Today’s Retail Sales data is for December and so should be ‘clean’ from the perspective of the January storms which dramatically reduced consumers ability to spend year-to-date, as illustrated by BofA’s ‘rest of US’ spending indicator…

After a big bounce in November, expectations were for a decent 0.4% MoM rise in retail sales to end the year (despite the plunge in consumer confidence signaled by UMich), but the actual print was a big disappointment with headline retail sales unchanged MoM in December. That is the weakest YoY retail sales growth since Sept 2024…

Source: Bloomberg

Motor Vehicle and Clothing sales tumbled the most while spending on Building Materials and Food & Beverage rose the most…

Core Retail sales was also unchanged MoM (a big miss from ther +0.4% MoM exp)…

Worse still the ‘Control Group’ which plugs into the GDP calculation, fell 0.1% MoM (far worse than the 0.4% MoM expected).

Of course, this December disappointment comes after a strong November so before you panic, perhaps some smoothing and seasonals are at play.

Interestingly, ‘real’ retail sales (admittedly crudely adjusted via CPI) actually decline on a YoY basis in December…

Perhaps it’s time for this alligator’s mouth to snap shut?

Source: Bloomberg

In addition to disappointing retail spending, sentiment among US small-business owners edged down in January for the first time in three months as optimism about the economic outlook eased. The NFIB Optimism index slipped 0.2 point to 99.3, with 7 of the 10 components that make up the gauge decreased, while three increased.

Taxes continued to rank as the single most important problem for small firms, followed by quality of labor.

However, a net 16% of owners said they expect inflation-adjusted sales to improve in the next three months, up 6 percentage points from December and the largest share in a year. Also, a net 15% of owners reported that now would be a good time to expand their business, a six-month high.

US equity futures are lower, reversing earlier gains and trading near session lows in a narrow, jitter overnight session as traders prepare for a heavy slate of earnings and readings of consumer sales and small-business due later. As of 8:15am ET, stock futures were muted, down 0.1% after earlier rising 0.2% and approaching last month’s record levels after an artificial-intelligence-driven selloff and subsequent rebound over the past week. Nasdaq futures drop -0.2% with small caps outperforming as bond yields drops by 1-3bps and the USD is flat. The downbeat mood doesn’t match the bullish tone in Asia, where stocks hit fresh records while European bourses are green across the board. Pre-market, Mag 7 are mixed, Semis are bid with SMH leading IGV as TSMC sees revenue +37% YoY in Jan. Financials and Industrials are leading Cyclical outperformance with healthcare the best performing sector within Defensives. Commodities are weaker but with vol lower, it appears to be profit-taking than what we have seen YTD. Today’s macro data focus is on Retail Sales, weekly ADP, Small Biz Survey, and Import / Export prices. 

In premarket trading, Mag 7 stocks are mixed (Amazon +0.7%, Nvidia +1%, Microsoft +0.6%, Tesla +0.8%, Meta +0.1%, Alphabet -0.2%, Apple -0.4%)

• Amentum (AMTM) falls 9% after the government contractor’s first-quarter revenue missed the average analyst estimate, pressured by contract transitions, divestitures and the government shutdown.
• Amkor Technology (AMKR) rises 3% after the semiconductor manufacturing company’s first-quarter revenue forecast was stronger than expected, prompting several analysts to raise their price targets.
• Clear Channel Outdoor (CCO) climbs 8% after agreeing to be acquired by investors led by Mubadala Capital in an all-cash transaction that values the billboard company at $6.2 billion, including debt.
• Coca-Cola (KO) down 4% after offering a 2026 full-year sales outlook with a bottom end of the range that came in below Wall Street estimates. Atlanta-based Coca-Cola sees organic sales growth of 4% to 5%. Analysts expected 5.01% on average.
• Credo Technology (CRDO) gains 17% after the communications equipment company’s preliminary third-quarter revenue was much stronger than expected.
• Datadog (DDOG) rises 9% after the software company’s fourth-quarter results beat expectations on key metrics.
• DuPont (DD) inches 2% higher after the chemicals company reported fourth-quarter adjusted earnings per share that beat the average analyst estimate as healthcare and water technologies segment sales grew.
• Goodyear Tire (GT) is down 9% after the company forecast that global unit volumes will be down in the first quarter, weighing on the profit outlook for the year.
• Harley-Davidson Inc. (HOG) falls 13% after the company reported an unexpected drop in motorcycle shipments, extending its struggles in the face of weak demand and punishing tariffs.
• Ichor (ICHR) gains 15% after the factory automation equipment company forecast adjusted EPS for the first quarter that beat the average analyst estimate. It also reported better-than-expected 4Q results.
• ON Semiconductor (ON) falls 3% after the chipmaker gave 1Q revenue guidance that was just shy of analyst expectations at mid-point, indicating a continued but slow recovery in demand for auto and industrial chips. Business disposals planned this year are also creating a headwind.
• Regenxbio (RGNX) shares tumble 10% after US regulators rejected its gene therapy for Hunter syndrome, underscoring the hard line the Trump administration is taking on drug approvals for rare diseases.
• Spotify (SPOT) rises 11% after the music streaming company reported a record 38 million monthly active users (MAUs) for the fourth quarter, surpassing its guidance for 32 million.
• Upwork (UPWK) shares are down 22% after the online recruitment company’s first-quarter forecast was weaker than expected.

In corporate news, BP halted share buybacks as pressure on the energy major mounts. Tesla’s head of sales for North America is leaving, exiting a position that’s seen substantial turnover in the past year. The Teamsters Union sued UPS, demanding the company shut down its planned buyout program targeting UPS Teamsters drivers.

Markets are experiencing a moment of calm after an artificial-intelligence-driven selloff and subsequent rebound over the past week. Traders are now waiting to see how this week’s data may shape expectations for the Federal Reserve’s interest-rate path.

“What’s at stake with this week’s US data is to know whether we can move from a K- to a V-shaped rebound,” said Kevin Thozet, an investment committee member at Carmignac. “There are signs that the US consumer’s morale is improving, but we’re not there yet. It’s clearly the objective of the Trump administration ahead of the midterms.”

