Japan remains the focal point, extending its LDP-driven rally

EU mid-market update: Select earnings pockets draw interest as indices show subdued volatility; Japan remains the focal point, extending its LDP-driven rally.

Notes/observations

- Europe began mixed and drifted slightly as session wore on. Asia outperformed, led by another strong rally in Japanese equities following the LDP’s dominant election result, while US equity futures softened after gains overnight. Sovereign bonds were generally firmer across the US, UK and euro area, with the long end of the JGB curve performing particularly well as post-election volatility unwound. Commodities were softer across oil, gold and crypto, with Bitcoin slipping back <$70K.

- UK assets mostly unfazed by PM Starmer temporarily stabilizing his position after securing cabinet backing. Rates markets reflected a mild risk-off bias. Gilt yields compressed modestly as political risks receded slightly, though the gilt–Bund spread remains wide. In Japan, long-end JGBs continued to rally strongly as markets pushed back against narratives of imminent BoJ tightening. US Treasury yields nudged lower as attention shifts to upcoming employment data and Treasury auctions.

- Most notable corporate movers were in banks, healthcare and luxury. Barclays beat on Q4 numbers and lifted medium-term targets, while Standard Chartered sold off on the surprise CFO exit; UniCredit got an overweight upgrade and progressed buybacks. Philips jumped on a clear Q4 beat and upbeat 2026-28 guidance, while AstraZeneca guided for low-double-digit core EPS growth in 2026. Kering surged on improving Q4 trends and a return-to-growth message, lifting peers. UK cyclicals were steadier: Bellway’s update pointed to improving early-spring demand, supporting the wider homebuilder complex, while TUI fell after softer booked revenue despite an EBIT beat and reaffirmed guidance.

- Kering during earnings call said it is now pivoting away from aggressive price hikes to combat "luxury fatigue," opting instead for a "properly priced" mix to win back consumers who found recent costs prohibitive. While the group eyes a 2026 recovery, CEO warned of macroeconomic headwinds, specifically noting that a potential AI bubble burst could trigger a U.S. stock market crash and derail the luxury rebound.

- Alibaba’s launch of RynnBrain, an open-source foundation model for robotic reasoning, marks a strategic bid to challenge the dominance of Google and Nvidia in the "embodied AI" frontier. By offering state-of-the-art spatial and temporal planning in packages as lean as 2 billion parameters, the DAMO Academy-led project aims to turn high-end automation into a commodity for the global developer crowd.

- The recent shift toward agentic AI - where models "do" via tool calls and code execution rather than just "say" - has turned the data center back into a complex control plane, sparking a CPU scarcity that was largely overlooked during the ongoing GPU and HBM gold rush. Modern AI clusters are no longer just GPU blocks; they are massive distributed systems. This "orchestration tax" is now visible in six-month lead times for Intel Xeons, proving that the bottleneck in scaling AI has moved from simple arithmetic to the administrative heavy lifting of the factory floor.

- Asia closed higher with Nikkei225 outperforming +2.2%. EU indices -0.3% to +0.5%. US futures +0.1%. Gold -0.2%, DXY 0.0%; Commodity: Brent -0.3%, WTI -0.4%; Crypto: BTC +0.7%, ETH -0.2%.

Asia

- Australia Feb Westpac Consumer Confidence: 90.5 v 92.9 prior.

- Australia Jan NAB Business Confidence: 3 v 3 prior; Business Conditions: 7 v 9 prior.

- Singapore Q4 Final GDP Q/Q: 2.1% v 2.6%e; Y/Y: 6.9% v 6.5%e.

- Japan Fin Min Katayama noted that could consider using surplus from its $1.4 trillion foreign currency reserves to fund planned food sales tax cuts.

- Fitch commented on Japan election risks remain that fiscal stimulus measures under Prime Minister Takaichi could prove larger than our baseline, adding pressure to the fiscal trajectory and, over time, the credit profile.

Taiwan

- China's CCP Senior advisor Wang Huning: Will resolutely crack down on "Taiwan Independence".

Europe

- ECB's Villeroy (France) to step down early on June 1st 2026 (term scheduled to end Oct 2027); Emmanuel Moulin was already being widely discussed as a potential candidate for the position.

- ECB’s Nagel (Germany): The current interest rate level was appropriate; Inflation shortfall was short-term and small; Latest update of Dec's 2025 projection confirms inflation outlook.

- BOE’s Mann noted Trump’s trade wars were pushing up UK inflation as China raised export prices to Britain to offset US tariffs. Import prices are a positive contribution to UK CPI.

- UK Jan BRC LFL Sales Y/Y: 2.3% v 1.0% prior.

Americas

- Fed's Miran (dovish dissenter): Inflation was once again stable; Underlying inflation was near where we needed it to be, we did not have a big inflation problem. USD would need to fall much further than it has so far to materially affect US consumer inflation.

- Fed's Bostic (non-voter): Beginning to see questions about the confidence in the US Dollar.

- Pres Trump: US economy could grow at 15% if Fed Chair Nominee Warsh did the job that he's capable of.

