More stability within precious metals

EU mid-market update: More stability within precious metals; Palantir surges 10% higher in pre-market as CEO warns that LLMs alone offer no "salvation"; Over $1T SpaceX/xAI merger.

Notes/observations

- European risk tone was constructive, equities opened higher in Europe in line with a firmer session across Asia and steadier US futures. Rates were mildly firmer overall, with the US 10-year around 4.28%, UK gilts ~1bp higher near 4.52%, and German Bunds broadly flat around 2.88%. A key near-term driver remains the re-pricing of Fed expectations after strong ISM manufacturing data and the market’s read across from Warsh being viewed as more hawkish; the partial shutdown also delayed the BLS nonfarm payrolls release.

- FX saw a softer dollar bias on the session, with analysts noting the underlying fundamentals behind earlier USD strength haven’t materially shifted even after the Warsh nomination. Sterling (GBP) held near a five-month high versus the euro and was marginally firmer versus the dollar, with focus on the BOE decision (expected unchanged). The standout G10 move was in AUD after RBA delivered a 25bp hike to 3.85% and signaled inflation risks imply a higher terminal rate (market pricing moved toward additional hikes later this year), though the press conf tone tempered peak hawkishness.

- Macro data were mixed but broadly disinflationary at the margin in France, where Jan prelim CPI surprised lower (0.3% y/y vs 0.6% expected), while Spain unemployment changes printed worse than consensus. UK Worldpanel data suggested grocery inflation eased to 4.0% (four weeks to 25th Jan). Politically, France finally passed a 2026 budget after PM Sébastien Lecornu survived two no-confidence motions, reducing near-term domestic policy noise.

- Commodities and alternatives were the main volatility pocket. Oil was lower, while precious metals staged a sharp rebound: gold +6% and silver +12-13%, framed by some desks as a positioning clean-out.

- Crypto stabilized but remained fragile. Commentary pointing to forced liquidations and “whale” selling as an ongoing overhang despite a modest bounce linked to improved risk appetite around trade headlines.

- Geopolitics and trade headlines added cross-asset texture. Pres Trump cited tariff cuts on India and additional purchase commitments (including energy), helping support India risk sentiment.

- Traders and developers are currently deciphering leaked Google Vertex AI logs that point to the imminent arrival of Anthropic's Claude Sonnet 5 (internally codenamed "Fennec"). The Claude 5 model is rumored to be an "Opus-killer," designed to deliver top-tier intelligence at nearly half the operating cost of the current flagship. The true headline is the potential leap in agency: an unverified 82% SWE-bench score (boosted by parallel compute) and the official debut of "Swarm" mode for AI agent teams that work 10 times faster than humans, which may result into more pressure on software stocks.

- By merging SpaceX with xAI in a staggering $1.25T union, Elon Musk is betting that the path to Artificial General Intelligence leads not through terrestrial power grids, but through the vacuum of space. The plan envisions Starship seeding the heavens with "compute-sats" to bypass Earth’s energy constraints, theoretically scaling toward a Kardashev-level infrastructure fueled by lunar manufacturing and solar abundance. Yet, this celestial expansion faces a terrestrial reality check: the brutal physics of heat rejection and the "interconnect mismatch" mean that, for now, silicon in orbit risks being a high-cost prisoner of its own thermodynamics.

- Palantir has shattered the "Rule of 40" with a record-breaking score of 127, signaling a non-linear breakout where AI has evolved from a speculative "science project" into a core engine of American industrial rearmament. By slashing planning cycles from weeks to minutes, the company’s "Warp Speed" and "ShipOS" platforms are invoking a Jevons paradox—driving such extreme efficiency that shipbuilders are adding entire shifts rather than cutting heads to meet surging demand. As CEO Alex Karp warns that large language models alone offer no "salvation" without a structured operational layer, a stark global divergence is emerging between the AI "haves" in the U.S. and the "have-nots" left "naked on the beach."

- SoftBank’s memory unit, SAIMEMORY, is joining forces with Intel to commercialize "Z-Angle Memory" (ZAM), a high-stakes bet on restructuring the silicon architecture that anchors the AI boom. By moving away from the precarious "tower" stacking of current High Bandwidth Memory—which risks thermal meltdown as layers multiply—ZAM utilizes a "via-in-one" vertical bonding technique to scale capacity and speed without the traditional power penalty. If the 2029 commercialization target holds, this shift from vertical "skyscrapers" to more efficient 3D lateral arrays could finally break the thermal bottleneck currently throttling the world’s most powerful chips.

- Asia closed higher with KOSPI outperforming +6.8%. EU indices -0.1% to +1.0%. US futures -0.1% to +0.5%. Gold +5.6%, DXY -0.1%; Commodity: Brent -0.2%, WTI -0.1%; Crypto: BTC +1.3%, ETH +0.8%.