In political news, President Macron of France said the EU needs to get tougher with Trump, who he said is pushing for the “dismemberment” of the bloc. Trump has also threatened to prevent the opening of a new bridge connecting Michigan and Ontario until the US is given compensation and ownership of half of it.  The EPA plans to repeal a policy that provides the legal foundation for rules regulating greenhouse gas emissions. China’s BYD, the world’s biggest manufacturer of EVs, has joined hundreds of companies in pushing to be refunded for duties paid under Trump’s import tariffs.

On the macro front, economists and analysts expect another solid month of retail sales in December, supported by household spending that has remained resilient despite the high cost of living and a fragile employment backdrop. 

Looking at earnings, out of the 302 S&P 500 companies that have reported so far, 79% have beat analyst estimates, while 17% have missed. More US companies are posting quarterly earnings growth, suggesting a sustained broadening beyond technology heavyweights, strategists at Deutsche Bank write. S&P 500 firms are on track to register a 14.5% increase in 4Q earnings, notching a four-year high. 

In Europe, the Stoxx 600 is up 0.1% and switching between small rises and falls. CAC 40 higher after results from Kering boosted luxury stocks.Here are some of the biggest movers on Tuesday:

• Thule shares gain as much as 15% for their biggest one-day gain in 10 months, after fourth-quarter results from the maker of roof and bike racks surpassed expectations.
• Kering shares gain as much as 14%, the most since March 2020, on hopes that the French luxury group is returning to a path to growth following better-than-expected fourth-quarter sales at its Gucci unit.
• Philips shares jump as much as 11%, the most in more than six months, after the Dutch medical technology firm reported better-than-expected results for the fourth quarter and provided guidance for 2026 which Bernstein analysts called “upbeat.”
• Lanxess shares rise as much as 9.8% as Goldman Sachs upgrades the German firm to neutral from sell, saying it sees less of a risk around the balance sheet and signs of positive economic momentum across the European chemicals sector.
• AstraZeneca shares rise as much as 2.3%, reversing an earlier dip, after the UK drugmaker provided upbeat sales guidance for 2026, which offset the weaker-than-expected core operating profit in the fourth quarter.
• Bellway shares rise as much as 5.4% after the UK housebuilder said it has seen a pickup in demand since the start of the important spring selling season.
• Allianz shares drop as much as 2.9%, leading a fall in European insurance stocks after US peers came under pressure on Monday over fears of artificial intelligence disruption.
• TUI shares fall as much as 7.6%, the most since June, as analysts noted slower bookings revenue from Europe’s biggest travel operator as a reflection of the challenging environment.
• BP shares drop as much as 5.7%, most since June, after the oil company suspended share buybacks to strengthen its balance sheet.

Earlier in the session, Asian stocks rose, as technology shares tracked their US peers higher on a revival of artificial intelligence enthusiasm, and Japan’s market extended gains following Prime Minister Sanae Takaichi’s election victory. The MSCI Asia Pacific Index climbed as much as much as 1.4%, set for a fresh record high and third day of gains. TSMC was among the biggest boosts to the region, with January sales surging 37% from last year. Other winners include fellow AI beneficiaries Softbank Group and Alibaba. 
Stock benchmarks also rose in Hong Kong, India and Philippines while shares in South Korea closed little changed.  Risk sentiment has been on the mend in Asia, as global tech shares rebound from last week’s selloff on concerns over high spending levels and business obsolescence due to AI. Investors continue to assess the unfolding earnings season and indications on the path for global monetary policy.  Japanese stocks got a fresh jolt on expectations that the greater parliamentary majority for Takaichi’s party will give her a mandate to increase fiscal spending and cut the sales tax on food. Among fresh tailwinds for the AI trade, the Financial Times reported that US tech giants are set to get a reprieve from forthcoming US tariffs on imported semiconductors. Indonesian equities edged higher even as index compiler FTSE Russell said it will join MSCI in pausing its index review for the country due to the risk of adverse turnover and uncertainty in determining public float. 

In FX, the Bloomberg Dollar Spot Index is also little changed, with the Norwegian krone rising on a surprise inflation jump, while Norwegian bonds are plunging.The Fed’s Bostic says he’s starting to see signs that confidence in the greenback is coming into question. The Fed’s Miran, meanwhile, said the central bank’s balance sheet should be smaller, but should be used during an economic crisis. Yen, Japanese stocks and long-end bonds all rallied on confidence that higher fiscal spending can be absorbed by markets.

In China, the yuan surged to its strongest level since May 2023 after regulators asked banks to limit their holdings of US Treasuries. The news reinforced a broader trend of diversification away from the dollar, potentially accelerating the repatriation of capital into Chinese assets.

In rates, treasuries hold small gains led by long-end tenors, outperforming European bonds ahead of December retail sales data, with January employment report ahead on Wednesday. Treasury yields are 1bp-3bp richer 3bp across the curve with 2s10s and 5s30s spreads tighter by 1bp and 1.5b. 10-year near 4.18% is 2bp richer on the day, slightly outperforming bunds and gilts.  Gilts leading gains in bonds following a turbulent session of political speculation on Monday,  as UK Prime Minister Keir Starmer shored up his position as UK prime minister.  This week’s Treasury coupon auctions begin with $58 billion 3-year note sale at 1pm in New York: the auction has when-issued yield near 3.55%, about 6bp richer than last month’s, which stopped through by 0.1bp; supply cycle includes 10- and 30-year new issues Wednesday and Thursday. IG dollar issuance slate slate includes Bank of England 3Y and IADB 5Y FRN; Google parent Alphabet Inc. headlined Monday’s calendar with a $20 billion multi-tranche offering. Issuers paid about 2bps in new issue concessions on deals that were 5.4 times covered for the two deals.

Money markets continue to price in two Fed rate cuts for 2026, with the first move seen under the likely leadership of Kevin Warsh after Jerome Powell steps down as chair in May. Traders have been debating whether Warsh would represent a more hawkish choice for the top role than other candidates President Donald Trump considered.

Trevor Greetham, head of multi-asset investing at Royal London Asset Management, said stocks are probably being driven more by interest-rate expectations than corporate results at the moment.

“You can see that by the performance of the technology sector and what’s going on with US Treasury yields,” Greetham said. “Recently, when you’ve had rising bonds, you’ve had tech underperformance, which tells you more about the interest-rate part of the calculation.”

In commodities, gold is edging lower but sticking above $5,000/oz, oil prices choppy with Brent holding around $69/barrel.

