February flash PMIs in the limelight

In focus today

In the euro area, the flash February PMI report is released today. We expect a decent increase in the manufacturing PMI to 50.0 from 49.5 as we have received positive signs from higher new orders and metal prices lately. The services PMI have been on a declining trend for the past two months and we expect a continuation in February with a decline from 51.6 to 51.4. The contrasting trends between services and manufacturing leaves the composite measure expected unchanged at 51.3 still showing decent activity in the economy.

Also in the euro area, we receive the first estimate of 2025Q4 wage growth through the ECB's negotiated wages indicator. The indicator only reports the part of wage growth that is collectively bargained, not painting the full picture of wage growth. The tracker declined to 1.9% y/y in Q3 from 4.0% y/y in Q2 due to heavy distortions from one-off payments. We expect a swift rebound in Q4 to 2.9% y/y as indicated by the ECB's wage tracker.

In the US, February flash PMIs, Q4 flash GDP, and December PCE inflation are due for release. For flash PMIs it is expected that both manufacturing and services PMIs will increase in February with manufacturing PMI expected at 52.6 (Jan: 52.4) and services PMI at 53.0 (Jan: 52.7). For flash GDP, consensus expects the seasonally adjusted growth in 2025Q4 at 3.0% q/q AR, which is a slowing from the extraordinarily strong growth in Q3 at 4.4% q/q. Finally, the PCE inflation for December is expected to show unchanged headline at 2.8% y/y and a small rise in core to 2.9% y/y.

Economic and market news

What happened overnight

In Japan, January's inflationary data came in as expected with CPI falling to 1.5% y/y (Dec: 2.1% y/y) and core CPI at 2.0% y/y (Dec: 2.4% y/y). The decline in headline inflation was primarily driven by utility subsidies and base effects from of last year's price surges. At the same time core inflation hit the lowest point in two years. The relatively low core inflation compared to recent years may influence the central banks decision on how soon to raise interest rates, although demand continues to be strong as shown in the February flash PMIs and fiscal policy is easing.

Japanese flash PMIs were also released overnight. Manufacturing PMI increased to 52.8 in February 2026 (Jan: 51.5), the highest since May 2022, driven by strong demand with factory output and new orders continuing their upward trend. Services PMI increased slightly to 53.8 in February (Jan: 53.7) with employment continuing to grow, though the pace of hiring eased slightly. These changes results in composite PMI increasing to 53.8 (Jan: 53.7). With January's PMI composite in Japan showing the fastest pace in over a year, February's flash figures indicate continued positive momentum.

What happened yesterday

In the euro area, flash estimates for consumer confidence data increased slightly to -12.2 in February 2026 (Jan: -12.4), the highest since November 2024 but still below expectations of -11.8. The data signals cautious household sentiment, staying below long-term averages, despite sound balance sheets and real income gains.

In the US, the trade deficit re-widened in December, as import volumes have started to recover after the tariff-driven slump seen earlier in 2025. This reflects that import volumes have been too low compared to solid final demand. The wider trade deficit will weigh on tomorrow's Q4 GDP via weaker net exports.

Philly Fed manufacturing index recovered further in February, but capex and new orders subindices weakened from January. Weekly initial jobless claims came in lower, while continuing claims remained steady giving overall positive signals.

In geopolitics, tensions between the US and Iran are continuing, with President Trump stating at his Board of Peace that the next 10-15 days will determine whether a deal is struck or military action is taken. The US has recently deployed significant military assets to the Middle East, including aircraft carriers, warships, and air defence systems, positioning for potential strikes on Iran's nuclear and missile sites. While indirect talks earlier this week have made limited progress, Iran has vowed retaliation against any US attack.

Equities: Equities were lower, breaking the three-session string of gains the US. Defensives took a slight leadership while tech, consumer discretionary and financials were 0.5-1% lower. It was not a major defensive rotation. In fact, the tech retreat was driven big tech rather than software, a slight trend shift from the last two weeks. What is interesting is that small caps outperformed, despite the defensive shift. S&P 500 ultimately closed -0.3% lower and Stoxx 600 -0.5%, but futures are higher this morning.

FI and FX: EUR/USD has dropped well below the 1.18 level as the USD continues to consolidate its gains this week with a combination of factors having supported the dollar including higher oil prices amid renewed US-Iran tensions - with Brent trading at year-to-date highs above USD 70/bbl. Similarly, US yields climbed slightly higher during yesterday's session in a session with overall positive signals on the macro front. Yesterday, was another day of broad SEK underperformance with NOK also performing poorly. Today, we have a packed calendar with PMI releases, core PCE and the Q4 GDP print out of the US and PMI data and the first estimate of wage growth in 2025Q4 with the ECB's negotiated wages indicator in the euro area.