- Trump said to repeal Obama-era climate findings on greenhouse gas emissions "endangering public health" in regulatory rollback.

Trade

- Taiwan said to have rebuffed US “push” to absorb 40% of its chip supply chain.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.08% at 621.90, FTSE -0.35% at 10,350.07, DAX +0.19% at 25,051.71, CAC-40 +0.42% at 8,358.10, IBEX-35 +0.11% at 18,214.55, FTSE MIB -0.11% at 46,769.50, SMI +0.16% at 13,539.20, S&P 500 Futures +0.07%].

Market focal points/key themes: European indices open generally lower, but began to recover in the early part of the session; risk appetite fluctuating on developments in the tech sector; among sectors managing gains are consumer discretionary and materials; sectors leading the way lower include financials and energy; apparel subsector supported following early release of Kerring results; oil & gas subsector under pressure over potential Venezuela production expansion; focus on US retail sales coming out later in the day; earnings expected in the upcoming US session include Coca-Cola, Ford, Ferrari, Marriott.

Equities

- Consumer discretionary: Kering [KER.FR] +10.0% (earnings; conf call comments), Koninklijke Philips [PHIA.NL] +6.5% (earnings; targets), TUI [TUI1.DE] -6.5% (earnings; bookings update).

- Energy: BP [BP.UK] -2.5% (earnings; suspends buyback).

- Healthcare: Astrazeneca [AZN.UK] +1.5% (earnings).

- Technology: TeamViewer [TMV.DE] -6.0% (earnings), ASML [ASML.NL] -0.5% (TSMC monthly sales).

Speakers

- ECB’s De Guindos (Spain) reiterated Council stance that was in a good place on inflation and that interest rates were appropriate amid risks.

- France Pres Macron commented that now was good time for Europe to launch a means of joint borrowing, for example via Eurobonds; EU-US tensions over Greenland far from over. Plans to make Europe more sovereign are not progressing fast enough.

- Thailand Fin Min Ekniti: Expect Thailand Q4 GDP growth >1.8%, citing govt stimulus; Expect 2025 GDP growth >2.2%; Asked central bank (BoT) to monitor speculation in baht (THB).

Currencies/fixed income

- USD consolidating some softness ahead of some key US data with focus on retail sales. Other key data points include non-farm payrolls on Wednesday and CPI on Friday.

- EUR/USD holding above the 1.19 level with the 1.20 area seen as key pivotal resistance. Dealers noted that the resignation of ECB’s Villeroy could
marginally shift the council's balance towards the hawkish side.

- GBP/USD steady at 1.3670 after PM Starmer appeared to starve off any imminent calls for him to step down.

- USD/JPY 155.50 as Yen continued to remain below the key 160 resistance.

- 10-year German Bund yield last at 2.82%, France 10-year Oat at 3.42% and 10-year Gilt yield at 4.50% 10-year Treasury yield: 4.18%; 10-year JGB: 2.22%.

Economic data

- (NL) Netherlands Jan Producer Confidence: +0.8 v -1.1 prior.

- (NL) Netherlands Dec Manufacturing Production M/M: +0.5 v -0.5% prior; Y/Y: 1.3% v 0.4% prior; Industrial Sales Y/Y: No est v -2.3% prior.

- (FI) Finland Dec Industrial Production M/M: 8.9% v 0.2% prior; Y/Y: 2.0% v 1.7% prior.

- (JP) Japan Jan Preliminary Machine Tool Orders Y/Y: 25.3% v 10.9% prior.

- (FR) France Q4 ILO Unemployment Rate: 7.9% v 7.7%e; Mainland Unemployment Rate: 7.7% v 7.5%e.

- (SE) Sweden Dec Private Sector Production M/M: 1.6% v 0.2% prior; Y/Y: 4.2% v 3.2% prior.

- (SE) Sweden Dec Industrial Orders M/M: -7.9% v +8.8% prior; Y/Y: 6.8% v 19.4% prior.

- (SE) Sweden Dec Industry Production Value Y/Y: 4.2% v 3.1% prior; Service Production Value Y/Y: 4.7% v 3.6% prior.

- (SE) Sweden Dec Household Consumption M/M: -3.7% v +3.0% prior; Y/Y: 0.5% v 4.6% prior.

- (NO) Norway Jan CPI M/M: 0.6% v 0.1% prior; Y/Y: 3.6% v 3.0%e.

- (NO) Norway Jan CPI Underlying M/M: 0.3% v -0.1%e; Y/Y: 3.4% v 3.0%e.

- (DK) Denmark Jan CPI M/M: -0.6% v -0.4% prior; Y/Y: 0.8% v 1.9% prior.

- (DK) Denmark Jan; CPI EU Harmonized M/M: -0.7% v -0.4% prior; Y/Y: 0.6% v 1.9% prior.

- (TR) Turkey Dec Industrial Production M/M: 1.2% v 2.5% prior; Y/Y: -2.1% v 2.2% prior.

