Trump delivers longest State of the Union speech on record

In focus today

In the euro area, the final January inflation data is released. We expect it to confirm the flash release of 1.7% y/y in headline and 2.2% y/y in core. As there were several changes to taxes in the different euro area countries in January (e.g. German VAT on restaurants) the HICP at constant taxes will shed light on the underlying inflation momentum.

In Norway, wage growth in both 2024 and 2025 exceeded the expected outcome from the central wage negotiations, so the wage statistics is getting more relevant. Today, the January figures will be published, and it will be interesting to see whether wage growth continues to decline into 2026, or whether lower unemployment also starts to lift wage growth. We expect that wage growth declined to below 3.5% y/y in January, but this is mainly due to base effects that will be partially reversed again in February.

In Sweden, although the Producer Price Index is interesting in its own right, especially given recent downside surprises to inflation, it is hardly a market mover and with an otherwise empty macro calendar the main events of the day will be the speeches delivered by the Riksbank's Per Jansson and Erik Thedéen. 

Economic and market news

What happened overnight

In the US, Donald Trump's State of the Union speech, which was the longest on record at 1h47mins, touched upon many of past year's key policy issues but was light on actual forward-looking policy signals. He emphasized that US will never allow Iran to gain a nuclear weapon, but said he wants 'to solve the issue with diplomacy'. Trump repeated his earlier claims that he has ended eight wars in 10 months, and that inflation is now coming lower thanks to his policies, referring specifically to lower taxes as well as prices of electricity, health care and eggs. He emphasized that tariffs 'will remain in place' under alternative legal statutes, which do not require congressional action, but refrained from more direct attacks against the Supreme Court. We do not expect the speech to have a significant impact on financial markets, or Republicans' popularity in polling ahead of the midterm elections later in the year.

What happened yesterday

In the US, the Conference Board's consumer confidence measure rebounded modestly in February to 91.2 (cons: 87.0, prior: 89.0), though the indices remain at weak levels. Future expectations recovered, while the current situation assessment weakened further. The widely followed 'jobs plentiful' index also rose modestly, but remains at low levels compared to pre-covid.

ADP's latest weekly private employment growth estimate came in at 12.75k. This is a 4W rolling average until 7 February, up from a revised 11.50k last week. At face value, it suggests strengthening jobs growth momentum, marking the fastest pace of hiring since late November. This is equivalent to a monthly increase of over 50k jobs.

On US monetary policy, Chicago Fed's Goolsbee (non-voter) took a notably hawkish stance, emphasising the need to see clear progress on inflation before supporting further rate cuts. His dissent already in December to hold rates steady underscores his position as one of Fed's most hawkish participants. Atlanta Fed's Bostic (non-voter) highlighted the economy's resilience to last year's trade shocks and current AI-driven growth, supporting a 'mildly restrictive' policy, while cautioning that resurging inflation could warrant rate hikes. Markets are currently pricing a coin flip of a cut in June. However, we expect cooling real growth will prompt the Fed to resume policy easing already in June.

In Hungary, the Central Bank of Hungary cut its Base Rate with 25bp to 6.25%, as widely expected.

Equities: Global equities staged a rebound rally of 0.5% after Monday's sell-off, in what was largely a reversal of Monday's loss, albeit not to the full extend. S&P500 rose 0.8%, with Nasdaq 1% higher and Russell2000 1.2% higher. Stoxx600 was 0.2% higher. As the AI scare was not part of the trading session, IT, Industrials and Consumer discretionary was among the best performing sectors. Overnight, equities are higher in Asia, and US futures are up. Looking specifically at the south Korean Kospi, which is our preferred way to express the AI / tech theme, it is up 2.8% today, adding to the "relentless rally" it has been on this year and is up 45% year to date.

FI and FX: Positive risk sentiment dominated yesterday's session with stronger equities. Movements within foreign exchange and fixed income were relatively modest. European rates initially rallied in a curve flattening but the move reversed later in the day. US rates were roughly unchanged. EUR/USD trades a tad higher this morning at 1.180. In its State of the Union Speech, which was the longest such speech on record at 1 hour and 48 minutes, President Trump declared a booming economy and a "golden age" message at the same time as delivering several combative attacks on Democrats and the Supreme Court. Market reaction was complacent.