Take Five: Near or far, wherever the markets are
The upcoming week will be dominated by the Japan snap election, key U.S. economic data, earnings season and a decline in some tech stocks.
Rae Wee, Lewis Krauskopf, Karin Strohecker and Lucy Raitano from London, and Rae Wee, in Singapore, will tell you everything you need to know about the financial markets.
A FREE HAND
On Sunday, Japan will vote and Prime Minister Sanae Taichi hopes that 'the nation of over 120 millions people' will give her a strong mandate so she can deliver on the promises of increased spending.
The election for the lower house is one of most unpredictable in recent years. Polls indicate that Takaichi’s Liberal Democratic Party will gain a majority.
A strong showing for the LDP could allow Takaichi's to expand stimulus. This could increase concerns about Japan’s finances, and push government bond yields up further.
Investors also sold the Japanese yen. The recent decline in the yen prompted a suspected rate check from Japan and U.S.
AI SPLITS INTO WINS AND LOSSES
Cisco Systems and Siemens Energy, a German company, both report their earnings on Wednesday.
Barclays claims that the trade has "seen extreme dispersion" as a result of the AI boom.
The market is more confident in identifying winners and losers. Stocks in?software and data analysis companies that are falling show how sensitive the market is to AI disruption. The stocks have plummeted as traders focused on the threat of AI models that are becoming more powerful.
AI enablers and companies that contribute to the global AI data center build-out have done better. It is wise to keep your hats on, especially with the threat of a "bubble" popping and markets at record highs.
3/ DELAYED DATA DUMP
Investors should get a more critical view of the U.S. economy after a double dose of important economic reports. The recent three-day shutdown of the government delayed the releases a bit.
According to a survey, the January non-farm payrolls, which is due Wednesday, will show an increase in jobs of around 70,000, as per a recent report. Federal Reserve noted signs of stabilisation on the labour market when it kept rates unchanged last month and paused its easing cycle.
The January Consumer Price Index, which is one of the most closely monitored measures to assess inflation trends, will be released two days later.
Investors are assessing the impact of the newly appointed Fed chair Kevin Warsh who may take over in time for the Fed meeting in June. The markets currently see that meeting as the most likely time for a rate reduction.
From Munich, with love
On Thursday, the Munich Security Conference will begin. The annual conference, now in its seventh decade saw its most significant - and controversial - meeting in 2025. A series of U.S. declarations set the stage for the tectonic change in international order that is still ongoing today.
Geopolitical issues are hotter than ever - from Iran, to Ukraine, and Greenland. Questions about the future of NATO also loom large.
Sources say that the meeting will go beyond its usual scope. The European Central Bank wants to expand access to euro liquidity for more countries as part of efforts aimed at boosting the international role of the single currency.
Christine Lagarde will most likely make the announcement. She is expected to open a conference roundtable about trade dependences.
5/ Is the time of European banks in the sun over?
European banks were among the top performing stocks in the last 12 months, with a gain of more than 60%, thanks to rising profitability, low default rates and the influx of cash for shareholders.
Barclays, NatWest and UniCredit in the UK and Italy will report their 2025 earnings soon after BNP Paribas and Deutsche Bank have already reported generally positive numbers. Lloyds and the French lender also increased their profitability targets.
Analysts warn that the good times will not last forever, particularly if European economies begin to slow. Spain's BBVA shares dropped 7% on Thursday, after the bank set aside 19% extra cash to cover loan losses during the fourth quarter compared to a year ago.
Investors are also looking for signs of a willingness to spend excess capital, such as the recent Santander acquisition of U.S. lender Webster Financial.
(source: Reuters)
