Markets
We’ve turned every stone in search of market-relevant news today, but it was nowhere to be found. European stock markets trade 0.5% lower with US indices probably also prone to some possible correction going into the long US weekend. Markets are closed across the Atlantic on Monday in observance of Martin Luther King Day. US President Trump’s bravado in mind favours erring on the side of caution. We’ve only had two weekends so far in 2026, but with the Maduro kidnapping and the Powell subpoena, Trump made sure both of them counted. The dollar holds near recent best levels with EUR/USD currently changing hands at 1.1615, holding just above technical support coming from the 200d moving average at 1.1589. The trade-weighted dollar (DXY) at 99.25 already broke this gauge earlier this month. Core bond yield curves show a very modest bear steepening with yield changes varying between +1 bp at the front end and +2.5 bps at the very long end in both Germany and the US. Consensus-beating December US industrial production data add to a growing list of positive eco surprises lately but had no immediate impact on trading. Production rose by 0.4% M/M (vs +0.1% consensus) with the November figure also being upwardly revised from 0.2% to 0.4%. Capacity utilization rose to 76.3% (vs 76% consensus) from revised 76.1% in November
“A spirit of dialogue”. The slogan of the annual World Economic Forum in Davos is a wakeup call to restore trust and order in an ever more fragmented world. Next week’s keynote speeches and panel discussion center around five questions. How can we operate in a more contested world?, How can we unlock new sources of growth?, How can we better invest in people?, How can be deployed innovation at scale and responsibility? and How can be build prosperity withing planetary boundaries? AI governance, trade resilience and geopolitical dialogue resonate through all of these questions. The lengthy list of high-profile economic, political, business and civil society leaders features US President Trump. Bloomberg reports that he will address the WEF next Wednesday in a key plenary address. Flagship central bank panels are on the agenda on Thursday with ECB president Lagarde already confirmed. Other market highlights next week include Chinese Q4 GDP data on Monday, outdated US PCE deflators (Thursday), the first batch of important UK eco data of this year (labour market report, inflation numbers and retail sales), January PMI surveys (Friday) and central bank meetings in Norway (Thursday) and Japan (Friday).
News & Views
The French government suspended parliamentary talks on the 2026 budget bill since they were headed for failure anyway. Budget minister Amelie de Montchalin put the blame with the far-left and -right parties for sabotaging efforts to reach a compromise over the last three months. Attention now shifts to tonight, when Lecornu plans to put a new fiscal plan on the table and which de Montchalin said will be passed without a vote in parliament. Using Article 49.3 has been tried before, however, and resulted with the help of the Socialists in the downfall of Barnier. Lecornu had previously vowed not to do that. Instead he could invoke Article 47 and push through the budget by executive order. But it has never been tested, has some legal issues that need clarifying and in any case already triggered the ire of the Socialist Party. They are pivotal in the survival of Lecornu’s minority government.
Bulgaria is headed for snap elections, the eighth in just five years’ time. President Radev made the announcement after the third party he spoke to form a government had rejected the offer. The previous administration collapsed over anti-corruption protests. An interim cabinet will be appointed before the next ballot date will be made public. The Gerb party of the outgoing government continues to lead in the polls but there has been very little movement overall in voting behaviour over the last couple of years, dimming prospects of a stable governing alliance. This could change if president Radev would enter the race. He is Bulgaria’s most popular politician and had voiced strong support for the protesters. He recently hinted at establishing his own political party but has yet to do so.