The US economic calendar includes weekly ADP employment change (8:15am), December import/export price indexes and retail sales and 4Q employment cost index (8:30am) and November business inventories (10am). Fed speaker slate includes Hammack (12pm) and Logan (1pm)

Market Snapshot

• S&P 500 mini little changed,
• Nasdaq 100 mini little changed,
• Russell 2000 mini +0.2%
• Stoxx Europe 600 little changed,
• DAX little changed,
• CAC 40 +0.5%
• 10-year Treasury yield -2 basis points at 4.18%
• VIX +0.1 points at 17.46
• Bloomberg Dollar Index little changed at 1182.98,
• euro little changed at $1.191
• WTI crude -0.2% at $64.24/barrel

Top Overnight News

• Trump will travel to Beijing during the first week of April for a meeting with Chinese President Xi Jinping. BBG
• White House eyes data center agreements amid energy price spikes, while a draft pact seeks to help ensure data centres do not raise household electricity prices and strain water resources or undermine grid reliability.
• Trump said his pick to lead the Federal Reserve can stoke the economy to grow at a rate of 15%, an exceedingly rosy target that nonetheless underscores the pressure that Kevin Warsh will face if confirmed to the role. BBG
• The Trump administration is planning this week to repeal the Obama-era scientific finding that serves as the legal basis for federal greenhouse-gas regulation, according to U.S. officials, in the most far-reaching rollback of U.S. climate policy to date. WSJ
• Alphabet is selling sterling and Swiss franc-denominated bonds for the first time, including an ultra-rare issue of a 100-year note. This follows a bumper $20 billion debt deal in the US to fund its AI ambitions. BBG
• Indian investors put a record $2.65 billion into gold ETFs in January, slightly more than equity funds, underscoring strong demand for bullion amid geopolitical and monetary risks. BBG
• Emmanuel Macron warned that the EU must stand up to Donald Trump. In an interview with newspapers including Le Monde and the FT, Macron said he anticipates a clash with the US over digital regulation. BBG
• TSM (TSMC) January sales grew at their fastest clip in months, a sign of sustained global AI spending even as concerns persist about an industry bubble. The contract chipmaker for Nvidia Corp. reported a 37% rise in January revenue to NT$401.3 billion ($12.7 billion), above the 30% revenue growth TSMC expects for the full year. BBG
• Keir Starmer has managed to shore up his position for now, but low approval ratings and electoral and party challenges put his leadership at risk — even as the UK economy strengthens. BBG
• The Fed’s Stephen Miran advocated a smaller Fed balance sheet while maintaining the option for large-scale asset purchases during crises. BBG
• US Department of Health and Human Services is to cut USD 600mln in public health grants to blue states: BBG

Trade/Tariffs

• India is reportedly in talks with France, Netherlands, Brazil and Canada over a deal on critical minerals.
• Japanese Trade Minister Akazawa said plan to visit US between February 11th to 14th to discuss Japan’s investment plan.
• US President Trump posted Canada is building a massive bridge between Ontario and Michigan which Canada will own and built it with virtually no US content, adds ” I will not allow this bridge to open until the United States is fully compensated…”.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly higher as the region took impetus from the gains on Wall Street, where the S&P 500 approached closer towards its record levels, and the Nasdaq outperformed as the tech rebound persisted. ASX 200 marginally gained amid continued outperformance in tech, but with advances in the index limited by underperformance in the top-weighted financial sector and weakness in some defensives. Nikkei 225 rallied to a fresh record high near the 58,000 level amid the Takaichi trade and expectations of incoming stimulus, while SoftBank was among the biggest gainers due to its heavy semiconductor exposure. Hang Seng and Shanghai Comp lagged behind their regional counterparts in somewhat mixed trade, with the Hong Kong benchmark led higher by pharmaceuticals, while the mainland was flat amid little fresh drivers.

Top Asian News

• China NPC Standing Committee will hold 21st session on February 25th-26th in Beijing.
• Japanese Finance Minister Katayama said discussions on using entire surplus are planned, but no position has been taken. Indicates that a proposed cut in food sales tax would serve as a temporary solution ahead of the implementation of a new tax credit system.
• China released a white paper on Hong Kong’s practice of safeguarding national security, according to Xinhua.
• TSMC (2330 TT) January (TWD) rev. rose 37% Y/Y to 401.3bln (prev. 335.0bln M/M).
• TSMC (2330 TT / TSM) board has approved the issuance of corporate bonds in Taiwan, of up to TWD 60bln in size.

European bourses (STOXX 600 +0.1%) are mostly firmer, but with slight underperformance in the FTSE 100 (-0.4%), which has been pressured by post-earning losses in BP (-5%) and as precious metals move lower. European sectors are mixed. Chemicals leads followed by Consumer Products whilst Travel & Leisure is found towards the bottom of the pile. For Luxury, Kering (+10%) is boosted by strong earnings, where the Co. highlighted it expects to return to growth and improve margins in 2026. Travel & Leisure has been pressured by TUI (-6%), which highlighted weaker markets and airline trading.

Top European News

• UK Cabinet Office has asked all Ministers not to follow Wes Streeting in publishing their messages with Peter Mandelson.
• Mail on Sunday’s Hodges reported that his understanding is that UK PM Starmer “is planning some sort of fresh attempt to limit what gets published over the Mandelson saga.”.
• French President Macron said the bloc should not be lulled into a false sense of security that tensions with the US over Greenland, technology and trade are over. said:Reiterated called for the EU to raise common debt to raise in AI and quantum computing, energy transition and defence.

