The Big Three
Economic Dashboard
| INDICATOR | ACT | EST | PREV | VERDICT |
|---|---|---|---|---|
| Initial Jobless Claims | 212K | 217K | 208K | ▲ Beat |
| Continuing Claims | 1,833K | 1,860K | 1,864K | ▲ Beat |
| KC Fed Manufacturing Index | 10 | — | −2 | ▲ Surge |
| 7-Year Note Auction | 3.790% | — | 4.018% | ▲ Strong demand |
| Natural Gas Storage | −52B | −36B | −144B | ▲ Larger draw |
| EZ Economic Sentiment (Feb) | 98.3 | 99.8 | 99.3 | ▼ Miss |
| EZ Services Sentiment (Feb) | 5.0 | 7.5 | 7.2 | ▼ Collapse |
| EZ Consumer Inflation Expect. | 25.8 | — | 24.2 | ▼ Jump |
| EZ M3 Money Supply YoY (Jan) | 3.3% | 2.9% | 2.8% | ▲ Beat |
| Italian 10-Year BTP Auction | 3.31% | — | 3.44% | ▲ Rally |
| Tokyo Core CPI YoY (Feb) | 1.8% | 1.7% | 2.0% | ▲ Cooler |
| Japan Retail Sales YoY (Jan) | 1.8% | 0.1% | −0.9% | ▲ Massive beat |
| Japan Industrial Production MoM | 2.2% | 5.5% | −0.1% | ▼ Miss |
| UK GfK Consumer Confidence | −19 | −15 | −16 | ▼ Plunge |
| Canada Current Account (Q4) | −$0.7B | −$8.2B | −$5.3B | ▲ Blowout |
| Brazil IGP-M Inflation MoM | −0.73% | −0.60% | 0.41% | ▲ Deflation |
Europe
Services confidence craters as Lagarde warns on inflation perceptions
The eurozone sentiment picture deteriorated sharply. The ESI fell to 98.3 from a near-three-year high of 99.3 in January, badly missing the 99.8 consensus. Services confidence collapsed to 5.0 from 7.2, a four-month low that drove virtually all the damage. Industrial sentiment weakened to −7.1 from −6.8, also missing the −6.1 estimate.
The inflation expectations jump is a worry for the ECB. Consumer inflation expectations surged to 25.8 from 24.2, while selling price expectations rose to 11.5 from 10.3. Lagarde addressed EU lawmakers Thursday, noting perceived inflation diverges sharply from actual readings and warning the trade situation remains difficult due to tariffs and the stronger euro.
Monetary conditions are loosening beneath the surface. M3 money supply growth accelerated to 3.3% YoY, smashing the 2.9% consensus and up from 2.8%. However, loans to non-financial corporations eased to 2.8% from 3.0%, suggesting the credit impulse is still uneven. Italian BTPs rallied with the 10-year clearing at 3.31%, down from 3.44%.
European equities held near record highs despite the sentiment miss. The Stoxx Europe 600 finished flat at 633, with the Euro Stoxx 50 adding 0.2% to 6,185. Earnings drove the action: LSEG surged 9% on a £3 billion buyback, Stellantis jumped 6.8% despite posting its first-ever annual loss, and Puma gained over 9% on its strategy reset.
Verdict
The services collapse and surging inflation expectations are a toxic combination for the ECB. ING rightly notes the January reading was the outlier and February’s level is still above long-term trend — but the direction matters. The ECB’s hold decision looks increasingly uncomfortable with growth softening and perceptions of inflation diverging from reality.
United States
Nvidia’s sell-the-news plunge exposes AI valuation fatigue
Nvidia’s paradox dominated the session. The chipmaker posted record $68.1 billion in quarterly revenue, beat on every line, and guided Q1 to $78 billion — yet the stock dropped 5.5% in its worst day since April. Investors are in “prove it” mode on AI capex sustainability, and even blowout numbers weren’t enough to satisfy elevated expectations.
The labour market remains stubbornly tight. Initial claims came in at 212K, below the 217K consensus, while continuing claims fell 31K to 1.833 million. The four-week average nudged up to 220.25K but remains historically low. The KC Fed manufacturing index surged to 10 from −2, the best reading in months.