Asia

- Reserve Bank of Australia (RBA) raised the Cash Rate Target by 25bps to 3.85% (as expected) to move into tightening. Statement noted that the decision to hike by 25bps was unanimous. Judged inflation was likely to remain above target for some time and it was appropriate to increase the cash rate target. outlook for inflation had been materially revised higher over the forecast period.

- RBA-Statement on Monetary Policy (SOMP) raised end-2026 Trimmed Mean Inflation forecast from 2.6% to 3.2% and raised end-2027 Trimmed Mean Inflation forecast from 2.5% to 2.7%. Projections raised end-2026 GDP growth from 1.9% to 2.1%.

- Australia Dec Building Approvals M/M: -14.9% v -6.4%e.

- South Korea Jan CPI M/M: 0.4% v 0.5%e; Y/Y: 2.0% v 2.0%e; CPI (ex-food/energy) Y/Y: 2.0% v 1.9%e.

- New Zealand Dec Building Permits M/M: -4.6% v +2.7% prior.

- (JP) Japan 10-year JGB Bond auction saw higher yield with lower bid-to-cover ratio.

- Japan PM Takaichi’s LDP now expected to win a majority in the Lower House. Seen winning 233 or more of the 465 seats up for grabs.

Europe

- France passed its 2026 budget after months of wrangling and no-confidence motions. Budget passed using special constitutional powers that avoided it being submitted to parliament for a vote.

Americas

- President Trump stated that he was working hard with House Speaker Johnson to get the current funding deal, which passed in the Senate last week. Stressed that there could be NO CHANGES at this time.

- President Trump stated that the Justice Department would not drop its criminal investigation into Federal Reserve Chairman Jerome Powell.

Trade

- Pres. Trump cut India reciprocal tariffs from 25% down to 18%; India's PM Modi agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.39% at 619.68, FTSE -0.11% at 10,330.57, DAX +0.65% at 24,947.75, CAC-40 +0.18% at 8,195.56, IBEX-35 +0.35% at 18,167.86, FTSE MIB % at #, SMI +0.13% at 13,423.80, S&P 500 Futures +0.19%].

Market focal points/key themes: European indices open higher across the board and advanced through the early part of the session; earnings and metals recovery seen supporting risk appetite; among sectors leading the way higher are materials and industrials; lagging sectors include communication services and telecom; mining subsector supported after recovery in metal prices; Orsted to sell its onshore unit in Europe to CIP; earnings expected in the upcoming US session include Pepsico, Merck, Pfizer, and AMD.

Equities

- Energy: Orsted [ORSTED.DK] -0.5% (analyst downgrade; wins ruling; divestment), Fortum [FORTUM.FI] -3.5% (earnings).

- Financials: Plus500 [PLUS.UK] +7.5% (launches US prediction markets platform), Amundi [AMUN.FR] +5.5% (earnings).

- Industrials: Schaeffler [SHA.DE] -4.0% (downgrade).

- Technology: ASML [ASML.NL] +1.0% (rally in Asian chip names), Siltronic [WAF.DE] -1.0% (prelim earnings).

- Telecom: Publicis [PUB.FR] -7.0% (earnings).

Speakers

- ECB Bank Q4 Lending Survey: Banks expect to tighten conditions further in Q1.

- France Fin Min Lescure: 2026 budget will reduce the budget deficit from 5.4% to 5.0%. The 1.0% GDP growth thus far in 2026 is a good start.

- Russia Dep PM Novak: Have a surplus in fuel supplies; enough diesel and gasoline for home consumption. Saw 2026 GDP growth between 1.0-1.3% compared to 1.0% in 2025.

- Bank of Korea (BOK) Jan Minutes saw one membe believe further rate cuts should be only considered after risks related to Forex and housing markets ease. Another member believed that current level of interest rates was appropriate to meet the medium term inflation target and achieve financial stability. Lastly one member noted monetary policy should continue to focus on supporting economy.

- China Foreign Ministry (MofA): China and Russia held new round of strategic stability talks; to firmly support multilateralism.

- Shanghai Gold Exchange: To adjust certain silver and gold contract margins and price limits; effective Feb 4th.

Currencies/fixed income

- USD was steady as a sense of calm returned to global markets. Greenback has benefited in recent days as the Warsh Fed Chair nomination was seen as a more restrictive stance monetary policy.

- EUR/USD at 1.1800 area with focus on the upcoming ECB meeting on Thursday. Some dealers speculated that ECB might address the strength of the euro. Pair now two big figures away from the key resistance area tested last week.

- USD/JPY holding above the 155.50 area. Japan PM Takaichi’s LDP was now expected to win a majority in the Lower House. Seen winning at least 233. This reinforced stimulus hopes for Japan.