FX

• DXY is flat and trades within a 96.79-97.00 range, taking a breather following the losses seen in the prior session. USD-specific newsflow has been lacking this morning, but will pick up later following the release of US Retail Sales and the Employment Cost Index; Fed speak is also due. On the trade front, Politico reported that US President Trump and Chinese President Xi’s summit is reportedly set for the first week of April – though the White House clarified that nothing is set in stone. ING opines that the index could trade within a 96.50-97.50 range over the next few days.
• JPY is the outperformer this morning, in the aftermath of the LDP landslide victory on Sunday. As mentioned in the coverage on Monday, investors are seemingly deriving confidence from the renewed political stability, and trust recent vows by PM Takaichi that she aims to adhere to fiscal responsibility. Moreover, on the monetary policy side of things, markets are increasing their bets of faster BoJ normalisation. JGB pressure also subsided overnight (albeit were already within recent ranges), and the continued strength in the Nikkei will also push JPY bears away. ING, citing local brokers, expects JPY 10tln to enter Japanese equities over the next 3 months – which could see USD/JPY break below 155.00. The pair currently trades around 155.30, and within a 155.08-156.29 range.
• G10s are mixed against the USD; as mentioned, JPY outperforms (+0.3%) whilst the Aussie is the slight laggard, as precious metals pull back a touch. The GBP remains on the backfoot, despite comments from PM Starmer who reiterated that he is to remain in his position – pushing back calls for him to resign. EUR is currently flat; earlier, ECB’s de Guindos failed to move the single currency, as his comments were largely in fitting with the Bank’s latest policy announcement. He stated that the ECB would need to be very vigilant if Chinese exports to Europe increase, via Econostream.
• NOK is stronger this morning after the region’s inflation metrics topped expectations. In brief, Core Y/Y printed at 3.4% (exp. 3%), with the headline metrics also printing above forecasts. Norges Bank has longed reiterated the line that “the policy rate will be reduced further in the course of the year”. Some had seen a cut as early as March/May, whilst SEB saw a cut in June pre-release; following the data the firm said, “we will not change our forecast for a June cut based on this one inflation release, but risks for a later cut have increased”. EUR/NOK is currently lower by 0.4%, and trades at the lower end of a 11.3468-11.4254 range.

Fixed Income

• Benchmarks bounce this morning with JGBs firmer overnight, having picked up off post-election lows, USTs rebounding from the pressure after the China diversification report. JGBs firmer by near 30 ticks at best, back to the week’s 131.60 opening level.
• Gilts have also rebounded, as the immediate pressure on PM Starmer eased slightly after the Cabinet backed him yesterday and no fresh revelations emerged overnight. As such, the benchmark gapped higher by 23 ticks before climbing to a 90.88 peak, firmer by 37 ticks on the day. However, Starmer’s situation remains fraught into the end-February by-election, May local elections and amidst that any fresh revelations about his dealings with Mandelson. On that point, the Mail on Sunday’s Hodges reports that Starmer appears to be planning to limit what is published re. Mandelson, and the Cabinet Office have asked Ministers not to publish their personal messages with Mandelson, after Wes Streeting made his available. No move to the 2031 Gilt auction, which was strong.
• Limited newsflow for EGBs thus far. As such, the benchmark is firmer given the bias from above, but with magnitudes more modest as EGBs were not hit directly by the China-UST report or the Starmer situation on Monday. Bunds moved a touch lower heading into a 2031 Bobl outing, which overall follows an improving trend of German outings, but still remains soft; EGBs remain firmer by a handful of ticks.
• Back to USTs, the benchmark is firmer by a handful of ticks at a 112-10 high, looking to last week’s 112-16+ peak. The docket is headlined by data (weekly ADP, Retail Sales & ECI) before Wednesday’s Payrolls & Friday’s CPI; additionally, 3yr supply is scheduled just after 2026 voters Hammack and Logan.
• Germany sells EUR 3.811bln vs exp. EUR 5bln 2.50% 2031 Bobl: b/c 1.65x (prev. 1.41x), average yield 2.40% (prev. 2.47%), retention 23.8% (prev. 23.38%)
• UK sold GBP 3.75bln 4.125% 2031 Gilt: b/c 3.94x (prev. 3.50x), average yield 4.001% (prev. 3.980%), tail 0.2bps (prev. 0.2bps).
• Netherlands sold EUR 1.845bln vs exp. EUR 1.5–2bln 3.25% 2044 Green DSL: average yield 3.388% (prev. 3.176%).
• Alphabet (GOOGL) launches its first GBP debt sale with a 100-year note. To also sell GBP-denominated 3-year, 6-year, 15-year and 32-year bonds.
• Japan sold JPY 250bln 10yr I/L JGB; b/c 3.38x, (prev. 3.46x), yield at lowest accepted price 0.458% (prev. 0.113%). Lowest accepted price 96.05 (prev. 99.00).
• Alphabet (GOOGL) launches its first CHF debt sale, according to Bloomberg.

Commodities

• Crude benchmarks have held onto the majority of Monday’s gains, with WTI holding above USD 64/bbl while Brent regains the USD 69/bbl mark. Geopolitical risk premium continues to be priced into the oil market, despite US-Iran tensions easing somewhat following their indirect talks in Oman.
• Nat gas futures have continued to pull back from the surge higher following the Arctic storm, due to warmer weather forecasts in the US. Henry Hub futures continue to near USD 3/MMBtu while Dutch TTF holds below EUR 35/MWh.
• Spot gold continues to hold above the USD 5k/oz, with Monday’s session managing to close above the level for the first time since the selloff on January 30th. The yellow metal sold off modestly at the start of the APAC session but has since clawed back earlier losses and is only seeing modest losses of 0.2%, at the time of writing.
• 3M LME Copper trades muted and in tight ranges, as the Chinese New Year holiday looms. Buying of the red metal is expected to be light going into, and throughout, the holiday period, with buying expected to resume when the festive period ends.
• Bank of China (3988 HK) is to increase margin requirements for gold deferred contracts, effective from the 11th of February.
• Venezuela’s largest refinery, Amuay, is out of service after a power blackout, according sources.

Central Banks

• US President Trump said he doesn’t know if the Powell probe is worth holding up Warsh, adds Powell is incompetent, but the question is if he’s corrupt.
• Fed’s Miran (Voter, Dove) said no significant tariff-driven inflation seen so far, and interest rates should be much lower than current levels.
• US President Trump said in a Fox Business taped interview that the US economy can grow at 15% if Fed nominee Walsh does a job that he’s capable of.
• BoJ is to submit nominee to replace board member Noguchi on February 25th.
• ECB’s de Guindos said the ECB would need to be very vigilant if Chinese exports to Europe increases, describes the economy as more resilient and inflation is moving towards target, via Econostream. Reiterates the current level of rates are appropriate. Recent euro strength is fully consistent with the assumptions included in the ECB’s projections.
• Monetary Authority of Singapore chief economist said monetary policy stance remains appropriate.

Geopolitics: Ukraine

• Russia’s Kremlin announce that they have no clear date for the next round of discussion with Ukraine.

Geopolitics: Middle East

• Iran warns of destructive influence on diplomacy ahead of Israeli’s PM Netanyahu’s trip to the US.
• White House officials said US President Trump does not support Israel annexing the West Bank, adds stable West Bank is key to Israel’s security and align with the administration’s peace goals.

