The Big Three
US consumer confidence rose to 91.2 in February, beating the 87.4 consensus, but the Expectations Index at 72.0 remained below 80 for the 13th consecutive month — a threshold historically associated with recession risk. The Present Situation Index fell 1.8 points to 120.0 as consumers flagged prices, trade, and politics as top concerns.
Fed Governor Cook delivered a landmark warning that monetary policy “may not be able to ameliorate” AI-driven unemployment. Speaking at NABE, she said a productivity boom could push unemployment higher without creating slack — meaning rate cuts would stoke inflation rather than help displaced workers. She called for education and workforce policy instead.
Section 122 tariffs took effect at 12:01 a.m. Tuesday at 10% — not the 15% Trump announced on Saturday. The “TACO” trade (Trump Always Chickens Out) kicked in as markets staged a relief rally: the Dow gained 370 points (+0.76%), the S&P 500 rose 0.77%, and the Nasdaq added 1.04%. AMD surged 8.8% on a multiyear Meta AI deal.
Economic Dashboard
| INDICATOR | ACT | EST | PREV | VERDICT |
|---|---|---|---|---|
| CB Consumer Confidence (Feb) | 91.2 | 87.4 | 89.0 | ▲ Beat |
| Richmond Mfg Index (Feb) | −10 | −8 | −6 | ▼ Miss |
| House Price Index MoM (Dec) | 0.1% | 0.3% | 0.7% | ▼ Miss |
| S&P/CS HPI 20-City YoY (Dec) | 1.4% | 1.3% | 1.4% | ▲ Beat |
| Dallas Fed Services (Feb) | −3.2 | — | 2.7 | ▼ Contraction |
| 2-Year Note Auction | 3.455% | — | 3.580% | ▲ Strong demand |
| Business Survey (Feb) | 102 | 104 | 105 | ▼ Miss |
| CBI Distributive Trades (Feb) | −43 | −27 | −17 | ▼ Miss |
| Consumer Confidence (Jan) | 80.5 | — | 75.9 | ▲ Improvement |
| Core CPI 1st Half Feb | 0.22% | 0.27% | 0.43% | ▲ Beat (cooler) |
| Current Account (Jan) | −$8.36B | −$6.60B | −$3.36B | ▼ Miss |
| FDI (Jan) | $8.17B | $7.00B | −$5.25B | ▲ Beat |
| Corporate Services Price YoY (Jan) | 2.6% | 2.6% | 2.6% | ● In-line |
| CPI YoY (Jan) | 3.8% | 3.7% | 3.8% | ▼ Hot |
| Construction Work QoQ (Q4) | −0.1% | 1.2% | 0.1% | ▼ Miss |
Europe
France darkens as UK retail collapses
The French business climate deteriorated sharply. INSEE’s manufacturing survey fell to 102 from 105, missing the 104 consensus, as production expectations and order books weakened. The broader composite slipped to 97, below the long-term average of 100. Services were hit hardest, plunging three points to 95 as forward-looking demand balances reached their lowest since February 2021.
UK retail was worse. The CBI Distributive Trades Survey crashed to −43 in February from −17, far below the −27 estimate — the weakest reading in over a year. BoE Governor Bailey spoke Tuesday, noting that services inflation had not eased as much as expected, complicating the rate path.
Spain was the bright spot. Consumer confidence surged to 80.5 in January from 75.9, the highest in months. On the continent, German car registrations fell 6.6% YoY in January after a 9.7% surge in December, while Italian registrations jumped 6.2% YoY. French registrations dropped 6.6%. European equity markets were muted, with the Stoxx 600 edging above the flatline as the “TACO” trade took hold.
Verdict
Bearish tilt. France’s broadening deterioration — manufacturing, services, and employment all weakening — offsets last week’s German Ifo optimism. The UK’s retail collapse adds pressure on the BoE. Spain is the lone bright spot, but not enough to move the needle for the continent.
United States
Confidence beats but the recession signal persists
The Conference Board’s consumer confidence headline at 91.2 crushed the 87.4 estimate, but the details were mixed. The Expectations Index rose 4.8 points to 72.0, still below 80 for the 13th straight month — a historically reliable recession predictor. The Present Situation Index slipped to 120.0. Consumers cited prices, inflation, and trade policy as their top concerns.
