Swedish inflation figures conclude the week

In focus today

In Sweden, flash estimates for the Swedish January inflation will be released today. We expect a decrease in core inflation from 2.3% y/y in December to 1.9% y/y in January, which would mark the first month in four years with core inflation below the Riksbank's 2.0% target. At the same time, we foresee an increase in headline inflation due to elevated electricity prices in January with CPIF expected at 2.4% y/y (2.1% y/y in December).

Also in Sweden, the Swedish Debt Office will publish the outcome of central government payments for January. Since the latest borrowing report from November the outcomes have so far been in line with their prediction.

Note that the US Jobs Report, including nonfarm payrolls, that was up for release today has been postponed to Wednesday next week due to past weekend's government shutdown.

Economic and market news

What happened overnight

In Japan, President Trump announced his endorsement of current Prime Minister Takaichi, the first female premier, ahead of the election on Sunday. Takaichi's coalition shows strong results in opinion polls and are expected to win on Sunday.

 What happened yesterday

In the euro area, the ECB decided to leave its key policy rates unchanged with the deposit facility rate at 2.00%, as widely expected by markets and consensus. Lagarde accentuated the positive factors of the economy such as low unemployment while downplaying the role of the inflation undershooting and strengthened euro. We maintain our call that the ECB will leave the deposit rate unchanged at 2.00% throughout both 2026 and 2027. For further information, see ECB Review - Accentuate the positive, 5 February.

In the UK, the Bank of England kept the interest rate unchanged at 3.75% in an unexpectedly narrow vote split of 5-4, which was a dovish surprise. In their report, they concluded that the economic outlook for the UK involves less growth and inflation than previously anticipated. This also entails that we continue to aim for the next rate cut in April but also pencil in another cut in November.

In the US, there was a big downside surprise as the JOLTs job openings came in at 6.542m in December (Cons: 7.200m, Nov: 6.928m). Hence, the US ratio of job openings to unemployed fell to just 0.87 in December. Such cooling is usually a good predictor for weakening wage growth and may be a concern for the private consumption outlook and, all else equal, supports the case for earlier cuts from the Fed.

In the US, the Challenger report also came in weaker than expected with job cuts totalling 108,435 in January. Generally, layoffs always pick up in January when seasonal holiday workers are laid off, but this was the largest number of layoffs announced for any given January since 2009. Amazon's 16k announced job cuts explained part of the uptick, but otherwise layoffs were broad-based across sectors.

Finally, the US state department has unveiled a programme to fund MAGA-aligned think-tanks and charities across Europe. The funding is expected to channel money into programs that promote American values and is connected to the 250-year celebration of American independence. The funding comes amid a general pullback of US foreign aid.

Bitcoin fell to its lowest level since October 2024 with a decline of 7% on Wednesday and a total decline so far this week of 11%. The fall comes amid higher volatility in markets and sell-off in tech stocks but could also be linked to Trump's nomination of Kevin Warsh as Fed Chair.

Equities: Global equities were markedly lower yesterday at -1.2%, with the majority of the move happening upon US open. Unlike the previous trading days this week, where one could pinpoint idiosyncratic drivers, the sell-off within equities were more like a classic risk-off with materials, consumer discretionary and IT with the biggest declines. S&P ended the day -1.2%, while Nasdaq was 1.6% lower, and Russell 2000 1.8% lower.

Overnight, Asian equities are weaker, as well as US futures. Alongside Amazon's earnings report they hiked their AI capex plans and announced a USD 200bn capex plan. Similar boost to capex was also seen from Microsoft and Alphabet when they reported. Amazon communicated that the money "predominantly" would go to its cloud services, reigniting the software vs hardware theme discussed in a previous morning espresso. Amazon dropped about 10% in the aftermarket.

FI and FX: Despite a slight softening of broad USD yesterday, the week has been characterised by a broad-based dollar rebound. EUR/USD has stabilised around 1.18 and could well remain in consolidation mode in the coming weeks. GBP had a rough session yesterday, as the Bank of England delivered an array of dovish signals at their policy meeting, although rates were left unchanged. Softer US labour market data sent US Treasury yields clearly lower yesterday, whereas European yields held mostly steady on ECB's firm hold. Scandies have had a couple of tough sessions, as the SEK suffers from the slightly dovish Riksbank minutes from earlier this week, whereas the NOK finds headwinds in global factors.