Geopolitics: Other

• EU Defence Commissioner Kubilius said the EU needs to take responsibility for its defence and that replacing US strategic enablers with European ones should be a priority.
• China holds 2026 work conference on Taiwan affairs, while Chairman of the Chinese People’s Political Consultative Conference Wang Huning said will resolutely crack down on Taiwan independence, according to Xinhua.
• China’s embassy in London said it has consistently opposed UK interference in China’s internal affairs, including the BNO issue. said:Urges British side to follow the general trend and cease political interference, while it accused Britain of resorting to tricks and described its behaviour as contemptible.
• Philippines ambassador to Washington said China seems ready to find ways to ease South China Sea tensions through cooperation.
• US military said it carried out a strike on a vessel in the eastern Pacific, killing two and leaving one survivor.
• US Interior Secretary Burgum said Greenland deal is moving forward with progress.

US Event Calendar

• 6:00 am: United States Jan NFIB Small Business
• 8:30 am: United States Dec Import Price Index MoM, est. 0.1%
• 8:30 am: United States 4Q Employment Cost Index, est. 0.8%, prior 0.8%
• 8:30 am: United States Dec Retail Sales Advance MoM, est. 0.4%, prior 0.6%
• 8:30 am: United States Dec Retail Sales Ex Auto MoM, est. 0.4%, prior 0.5%
• 12:00 pm: United States Fed’s Hammack Speaks on Banking and Economic Outlook
• 1:00 pm: United States Fed’s Logan Speaks at Asset Management Derivatives Forum

DB’s Jim Reid concludes the overnight wrap

A rare moment of peace descended yesterday: not a single new disruptive AI model has appeared since at least last Thursday! The lull gave me just enough time to investigate who “Bad Bunny” is, having been entirely unaware of their existence before the Super Bowl halftime show. After a few clips from the most streamed global artist of 2025 it’s safe to say I won’t listen again. Talking of rabbits, the market bounce continued yesterday, with the S&P 500 (+0.47%) closing just shy of its record high, while in Europe the STOXX 600 (+0.70%) hit another record high. Tech stocks led the way, posting a strong rebound from their recent slump, and the S&P 500’s software component (+3.36%) had its best daily performance since May last year, with little sign of the concern that affected markets last week. The rebound also supported other asset classes including gold (+1.88%) but overall it was a fairly quiet day on the news front. Treasury yields saw a modest decline following some unusual labour market comments from NEC Director Kevin Hassett ahead of tomorrow’s jobs report.

Hassett said on CNBC that markets should expect “slightly lower jobs numbers”, but that this “shouldn’t trigger any panic.” While this was more a comment on the general jobs trend amid slowing population growth and rising productivity, it still created some fears over a weaker number for the delayed January jobs report tomorrow, particularly after the JOLTS survey last Thursday showed December job openings at their lowest since 2020. Treasuries saw a modest rally following Hassett’s interview, with 2yr yields closing -1.3bps lower at 3.49% and 10yr yields -0.5bps at 4.20%. They are -0.8bps and -1.5bps lower again this morning.

Yields had been higher earlier, and 30yrs still closed +0.7bps at 4.86% following a Bloomberg report that Chinese regulators had directed financial institutions to limit purchases of US Treasuries. So that limited the performance of bonds but like the rest of the curve, 30yrs are rallying (-1.5bps) this morning.  The dollar is flat this morning but yesterday fell -0.77%, posting its second-worst day of 2026 so far.
By contrast, US equities had a strong day, with the S&P 500 (+0.47%) closing just 0.2% from its all-time high. Technology stocks led the gains after last week’s struggles, with Oracle (+9.64%) the second best-performer in the S&P500 though its shares are still down over -50% from their September peak. The Mag-7 were up +1.10% led by Microsoft (+3.11%) and Nvidia (+2.50%). And the equal-weighted version of the S&P 500 (+0.07%) reached a new record, even as its advance was limited by losses in defensive sectors including healthcare (-0.86%) and consumer staples (-0.86%).

Earlier on, UK politics was back in the headlines, with gilts coming under fresh pressure amidst a further round of questions about PM Starmer’s position. Gilts had struggled from the open, given the weekend news that Starmer’s chief of staff had resigned. The selloff then reached its peak after Labour’s leader in Scotland publicly called on Starmer to resign, with investors concerned that a new PM may be more likely to ease the fiscal rules and borrow more. At the intraday peak, 10yr gilt yields were up by over +8bps, but this move faded back to just +1.2bps higher after the entire cabinet publicly came out in support of Starmer. Similarly, the 30yr gilt yield was +9bps intraday, before closing up just +1.0bps. Still, UK assets in general underperformed, with the FTSE100 (+0.16%) eking out only a marginal gain.

There was stronger performance elsewhere in Europe, with multiple indices like the STOXX 600 (+0.70%), FTSE MIB (+2.06%), and DAX (+1.19%) all posting strong gains. Sovereign bonds also rallied, with yields on 10yr bunds (-0.1bps), OAT (-0.4bps) and BTPs (-1.6bps) falling back. Those moves came as markets slightly dialled up the chances of another ECB rate cut this year from 22% to 29%. While ECB President Lagarde said little new on policy compared to last week’s press conference, Bundesbank President Nagel said that while there was no current need for the ECB to react to below target inflation, they could adjust policy in either direction.

Earlier on, we also heard that Banque du France Governor Villeroy will be stepping down from his position on June 1, before the end of his term in October 2027. Villeroy said his decision to step down was a “personal” one but it means that President Macron will now get to nominate the next Governor for a new six-year term, rather than the pick being left until after the French Presidential election due next spring. It also adds to the upcoming changes of some of the key figures on the ECB Governing Council, including Vice President de Guindos who is finishing his term in May.

Elsewhere in markets, Brent crude oil prices rose +1.45% to $69.04/bbl after the US Maritime Administration warned US ships to stay “as far as possible” from Iranian territory. So that added to fears about a potential escalation, with oil prices continuing to fluctuate on various headlines. Meanwhile, silver (+7.15%) and gold prices (+1.88%) also rebounded, with gold closing at $5,058/oz. This morning Brent and Gold are back down just under half a percent with Silver down -2.5%.