- 10-year German Bund yield last at 2.88%, France 10-year Oat at 3.44% and 10-year Gilt yield at 4.52% 10-year Treasury yield: 4.28%; 10-year JGB: 2.25%.

Economic data

- (TR) Turkey Jan CPI M/M: 4.8% v 4.3%e; Y/Y: 30.7% v 30.0%e; CPI Core Index Y/Y: 29.8% v 29.2%e.

- (TR) Turkey Jan PPI M/M: 2.7% v 0.8% prior; Y/Y: 27.2% v 27.7% prior.

- (FR) France Jan Preliminary CPI M/M: -03% v -0.2%e; Y/Y: 0.3% v 0.6%e.

- (FR) France Jan Preliminary CPI EU Harmonized M/M: -0.4% v -0.2%e; Y/Y: 0.4% v 0.6%e.

- (FR) France Dec YTD Budget Balance: -€124.7B v -€155.4B prior.

- (ES) Spain Jan Net Unemployment Change: +30.4K v -16.3K prior; Net Employment Change M/M: +17.3K v +35.5K prior.

- (BR) Brazil Jan FIPE CPI (Sao Paulo) M/M: 0.2% v 0.4%e.

- (HK) Hong Kong Dec Retail Sales Value Y/Y: 6.6% v 7.9%e; Retail Sales Volume Y/Y: 5.1% v 6.6%e.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) opened its book to sell new 15-year BTP bond via syndication; guidance seen +10bps to Oct 2040 BTP.

- (ZA) South Africa sold total ZAR3.0B vs. ZAR3.0B indicated in 2033, 2038 and 2053 bonds.

- (ES) Spain Debt Agency (Tesoro) sold total €6.13B vs. €5.5-6.5B indicated range in 6-month and 12-month bills.

- (UK) DMO sold £4.5B in 4.75% Oct 2035 Gilts; Avg Yield: 4.585% v 4.456% prior; bid-to-cover: 3.63x v 3.26x prior; Tail: 0.2bps v 0.3bps prior.

Looking ahead

- (US) Total Vehicle Sales (SAAR): No est v 15.0M prior.

- (ID) Indonesia to sell bills and bonds.

- 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 €4.0B in 2.5% Feb 2035 bunds.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month, 6-month and 12-month 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 (BR) Brazil Central Bank (BCB) Jan Minutes.

- 07:00 (BR) Brazil Dec Industrial Production M/M: -0.9%e v 0.0% prior; Y/Y: +1.1%e v -1.2% prior.

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

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

- 08:00 (US) Fed’s Barkin.

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

- 09:40 (US) Fed’s Bowman.

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

- 10:00 (MX) Mexico Jan Manufacturing PMI: No est v 46.1 prior.

- 10:00 (MX) Mexico Dec Total Remittances: $5.2Be v $5.1B prior.

- 10:00 (MX) Mexico Central Bank Economist Survey.

- 10:00 (CO) Colombia Dec Exports: $4.4Be v $4.0B prior.

- 11:00 (DK) Denmark Jan Foreign Reserves (DKK): No est v 651.1B prior.

- 11:30 (US) Treasury to sell 6-Week Bills.

- 13:00 (MX) Mexico Jan IMEF Manufacturing Index: 46.5e v 46.2 prior; Non-Manufacturing Index : 50.0e v 49.5 prior.

- 16:00 (KR) South Korea Jan Foreign Reserves: No est v $428.1B prior.

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

- 16:45 (NZ) New Zealand Q4 Unemployment Rate: 5.3%e v 5.3% prior.

- 16:45 (NZ) New Zealand Q4 Employment Change Q/Q: 0.3%e v 0.0% prior; Y/Y: -0.1%e v -0.6% prior; Participation Rate: 70.3%e v 70.3% prior; Private Wages Q/Q: 0.5%e v 0.4% prior; Pvt Wages (ex-overtime) Q/Q: 0.5%e v 0.5% prior; Average Hourly Earnings Q/Q: No est v 0.7% prior.

- 17:00 (AU) Australia Jan Final PMI Services: No est v 56.0 prelim; PMI Composite: No est v 55.5 prelim.

- 19:00 (NZ) New Zealand Jan ANZ Commodity Price M/M: No est v -2.1% prior.

- 19:30 (JP) Japan Jan Final PMI Services: No est v 53.4 prelim; PMI Composite: No est v 52.8 prelim.

- 19:30 (HK) Hong Kong Jan PMI (whole economy): No est v 51.9 prior.

- 19:30 (SG) Singapore Jan PMI (whole economy): No est v 54.1 prior.

- 20:45 (CN) China Jan RatingDog PMI Services: 51.9e v 52.0 prior; PMI Composite: No est v 51.3 prior.

- 21:30 (HK) Hong Kong to sell combined HK$4.0B in 1-year, 7-year and 20-year bonds.