- (AT) Austria Dec Industrial Production M/M: -2.4% v -0.8% prior; Y/Y: -3.3% v -0.1% prior.

- (CZ) Czech Dec Import Price Index Y/Y: -5.4% v -5.4% prior; Export Price Index Y/Y: -4.4% v -4.7% prior.

- (GR) Greece Dec Industrial Production Y/Y: 3.9 v 4.3% prior.

Fixed income issuance

- (EU) European Union opened its book to sell 2032 and 2045 NGEU bonds via syndicate.

- (ID) Indonesia sold total IDR12.0T vs. IDR11.0T target in Islamic bills and bonds (sukuk).

- (NL) Netherlands Debt Agency (DSTA) sold €1.845B vs. €1.5-2.0B indicated in 3.25% Jan 2044 Green DSL Bonds; Avg Yield: 3.388% v 3.176% prior.

- (ZA) South Africa sold total ZAR3.0B vs. ZAR3.0B indicated in 2039, 2042 and 2053 bonds.

- (ES) Spain Debt Agency (Tesoro) sold total €3.02B vs. €2.0-3.0B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £B vs. £3.75B indicated in 4.125% Mar 2031 Gilts; Avg Yield: 4.001% v 3,980% prior; bid-to-cover: 3.94x v 3.50x prior; Tail: 0.2bps v 0.2bps prior.

- (AT) Austria Debt Agency (AFFA) sold total €1.73B vs. €1.73B indicated in 2031 and 2036 RAGB bonds.

Looking ahead

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

- 05:25 (CH) Switzerland to sell 3-month Bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (DE) Germany to sell €5.0B in 2.50% Apr 2031 BOBL.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €2.8B in 3-month and 12-montrh bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR).

- 06:00 (US) Jan NFIB Small Business Optimism: 99.8e v 99.5 prior.

- 06:00 (IL) Israel Jan Consumer Confidence: No est v 82 prior.

- 06:00 (IL) Israel Dec Chain Store Sales Y/Y: No est v -0.5% prior.

- 6:00 (FI) Finland to sell combined €2.0B in 6-month and 9-month Bills.

- 06:00 (TR) Turkey to sell bonds.

- 06:30 (CL) Chile Central Bank Economist Survey.

- 07:00 (BR) Brazil end-Jan IBGE Inflation IPCA M/M: No est v 0.3% prior; Y/Y4.3%e v 4.3% prior.

- 07:00 (MX) Mexico Jan Vehicle Production: No est v 244.0K prior; Vehicle Exports: No est v 227.3K prior.

- 07:00 (IS) Iceland Jan Unemployment Ratre: No est v 4.4% prior.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

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

- 08:15 (US) ADP Preliminary Employment Change for 4-weeks ending Jan 24th: No est v +7.75K prior.

- 08:30 (US) Q4 Employment Cost Index: 0.8%e v 0.8% prior.

- 08:30 (US) Dec Import Price Index M/M: +0.1 v -0.1 prior (revised from 0.0%); Y/Y: 0.1%e v 0.1% prior; Import Price Index (ex-petroleum): No est v 0.0% prior (revised from 0.2%).

- 08:30 (US) Dec Export Price Index M/M: 0.1%e v N/A prior; Y/Y: No est v 3.3% prior.

- 08:30 (US) Dec Advance Retail Sales M/M: 0.4%e v 0.6% prior; Retail Sales (ex-auto) M/M: 0.4%e v 0.5% prior; Retail Sales (ex-auto/gas): 0.4%e v 0.4% prior; Retail Sales Control Group: 0.5%e v 0.4% prior.

- 08:30 (UR) Ukraine Jan CPI M/M: No est v 0.2% prior; Y/Y: 7.6%e v 8.0% prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 10:00 (US) Nov Business Inventories: 0.2%e v 0.3% prior.

- 11:30 (US) Treasury to sell 6-week bills.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 12:00 (US) Fed’s Hammack.

- 13:00 (US) Fed’s Logan.

- 14:00 (AR) Argentina Jan National CPI M/M: 2.4%e v 2.8% prior; Y/Y: 31.8%e v 31.5% prior.

- 16:30 (US) Weekly API Crude Oil Inventories:

- 18:00 (KR) South Korea Jan Unemployment Rate: 3.0%e v 4.0% prior.

- 19:00 (KR) South Korea Feb Exports 10 Days Y/Y: No est v -2.3% prior; Imports 10 Days Y/Y: No est v -4.5% prior.

- 19:30 (AU) Australia Q4 Home Loans Value Q/Q: 4.8%e v 9.6% prior; Investor Loan Value Q/Q: No est v 17.6% prior; Owner-Occupier Loan Value Q/Q: No est v 4.7% prior.

- 20:30 (CN) China Jan CPI Y/Y: 0.4%e v 0.8% prior; PPI Y/Y: -1.5%e v -1.9% prior.

- 20:30 (AU) RBA’s Hauser.

- 22:00 (KR) South Korea Jan Total Bank Lending To Household (KRW): No est v 1.174T prior.