Bond demand was strong across the curve. The 7-year auction cleared at 3.79%, well below the prior 4.02%, signalling robust appetite for duration. Natural gas storage drew 52 billion cubic feet against a 36B estimate, the larger-than-expected draw supporting energy prices. Fed Vice Chair Bowman spoke but offered no new policy signals ahead of the March FOMC.
Markets diverged sharply by sector. The S&P 500 fell 0.54% to 6,908.86 and the Nasdaq dropped 1.18%, while the Dow scraped out a 17-point gain. Futures pointed lower overnight as Salesforce tumbled 2% and Zscaler shed 10% after hours. PPI data looms Friday as the last inflation read before the March FOMC.
Verdict
Rock-solid labour data and surging KC Fed manufacturing paint a fundamentally healthy economy. However, the Nvidia sell-off reveals a market no longer willing to pay up for AI growth — the valuation reset is underway, and the Nasdaq is tracking a 2.5% February decline, its worst month since March 2025.
Asia-Pacific
Tokyo CPI drops below BoJ target, UK confidence plunges
Japan’s inflation picture weakened meaningfully. Tokyo core CPI eased to 1.8% YoY, slipping below the BoJ’s 2% target for the first time since October 2024. National headline CPI fell to 1.5% from 2.1%, the lowest since March 2022. Energy subsidies and easing food prices are driving the deceleration.
The BoJ rate hike narrative is losing momentum. The government nominated two reflation-leaning academics to the policy board, while hawkish member Takata still pushed for further tightening. Governor Ueda signalled careful assessment at March and April meetings. The 2-year JGB auction cleared at 1.244%, slightly below 1.253% prior.
The consumption picture was surprisingly strong even as factory output disappointed. Retail sales surged 1.8% YoY vs. the 0.1% consensus, a massive beat. Large retailers’ sales jumped 4.1% MoM. However, industrial production rose only 2.2% MoM against a 5.5% forecast, and the forward outlook is weak: −0.5% expected for February and −2.6% for March.
UK consumer confidence plunged to −19 from −16, badly missing the −15 consensus and erasing two months of gains. Rising unemployment — now at 5.2%, the highest since early 2021 — is hitting personal finance perceptions hard. The major purchase index fell four points to −14, a grim signal for retailers heading into spring.
Verdict
Japan’s sub-2% CPI print and dovish board nominees push the next BoJ hike well into Q2 at the earliest. The retail sales beat is a bright spot, but the factory output miss and deteriorating production outlook expose the tariff drag on Japan’s export engine. The UK’s confidence crash puts the BoE under renewed pressure to deliver spring rate cuts.
Latin America & Canada
Brazil swings to deflation, Canada’s current account stuns
Brazil’s wholesale inflation swung into outright deflation. The IGP-M index came in at −0.73% MoM, deeper than the −0.60% expected and a sharp reversal from January’s +0.41%. Commodity price weakness and a stabilising real are driving producer prices lower even as consumer-facing inflation remains elevated above 4%.
The BCB’s National Monetary Council met Thursday against a backdrop of persistent fiscal concerns. Brazil’s primary deficit remains above 1% of GDP, and general government debt is projected to hit 95% of GDP in 2026 — extremely high for an emerging market in an election year. The Selic rate at 13.25% continues to weigh on growth expectations.
Mexico’s labour market held firm. The unemployment rate was unchanged at 2.60% in January on a seasonally adjusted basis, though the non-adjusted figure ticked up to 2.70% from 2.40%. Near-full employment gives Banxico room to focus on inflation, where core readings are trending lower and supporting the case for further rate cuts.
Canada’s Q4 current account was a blowout surprise. The deficit narrowed dramatically to just −$0.7 billion from −$5.3 billion, smashing the −$8.2 billion consensus. Gold exports surged 23.4%, driving total goods exports up 3.9%. However, the full-year 2025 deficit doubled to $30.4 billion, reflecting the structural drag from declining US-bound trade flows.
Verdict
Brazil’s IGP-M deflation print opens space for the BCB to pause tightening sooner than expected, but the fiscal trajectory remains the binding constraint. Mexico’s ultra-low unemployment and falling core inflation is the cleanest EM setup in the region. Canada’s Q4 current account surprise is encouraging, though the full-year doubling of the deficit reveals underlying trade fragility.
Trades & Tilts