Japanese equities continue their climb this morning with the Nikkei (+2.34%) and Topix (+1.89%) extending record levels in the wake of Prime Minister Sanae Takaichi’s landslide victory in the Lower House. JGBs are remarkably calm with 10 and 30yr yields -3 to -4bps lower. The Yen continues to edge higher (+0.3%) to 155.30 having been as low as 157.73 near the open yesterday as markets first reacted to the likely record election victory. So all calm for now. Elsewhere, the Hang Seng (+0.54%) and the KOSPI (+0.53%) are both higher with other markets flatish, including US and European futures. 

To the day ahead now, data includes US January NFIB small business optimism, Q4 employment cost index, December retail sales, import price index, export price index, November business inventories. We’ll also hear the Fed’s Hammack and Logan speak. Earnings include Coca-Cola, AstraZeneca, and Barclays. Finally, the US will hold a 3yr Treasury auction

BP Plc shares fell nearly 6% in London trading after the oil and gas giant said its board has suspended share buybacks to allocate excess cash to strengthening the balance sheet and has withdrawn guidance to return 30% to 40% of operating cash flow to shareholders.

In an earnings report released earlier, BP said it is suspending share buybacks, ending its $750 million quarterly repurchase program.

“The board has decided to suspend the share buyback and fully allocate excess cash to accelerate strengthening of our balance sheet,” the oil and gas giant said, adding, “This creates a strong platform to invest with discipline into our distinctive deep hopper of oil & gas opportunities.”

The board’s move to scrap share buybacks and prioritize balance sheet health makes BP the only top-five oil major without an active repurchase program.

CFO Kate Thomson said in an interview that a decision to restart the quarterly repurchase program depends on incoming CEO Meg O’Neill, who takes over in April.

BP also withdrew its guidance that shareholder distributions would be around 30% to 40% of operating cash flow and said 2026 spending will come in at the low end of its prior guidance.

The fourth quarter capped a volatile year for the company, with shares still languishing and yet to break above their 2023 highs. Tuesday’s news sent the stock down about 5.7% in London.

Bloomberg noted that in the fourth quarter, activist investor Elliott Investment Management was pushing for drastic change, culminating in Chairman Albert Manifold ousting CEO Murray Auchincloss.

The shakeup at BP comes after it pulled back from failed green ventures and refocused BP on its core oil and gas business.

The shift was correct, but “increased rigor and diligence are required to make the necessary transformative changes to maximize value for our shareholders,” Chairman Manifold told investors in late 2025.

Barclays Plc analyst Lydia Rainforth told clients earlier that the “story for BP from here is about the focus on rebuilding trust in capital allocation.”

At UBS, analyst Josh Stone maintained his “neutral” rating on the stock.  

French luxury group Kering jumped as much as 14% in Paris trading, the biggest intraday move in almost six years, after better-than-expected fourth-quarter sales at its Gucci unit. The UBS Luxury basket (UBXELUX) rose nearly 2%, driven largely by hopes of a turnaround at the luxury house.

Fourth quarter sales showed revenue fell about 10%, slightly better than the Bloomberg Consensus estimate of a 10.4% decline. It was Kering’s smallest decline in two years, reinforcing Wall Street analysts’ view that trends are stabilizing and the pathway to recovery may be near. This matters because Gucci still accounts for about 60% of Kering’s profits, so even a marginal improvement carries outsized weight.

RBC analyst Piral Dadhania told clients results “confirmed modest further improvements,” and the focus now shifts to “the extent to which Kering can engineer a return to growth in a still fairly challenging luxury environment.”

At UBS, analyst Justinus Steinhorst told clients that Kering’s results “boosted hopes of a turnaround,” lifting the UBXELUX basket.

Here’s more from Steinhorst:

The UBS Luxury basket {UBXELUX} is up 1.9% on Kering results after Q4 sales fell less than anticipated, boosting hopes of a turnaround. Positioning exacerbating the move, Kering scored as a 2 sigma crowded short. The Luxury basket scores as a 0.5 sigma crowded short down from neutral at the start of the year.

Jefferies analyst James Grzinic said the results were likely “fractionally” better than the buy side expected. He added the latest numbers “confirm gradually reducing pressures at a time of more supportive industry conditions.”

Deutsche Bank analyst Adam Cochrane said the earnings should be enough to remind investors of the “direction of travel,” citing a decent sequential improvement from Q3 to Q4.

Cochrane highlighted management’s expectation of returning to growth and improving margins, though there was no explicit commentary on the 2026 outlook. He added that valuation already prices in sales and margin recovery, but still leaves some potential upside in the stock.

Here’s the earnings snapshot of the fourth quarter (courtesy of Bloomberg):

Comparable revenue -3%, estimate -4.77% (Bloomberg Consensus)

• Gucci revenue on a comparable basis -10%, estimate -10.4%

• Yves Saint Laurent revenue on a comparable basis 0%, estimate -2.58%

• Bottega Veneta revenue on a comparable basis +3%, estimate +0.64%

• Other Houses revenue on a comparable basis +3%, estimate -2.35%

• Eyewear & corporate revenue on a comparable basis +2%, estimate +3.34%

Revenue EU3.91 billion, -9.1% y/y

• Gucci revenue EU1.62 billion, -16% y/y, estimate EU1.61 billion

• Yves Saint Laurent revenue EU735 million, -4.5% y/y, estimate EU710 million

• Bottega Veneta revenue EU467 million, -2.7% y/y, estimate EU458.3 million

• Other Houses revenue EU789 million, -3.5% y/y, estimate EU766.2 million

• Eyewear & corporate revenue EU329 million, -2.7% y/y, estimate EU377.9 million

2025 Results:

Recurring operating income EU1.63 billion, -33% y/y, estimate EU1.68 billion

• Gucci recurring operating income EU966 million, -40% y/y, estimate EU911 million

• Yves Saint Laurent recurring operating income EU529 million, -11% y/y, estimate EU504.5 million

• Bottega Veneta recurring operating income EU267 million, +4.7% y/y, estimate EU257.8 million

• Other Houses recurring operating loss EU112 million vs. loss EU9 million y/y, estimate loss EU83.2 million

Recurring operating margin 11.1% vs. 14.5% y/y, estimate 12.1%

Dividend per share EU3, estimate EU3.71

Kering shares in Paris jumped as much as 14%, the biggest intraday since March 2020. Luxury rivals also got a boost.

