In focus today
The US January CPI report, that was originally scheduled for Wednesday, will be released today. We think headline inflation slowed down to +0.2% m/m SA (+2.4% y/y) driven by lower gasoline prices and base effects related to high energy prices a year ago. The effect will likely reverse in February, as both gasoline and particularly US natural gas prices rose towards the end of month. We think that core inflation remained relatively steadier at +0.3% m/m SA (2.5% y/y). The apparent slowing in the annual growth rate is also mostly explained by base effects.
In the euro area, the second estimate of GDP growth in 2025Q4 will also reveal how much employment changed in the final quarter of last year. National data show that employment rose sharply in Spain while declined marginally in France and Germany. We thus expect aggregate euro area employment rose 0.1% q/q. The continued growth in employment is positive for the economy, but the low employment growth rate is also showing that the labour market is cooling.
The Munich Security Conference will kick off today, so we might hear some interesting takes on security policies over the weekend.
Economic and market news
What happened overnight
In China, new home prices fell 0.4% m/m (-3.1% y/y) in January, marking the sharpest annual decline in seven months. Despite government measures aimed at reviving the property sector, demand remains weak, particularly in smaller cities with heavy inventories. The prolonged downturn has weighed on household wealth, dampened consumption, and impacted property developers struggling with debt and unfinished projects.
The US and Taiwan finalised a trade agreement reducing Taiwan’s tariffs on US goods and committing to nearly USD 85bn in US purchases over four years. The deal maintains a 15% US tariff on Taiwanese imports and lowers tariffs on over 2,000 Taiwanese export items. Taiwan’s parliament must still approve the agreement, which aims to strengthen supply chain resilience in high-tech sectors.
What happened yesterday
In the UK, GDP grew by 0.1% q/q in Q4 2025, missing expectations for 0.2%, as uncertainty surrounding November’s budget weighed on activity. Business investment fell by nearly 3%, reflecting hesitancy amid economic and political challenges. Manufacturing drove growth, while the services sector stagnated, and construction contracted. Weak data have strengthened expectations for a potential Bank of England rate cut in March. The next key focus will be inflation data on Wednesday, which will be particularly interesting following the dovish tone at the Bank of England’s meeting last week.
In the US, the Congressional Budget Office (CBO) released updated budget projections that now fully account for President Trump’s policy changes implemented last year. The projections show that the OBBBA will add USD 4.7 trillion to the cumulative deficit over 10 years, partially offset by USD 3.0 trillion in tariff revenues. As a share of GDP, the deficit forecast for 2026 was lifted to -5.8% (from -5.5%), and 2027 to -5.7% (from -5.2%), reflecting faster real growth and higher inflation expectations lifting nominal GDP estimates.
The Trump administration has paused several key tech restrictions targeting China ahead of an April summit with President Xi Jinping. The measures include curbs on telecom imports and Chinese-linked data centre equipment. While the move aims to stabilise trade relations, critics warn of growing national security risks in sensitive sectors like AI and energy infrastructure.
In Norway, the Q1 oil investment survey revealed that oil companies expect to invest NOK 255.3 billion in 2026 and NOK 201.1 billion in 2027, indicating nominal growth of 0.6% and 2.0%, respectively. Adjusting for cost inflation, the figures suggest slightly stronger growth than Norges Bank’s December MPR volume estimate for 2026 at -3%, and significantly stronger for 2027 at -6%.
As expected, there was no new monetary signals in NB governor Wolden Bache’s annual address last night. The most interesting point short term is that Norges Bank is getting more transparent: ‘In the course of this year, we will begin to publish a summary of the Committee’s discussions.’ This could improve market guiding and avoid some of the volatility occasionally seen on the day of the MPC-meeting the last couple of years
Equities: Equities sold off yesterday, led by the US, as another round of AI-disruption narratives ignited cross-sector de-rating. It is increasingly evident that macro and earnings are not currently in the driver’s seat; anything that rhymes with potential AI disruption is being indiscriminately repriced.
Transport was yesterday’s casualty. A seemingly contained corporate headline cascaded into a broader re-rating of the segment, ironically sparked by news from a company that itself could plausibly be seen as disruption-vulnerable. Russell 3000 Trucking fell ~7%, while Transportation within the Stoxx 600 underperformed at -3.6%, the weakest industry group on the day.
Notably, US hardware underperformed software for the first time in an extended period.
Style-wise, value and small caps outperformed, while large cap and growth remains under pressure within the AI-disruption trade. This rotation is thematic rather than cyclical. We will elaborate further in Sunday’s editorial.
In the US yesterday, Dow -1.3%, S&P 500 -1.6%, Nasdaq -2.0% and Russell 2000 -2.0%.
Asian equities are softer this morning. Still, barely six weeks into the year, Asia is outperforming the US by ~15% YTD.
Futures point to a firmer open in Europe and a softer in the US.
FI and FX: Yesterday’s risk-off environment implied a classic risk-off pattern in G10 FX, with the CHF, JPY, and USD outperforming. EUR/USD remains below the 1.19 mark, with the broad USD consolidating. USD/CNY continues its relentless decline, moving from 6.95 ten days ago to 6.90 now. Yields in the US declined significantly, with the 2-year Treasury reverting to pre-NFP levels and the 10-year Treasury falling even below its pre-NFP level. In the euro area, the decline in yields was more modest, with the 2-year Bund yield down 1bp and the 10-year Bund yield 2bp lower. In this week’s Reading the Markets Sweden, we take a look at recent weeks’ SEK rally through the lens of our in-house time-zone analysis and financial flow data.
 driven by lower gasoline prices and base effects related to high energy prices a year ago. The effect will likely reverse in February, as both gasoline and particularly US natural gas prices rose towards the end of month. We think that core inflation remained relatively steadier at +0.3% m/m SA (2.5% y/y). The apparent slowing in the annual growth rate is also mostly explained by base effects.){kind=link}