US December industrial production data wraps up the week

In focus today

• In the US, December industrial production data is due for release. Leading manufacturing indicators pointed towards muted activity growth towards the end of the year.
• In Sweden focus shifts to a speech by Erik Thedéen on the topic "Why has consumption been weak?". This has obviously been the case over the past couple of years, but in recent figures we can now see that household consumption is indeed picking up. The outlook for household consumption in 2026 is bright, supported by tax cuts, the Riksbank's interest rate cuts during 2025 and the recovering labour market. Thedéen's speech will be published on the Riksbank homepage at 8.30 CET.

Economic and market news

What happened overnight

US-Taiwan trade deal puts Asian chip stocks in focus. The US and Taiwan have signed a semiconductor-focused trade agreement, lowering reciprocal US tariffs on Taiwanese goods to 15% and securing over USD 250bn in Taiwanese investment in US chip production, led by companies like TSMC. The deal aligns with Washington's strategy to reshore supply chains and bolsters domestic manufacturing. It follows the recent US decision to impose a 25% tariff on specific AI chips to further incentivise local production. While economically significant, the agreement is likely to heighten geopolitical tensions, with China expected to resist deeper economic ties between the US and Taiwan.

What happened yesterday

In the US, both the Philly and NY Empire manufacturing indices exceeded expectations in January. While these indices are highly volatile month-to-month, making single prints less significant, new orders and CAPEX plans appear to be improving. Weekly jobless claims also surprised positively, with only 198k claims against the expected 215k. However, releases near year-end are heavily influenced by seasonal adjustments.

In Sweden, the final December inflation figures confirmed the flash estimate, showing CPIF excluding energy at 2.3%, CPIF at 2.1%, and CPI at 0.3% y/y. Core inflation (CPIF) significantly undershot expectations of 2.6%, mainly due to lower-than-expected prices for furniture and household goods. This decline in goods inflation may partly reflect Sweden's stronger currency.

In Norway, the SSB industrial confidence indicator showed improvement, with Q1 expectations rebounding after a weak Q4 2025. Production and new orders increased across all sub-sectors, alongside a slight rise in employment. While capacity utilization stabilized, it remains far below historical average. Overall, the report was slightly more optimistic but is unlikely impact markets. 

In Germany, the economy grew 0.2% y/y in 2025, as expected, following a 0.5% y/y contraction in 2024. This marks the first year of growth since 2022, driven by both private and government consumption while exports and investments continued to decline. Early estimate for Q4 2025 indicates 0.2% q/q SA growth. Although modest, it is encouraging that that the German economy ended the year with growth.

In the UK, November GDP growth reached 0.3% m/m (cons: 0.1% m/m), supported by solid performance in the service sector. This improvement follows a weak second half of 2025 and reduces the urgency for further BoE rate cuts. Currently the March meeting is priced just below 50-50 for a cut.

Equities: Equities rose yesterday supported by strong earnings reports and solid macro data. Global equities rose 0.2% with S&P500 rising +0.3%, Nasdaq +0.2% and Russell2000 +0.9%, cementing the changed equity narrative with small caps outperforming here at the start of 2026. In fact, it was the 10th consecutive day of small caps beating the S&P500, which has not happened since 2008. With the positive economic data releases, strong earnings, higher equities and the higher yields, the market reaction can best be described as risk-on. And this, also when looking at the sector performance of the equity market (only comms were down). Overnight, futures are in green by about 0.3%.

FI and FX:  European FX generally had a poor session yesterday with the Scandies and the CEEs leading losses. EUR/USD traded down towards the 1.16-level yesterday due to an underperformance in US yields driven by stronger US data. The dollar has weakened slightly overnight, with the USD/EUR trading around 1.1610 and USD/JPY moving lower overnight as the Japanese finance minister Katayama voiced concerns over recent weakness, suggesting an intervention could be considered.

Yesterday, we published our first edition of Reading the Markets Nordics this year in which we present our 12 fixed income and foreign exchange top trade ideas across our Nordic markets for 2026.