CEO Luca de Meo took over at Kering in September and plans to unveil his strategic plan for the luxury group in April. He has already reshaped Gucci’s leadership and announced a $4.8 billion sale of Kering’s beauty business to L’Oréal SA to reduce debt.

Trust in institutions shapes how societies function—from whether people follow public health guidance to whether they believe election results. Yet confidence in governments and the media has diverged sharply across countries.

This visualization, via Visual Capitalist’s Niccolo Conte, shows whether people trust the media or the government more, based on responses from nearly 34,000 people across dozens of countries.

The data comes from the 2026 Edelman Trust Barometer. Respondents were asked whether they trust the government and the media to “do what is right.”

High Government Trust in the Middle East and Asia

Countries such as Saudi Arabia, the UAE, China, and Singapore show higher trust in government than in media.

Saudi Arabia tops the list, with an 89% government trust score compared to 66% for media—a 23-point gap.

Media Trusted More in Many Western Democracies

In much of Europe and the Americas, trust tilts toward the media rather than the government.

Countries like France, Spain, the U.S., and the UK all show higher media trust scores, even though overall trust levels are relatively low.

France stands out at the bottom of the ranking, with just 30% trusting the government versus 40% trusting the media.

Large Trust Gaps Signal Institutional Tension

Kenya shows the largest pro-media gap, with media trusted by 70% compared to just 47% for government.

Conversely, Sweden, Japan, and South Korea lean more toward government trust, though with lower absolute scores than high-trust countries in Asia or the Middle East. Ireland is the lone country where trust in media and government is equal.

If you enjoyed today’s post, check out Trump Trade Shake-Up: Which Countries Are Winning Vs. Losing? on Voronoi, the new app from Visual Capitalist.

Via Remix News,

France and Europe have four years to prepare for war, said Fabien Mandon, chief of the defense staff of the French Armed Forces, who cited Russia as Europe’s biggest threat.

His speech at a major naval conference outlined that France, as well as its allies, must take into account that this war will break out in the near future and that the French military must be ready by 2030.

“Today, we are preparing for war,” he said, according to BreakingDefense.

During his speech at the naval conference, Mandon stated that France is not prepared for war and the country had “an insufficient number of ships and armaments.”

He stated the nation needs “more missiles with greater range and lethality.” 

Mandon recently made headlines for stating that Europeans and the French must be ready to lose children in a war, stating:

“You have to accept that you will lose your children,” which is necessary to defeat Russia during a November speech at the National Congress of French Mayors.

His words caused national shock, while the representatives of the parliamentary parties protested sharply in connection with his comment.

As in November, he named Russia as the main source of the threat of war.

Read more here…

How does the cost of living vary across countries in 2026?

To find out, this graphic, via Visual Capitalist’s Dorothy Neufeld, visualizes Numbeo’s Global Cost of Living Index, which measures the price of everyday expenses, including rent, relative to New York City (baseline of 100).

If a country has an index score of 80, prices are 20% lower than in New York. Scores above 100 indicate higher everyday costs.

While inflation has eased in many regions, the cost of living remains a major global challenge. Across 28 countries, home prices have risen more than 50% since 2020, and grocery costs have risen sharply in countries such as Mexico, Germany, and Malaysia, continuing to strain household budgets worldwide.

Global Cost of Living by Country

Below, we show the cost of living index for 155 countries or territories in 2026, highlighting stark differences in everyday costs around the world.

Bermuda has the highest cost of living worldwide, a British Overseas Territory synonymous with high-end real estate, luxury tourism, and offshore wealth.

Many of the world’s most expensive places, in terms of cost of living, are islands and often tax shelters or financial centers. The U.S. Virgin Islands, Jersey, and Cayman Islands all make the top 10 in the cost of living index. High concentrations of wealth, combined with heavy reliance on imports, push up prices across these island economies.

Switzerland ranks third overall, with Zurich named the world’s most expensive city in 2026. Beyond a strong Swiss franc, high wages and elevated living standards significantly drive up costs.

Singapore has the highest cost of living in Asia, placing fifth worldwide. Limited land availability has fueled high real estate prices, while the country’s reliance on imports—around 90% of its food—adds further cost pressures.

The U.S. ranks 19th globally, with a cost of living index score of 56.3. By comparison, the global median index score in 2026 stands at 30.8.

To learn more about this topic, check out this graphic on the world’s most unaffordable housing markets.

Submitted by Thomas Kolbe

Friedrich Merz finally has a positive headline. In December, industrial orders surged. But behind the costly statistical recovery lies nothing more than the buildup of a debt-financed defense sector.

It took some lead time, but the Chancellor now finally has a success story. For December 2025, Germany’s Federal Statistics Office reported a 7.6% month-on-month jump in industrial orders. November had already provided a first boost with a rise of over 5%—right in the midst of a severe economic crisis.

Industrial production, meanwhile, fell 1.9% in December, sliding back into negative territory—a fact largely lost in the media’s cheerleading. That the once-proud German automotive industry saw a 6.3% drop in orders also barely registered amid the general sigh of relief.

But once you dissect the data and strip out large orders, a very different picture emerges. The apparent surge in orders shrinks to a mere 0.9%.

What happened? Experience shows that this comes from “Other Vehicle Manufacturing,” which jumped roughly 9.5%. This category is dominated by defense equipment. In short: the federal government’s debt-financed special fund has found its way into German military production.

Or put differently: the government can now take a public victory lap after plunging citizens into massive debt to generate a short-term statistical effect in the super-election year 2026. Nobody wants to appear a total failure.

What is celebrated as an economic turnaround is in reality a statistical masking of the transition from market-based order to a debt-fueled administrative economy.

The military buildup is basically the last gasp of a policy that, in stubborn Keynesian mode, keeps trying to replace the gaps in Germany’s industrial economy with a “managed economy.” This strategy ties up resources and personnel, diverting exactly the capital needed for real investment under better conditions.

Goods are produced that no one demands on the market. A few pockets get richer. It’s classic client politics in the Berlin–Brussels style. Nothing new in the West, really.

The Real Situation

The real state of the German economy is shown in construction. The HCOB Germany Construction PMI, a monthly leading indicator, fell in January to 44.7 points. Values below 50 signal contraction.

After a brief uptick in December to 50.3, mostly due to energy network investments, the German construction sector plunged back into recession in January—mirroring the entire Eurozone.

