) Germany Jan Construction PMI: 44.7 v 50.3 prior.

- (UK) Jan New Car Registrations Y/Y: 3.4% v 3.9% prior.

- (IT) Italy Dec Retail Sales M/M: -0.8% v -0.4%e; Y/Y: 0.9% v 1.3% prior.

- (UK) Jan Construction PMI: 46.4 v 42.0e (13th month of contraction).

- (EU) Euro Zone Dec Retail Sales M/M: -0.5% v -0.2%e; Y/Y: 1.3% v 1.7%e.

- (CY) Cyprus Jan CPI M/M: % v 0.1% prior; Y/Y: % v -0.5% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.838B vs. €5.0-6.0B indicated range in 2029, 2033 and 2035 SPGB bonds.

- (ES) Spain Debt Agency (Tesoro) sold €M vs. €250-750M indicated range in 0.70% Nov 2033 inflation-linked bonds (SPGBei); Real Yield: 1.078% v 1.271% prior; Bid-to-cover: 2.39x v 2.27x prior.

- (FR) France Debt Agency (AFT) sold total €13.5B vs. €11.5-13.5B indicated range in 2035, 2042 and 2049 bonds.

Looking ahead

- (IL) Israel Jan Foreign Currency Balance: No est v $229.5B prior.

- (CO) Colombia Central Bank Quarterly Monetary Policy Report.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year ad 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland Jan Unemployment Rate: No est v 5.0% prior.

- 06:00 (ZA) South Africa Dec Electricity Production Y/Y: No est v -7.0% prior; Electricity Consumption Y/Y: No est v -7.4% prior.

- 06:00 (FI) Finland to sell Ori Bonds.

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Bank Rate unchanged at 3.75%.

- 07:00 (UK) BOE Quarterly Monetary Policy Report (aka Staff Projections).

- 07:00 (UK) BOE Feb Minutes.

- 07:00 (MX) Mexico Nov Gross Fixed Investment M/M: 0.5%e v 0.9% prior; Y/Y: -6.0%e v -5.5% prior; Private Consumption Y/Y: 1.9%e v 4.2% prior.

- 07:00 (MX) Mexico Jan Vehicle Domestic Sales: No est v 154.4K prior.

- 07:00 (MX) Mexico Dec Leading Indicators M/M: No est v 0.11 prior.

- 07:00 (BR) Brazil CONAB Coffee Production.

- 07:00 (CL) Chile Dec Nominal Wage Y/Y: No est v 5.9% prior.

- 07:30 (US) Jan Challenger Job Cuts: No est v 35.6K prior; Y/Y: No est v -8.3% prior.

- 07:30 (UK) BOE Gov Baily post rate decision press conference.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 30th: No est v $786.9B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:15 (EU) ECB Interest Rate Decision: Expected to leave Key Rates unchanged.

- 08:30 (US) Initial Jobless Claims: 212Ke v 209K prior; Continuing Claims: 1.85Me v 1.827M prior.

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-week Repo Rate unchanged at 3.50%.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (EU) ECB President Christine Lagarde Holds Press Conference.

- 09:00 (UK) Bank of England (BoE) Jan Decision Maker Panel (DMP) Survey.

- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.

- 10:00 (US) Dec Jolts Job Openings: 7.250Me v 7.146M prior.

- 10:00 (CZ) Czech Central Bank post rate decision press conference.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:40 (CA) Bank of Canada Govf Macklem.

- 13:00 (BR) Brazil Jan Trade Balance: $5.2Be v $9.6B prior; Exports: $26.3Be v $31.0B prior; Imports: $21.2Be v $21.4B prior.

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 7.00%.

- 17:30 (AU) RBA Gov Bullock in Parliament.

- 18:00 (KR) South Korea Dec Current Account Balance: No est v $12.2B prior; Balance of Goods (BOP): No est v $13.3B prior.

- 18:30 (JP) Japan Dec Household Spending Y/Y: -0.3%e v +2.9% prior.

- 20:00 (PH) Philippines Dec Unemployment Rate: No est v 4.4% prior.

- 21:05 (VN) Vietnam Jan CPI Y/Y: 3.0%e v 3.5% prior.

- 21:05 (VN) Vietnam Jan Trade Balance: $1.3Be v -$0.7B prior; Exports Y/Y: 26.0%e v 23.8% prior; Imports Y/Y: 39.8%e v 27.7%prior.

- 21:05 (VN) Vietnam Jan Industrial Production Y/Y: No est v 10.1% prior.

- 21:05 (VN) Vietnam Jan Retail Sales Y/Y: No est v 9.8% prior.

- 22:00 (ID) Indonesia Jan Foreign Reserves: No est v $156.5B prior.

- 23:30 (IN) India Central Bank (RBI) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 5.25%.

- 23:30 (JP) Japan to sell 3-Month Bills.