Manufacturing continued to weaken. The Richmond Fed index fell to −10 from −6, worse than the −8 estimate, marking its 12th consecutive month in contraction. Shipments plunged to −13 from −5 and local business conditions collapsed to −15 from −8. The Dallas Fed services index flipped negative at −3.2 from 2.7, adding to the regional weakness.
Housing decelerated. The FHFA House Price Index rose just 0.1% MoM in December versus the 0.3% estimate, the slowest pace in over a year. The S&P/Case-Shiller 20-city index held at 1.4% YoY, narrowly beating the 1.3% estimate but down sharply from 2024’s pace. The 2-year Treasury auction cleared at 3.455%, well below the prior 3.580%, reflecting strong demand for safety.
Fed Governor Cook’s NABE speech was the day’s policy bombshell. She warned that AI is triggering “the most significant reorganization of work in generations” and that the Fed’s tools may be inadequate — rate cuts could stoke inflation without helping structurally displaced workers. Separately, Section 122 tariffs took effect at 10%, not the 15% Trump had promised, as CBP issued a customs notice contradicting the president’s Truth Social post.
Markets rallied on the tariff relief. The Dow gained 370 points (+0.76%) to 49,175, the S&P 500 rose 0.77% to 6,890, and the Nasdaq added 1.04% to 22,864. AMD surged 8.8% after Meta announced a multiyear AI data center deal. Home Depot rallied on an earnings beat. Software stocks bounced from Monday’s AI panic. The 10-year yield held at 4.06%. Gold fell roughly 3% as the risk-off trade unwound. Bitcoin slumped below $63,000.
Verdict
Cautiously constructive near-term, structurally uncertain. The tariff downshift to 10% bought breathing room and the confidence beat helped sentiment. But Cook’s AI warning, the 13-month expectations streak below 80, and Richmond Fed’s deepening contraction point to mounting structural risk beneath the surface. Nvidia earnings Wednesday is the next inflection point.
Asia-Pacific
Australia’s sticky inflation complicates RBA path
Australia’s January CPI came in hot at 3.8% YoY, above the 3.7% estimate and unchanged from December. The trimmed mean held at 3.4% versus the 3.3% expected. This complicates the RBA’s easing path just weeks after its first rate cut — further loosening looks difficult while inflation remains well above the 2–3% target band.
Australian construction work fell 0.1% QoQ in Q4, badly missing the 1.2% estimate and signaling a sharp slowdown from the 0.1% prior. The residential sector in particular is struggling under high borrowing costs. The AUD weakened after the CPI print as markets reassessed the pace of RBA easing.
Japan’s corporate services price index held steady at 2.6% YoY, in line with expectations. South Korean markets surged, with the Kospi gaining over 2% to touch a new high. China markets remain closed for Chinese New Year. The Section 122 tariff regime taking effect at 10% rather than 15% provided a modest relief for APAC exporters, though the 150-day expiry window injects uncertainty.
Verdict
Mixed. Australia’s stubborn inflation limits the RBA’s room to cut further, but the construction weakness argues for easing. Korea’s equity rally is a bright spot. The 10% tariff relief helps APAC exporters near-term, but the pending 15% hike and 150-day window keep the structural risk alive.
Latin America & Africa
Mexico inflation cools, Brazil’s current account blows out
Mexico’s first-half February core CPI printed 0.22%, below the 0.27% estimate and sharply down from 0.43% in the prior period. The cooler-than-expected reading supports Banxico’s easing cycle and suggests the tariff pass-through to domestic prices remains muted. Headline CPI was slightly hotter at 0.25% versus 0.21%, but the core trajectory is what matters for policy.
Brazil’s January current account deficit blew out to −$8.36 billion versus the −$6.60 billion estimate, more than doubling from December’s −$3.36 billion. The deterioration reflects a wider trade gap and seasonal import pressures. Foreign direct investment partially offset the damage at $8.17 billion, beating the $7.00 billion estimate and swinging massively from December’s −$5.25 billion outflow.
Argentina’s economic activity surprised massively to the upside: December GDP proxy rose 3.5% YoY versus the 0.5% estimate, flipping from November’s −0.3% contraction. The data signals Milei’s reform program is gaining traction. South Africa’s leading indicators eased to 117.2% from 118.4%, suggesting modest growth deceleration ahead.
Verdict
Constructive for Mexico, cautious for Brazil. Mexico’s cooling core inflation gives Banxico room to cut and CUSMA shields it from the worst of Section 122. Brazil’s current account blow-out is a warning sign despite strong FDI. Argentina’s GDP surprise is the region’s standout data point.