Highlights
U.S. stocks ended the week lower, pressured by widespread concerns that artificial intelligence could disrupt many industries. Technology shares were particularly affected, with the Nasdaq Composite falling 1.37%, while the S&P 500 and Dow Jones Industrial Average also declined by 1.39% and 1.15% respectively. Mid-cap stocks held up better but still ended in negative territory. Value stocks continued to outperform growth stocks, extending a strong run relative to their counterparts. Labor market figures released during the week showed stronger-than-anticipated hiring. The Bureau of Labor Statistics reported that employers added 130,000 jobs in January—the highest monthly increase in more than a year and above forecasts. The unemployment rate edged down to 4.3%. The unexpectedly solid January report led investors to reassess the outlook for interest rates. Expectations for near-term rate cuts diminished, with markets increasingly anticipating that the Federal Reserve could keep rates unchanged at least through midyear. Consumer price data showed that inflation cooled in January. Prices rose more slowly both month over month and year over year compared with December, largely due to falling energy costs. However, core inflation, which excludes food and energy, increased at a slightly faster monthly pace, indicating that underlying price pressures remain. Crossing the Atlantic, European equities experienced volatility but finished the week relatively flat overall, even after briefly reaching record highs. Investors weighed strong U.S. employment data alongside concerns about the economic implications of artificial intelligence. For the week, the pan European STOXX 600 shed 0.28%. Economic data showed that the eurozone continued to grow modestly in the fourth quarter of 2025, with Spain leading among major economies. Employment in the region also increased more than expected, though Germany recorded a slight decline in jobs. In the UK, political uncertainty affected investor sentiment, while economic growth remained modest. GDP rose slightly in the fourth quarter, with manufacturing expanding but construction weakening. Retail sales increased year over year at the fastest pace in several months. In Asia, Japanese equities advanced sharply-with the Nikkei adding almost 5% for the week-after Prime Minister Sanae Takaichi’s Liberal Democratic Party secured a decisive victory in the February 8 lower house election, winning more than two-thirds of parliamentary seats. The outcome signalled strong public support for policies centered on fiscal expansion, investment, and targeted tax reductions. Meanwhile, Chinese equities rose modestly before the Lunar New Year holiday period, after which mainland markets closed temporarily. Inflation data indicated that consumer price growth slowed, while producer prices remained in deflation, reflecting persistent weak demand and ongoing price pressures in the industrial sector. The People’s Bank of China reaffirmed plans to maintain an accommodative monetary policy, signalling the possibility of further reductions in interest rates and bank reserve requirements to support economic growth.
Data Highlights
Unemployment Rate (Jan) fell to 4.3%, 10bps less than the previous and consensus of 4.4%. Non-Farm Payrolls (Jan) rose from 48K to 130K, the market had only priced an increase to 66K. Continuing Jobless Claims (Jan) rose from 1841K to 1862K, the market had expected an increase to 1850K but were proven as underestimated. Inflation Rate YoY (Jan) fell 30bps from the previous 2.7%, down to 2.4%, 10bps more of a drop than the 2.55% consensus. CHF Inflation Rate YoY (Jan) stayed still at 0.1%, as expected. The GBP GDP YoY (Dec) was revised from 1.4% to 1.2%, last week showed a worse than expected result as this time around it fell to 0.7%, the consensus had missed by 40bps, expecting only a 10bps drop. CNY CPI YoY (Jan) fell to 0.2% from 0.8%, the market had only priced a fall to 0.4%. JPY PPI YoY (Jan) fell in line with consensus to 2.3%, from 2.4%.
Week Ahead
GBP Unemployment Rate (Dec), Germany Inflation Rate YoY (Jan), CAD Inflation Rate YoY (Jan), CAD CPI Median YoY (Jan) – Tuesday | NZD Interest Rate Decision, GBP Inflation Rate YoY (Jan), ZAR Inflation Rate YoY (Jan) – Wednesday | AUD Unemployment Rate (Jan), USD Initial Jobless Claims (Feb), USD Continuing Jobless Claims (Feb), USD Balance of Trade (Dec) – Thursday | JPY Inflation Rate YoY (Jan), Germany PPI YoY (Jan), USD Core PCE Price Index YoY (Dec) – Friday