For four years now, this central economic sector has been essentially frozen. Investments are held back; new projects, especially commercial ones, are nowhere to be found. The sector remains in prolonged stagnation.

Excessive energy costs, Kafkaesque regulation from Brussels and Berlin, and stifling interventions like rent caps are the recipe for a recession set in stone.

Expect billion-euro programs for subsidized public housing soon, purely to create a statistical illusion of recovery.

System-Compatible Criticism

The federal government can finally breathe. Expensive for taxpayers, but apparently worth it politically. Applying Keynesianism to the defense industry is among the dumbest of political moves. Driving a nation deeper into debt to produce goods that either rust or are used destructively is maximal political nihilism—bordering on madness.

The fact that the state-friendly media celebrates this “recovery” implies two things: complete media submission to government goals, and statistical validation to continue reshaping German society into a green, militarized command economy.

Silence from German business leadership confirms that politics has morally inoculated this strategy. The perpetuated narrative of an imminent Russian invasion now legitimizes the defense buildup.

Similarly, under the Green Deal, years of effort have embedded the fairy tale of saving the world via CO₂ reduction deep in public consciousness, with most voters still supporting the course. Criticism now appears climate-hostile, irresponsible, and anti-scientific.

Compliance is no longer enforced through coercion, but through reshaping business rationality. Every new regulation or CO₂ levy creates companies that survive only within the state’s subsidy architecture.

Result: media-friendly, calibrated language dominates discussions of “bureaucracy relief.” It is system-compatible fine-tuning, subtly orchestrated by Brussels. No one risks reputational loss in this highly repressive media environment.

Business has learned to couch criticism to avoid upsetting the Kaiser while remaining eligible for support. We see conditioned obsequiousness leading us steadily toward a new socialism.

* * * 

About the author: Thomas Kolbe, a German graduate economist, has worked for over 25 years as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.

Europe is widely known for its generous work-life balance policies, and paid time off is a major part of that reputation.

Across the continent, employees are legally entitled to a combination of paid vacation days and public holidays, with totals varying widely by country.

This map, via Visual Capitalist’s Niccolo Conte, shows the minimum total number of paid leave days in Europe in 2025.

The data for this visualization comes from World Population Review.

Europe’s Most Generous Leave Policies

Several countries stand out for offering more than 40 days of paid leave annually. Andorra tops the ranking with 45 days, including 31 paid vacation days and 14 paid public holidays.

Countries such as France, Luxembourg, Malta, and Russia also provide more than 40 days of total paid leave.

The regional average sits at 33 days, and many countries fall close to this level. Nations such as Czechia, Hungary, Croatia, Slovenia, and Belarus offer between 32 and 34 days of paid leave per year.

Lower Leave Totals at Europe’s Edges

At the lower end of the spectrum, San Marino offers the fewest paid leave days at just 10, followed by Jersey, Moldova, and Montenegro, all of which fall well below the European average.

Meanwhile, countries like Germany, Belgium, and Ireland sit near the middle, offering around 30 days of total paid leave—still higher than many non-European economies.

If you enjoyed today’s post, check out The Rise of Senior Populations by Region on Voronoi, the new app from Visual Capitalist.

Authored by Andrew Korybko,

It’s possible that the US – whether under Trump 2.0 or whichever administration, including a possible Democrat one, comes afterwards – might agree to transfer its tactical nukes to Estonia in parallel with a possible British F-35A deployment to the latter’s base there.

The Daily Mail cited Pentagon funding proposals to report in late December that the US plans to once again store tactical nukes in the UK upon renovating Lakenheath Airbase. The project is expected to cost $264 million and be completed by 2031. They added that “The U.K. will receive its (12 F-35A) jets at the end of this decade and it will be the first time it has had an air-launched tactical nuclear weapon since 1998. While it will own the jets, the U.S. will retain ownership of the nuclear weapons they come with.”

Although they also wrote that “[this] represents confirmation that American nuclear weapons will return to Britain for the first time since President Barack Obama withdrew them 17 years ago”, that was assumed in June after two announcements. The Ministry of Defense revealed that London will purchase 12 F-35As from the US and join NATO’s dual-capable nuclear aircraft mission. The Defense Minister then confirmed in November that the US would retain control over the nuclear weapons involved.

What makes the Daily Mail’s report significant is that it was published amidst the ongoing Russian-US talks over Ukraine as Putin’s Special Envoy Kirill Dmitriev met with Trump’s Special Envoys Steve Witkoff and Jared Kushner in Miami that weekend to discuss this. The signal being sent was that any grand deal with Russia for reforming the European security architecture after their proxy war ends won’t result in the US hanging its NATO allies out to dry as proven by its planned nuclear deployment to the UK.

Some of its troops in Europe might be redeployed to the Western Hemisphere or the Asia-Pacific, which are respectively the new National Security Strategy’s first and second priorities, but this isn’t akin to “selling Europe out” to Russia or agreeing to “a new Yalta”. The purpose would solely be to help alleviate some of Russia’s concerns for better managing their security dilemma all while reassuring NATO allies of its reliability through a continued presence on the mainland and the resumed nuclear one in the UK.

Readers should also remember that the US already stores nuclear weapons in Belgium, Germany, Italy, the Netherlands, and Turkiye so once again storing them in the UK shouldn’t be seen as too provocative by Russia since it’s geographically more distant from its borders than all of the aforesaid NATO countries. Nevertheless, resuming the UK’s role in the US’ nuclear-sharing program comes with additional risks due to London’s military presence at Estonia’s Tapa Army Base, whose government wants to host its F-35As.

The Estonian Defense Minister first floated this in July, the strategic significance of which was analyzed here at the time, and then reaffirmed his interest in September. It’s therefore possible that the US – whether under Trump 2.0 or whichever administration, including a possible Democrat one, comes afterwards – might agree to transfer its tactical nukes to Estonia in parallel with a possible British F-35A deployment there. The UK would then function as the tip of the US’ nuclear spear against Russia.

To be clear, these plans remain in the realm of speculation for now, but they also can’t be ruled out. If a fellow MAGA ally such as Vice President JD Vance succeeds Trump, then this likely won’t happen unless in the far-fetched event of ties with Russia deteriorating for whatever reason, but a Democrat successor might flirt with this or actually go through with it precisely to provoke a crisis. Russia is accordingly expected to closely monitor this deployment due to its potentially outsized strategic significance.