📆 Tuesday, February 18
► European markets were mixed, with defense stocks maintaining gains as investors assessed the implications of higher military spending and U.S.-Russia “peace” talks in Saudi Arabia. The Stoxx 600 traded flat, while Germany’s 10-year bond yield climbed 2.5 basis points (to 2.51%) as traders speculated that joint EU borrowing could finance increased defense commitments. The GBP reduced losses, supported by strong UK wage growth data, which could delay Bank of England rate cuts. France’s inflation rose to 1.7%, above expectations, adding pressure on the ECB’s rate path. The EUR, however, fell about 0.25% vs. the USD (similar to the GBP). European leaders expressed frustration over their exclusion from the U.S.-Russia negotiations, while Polish Prime Minister Donald Tusk signaled new EU defense measures would be unveiled by March 20-21.
► U.S. markets resumed trading after the holiday, with Treasury yields rising and the USD strengthening after Federal Reserve Governor Christopher Waller’s hawkish comments suggested interest rate cuts are not imminent. S&P 500 futures are trading flat (0.0%), pointing to a cautious start into the week for Wall Street. Investors remain focused on Trump’s proposed tariffs and upcoming Fed meeting minutes.
► Asian markets were mixed, with Chinese stocks swinging to losses after initial optimism from President Xi Jinping’s meeting with business leaders faded. Hong Kong’s Hang Seng Index pared gains (but closed still significantly higher at +1.6%) after approaching a three-year high, while the Shanghai Composite dropped 0.93% as profit-taking set in. Baidu (BIDU) reported stronger-than-expected earnings, with Q4 Non-GAAP EPADS of $2.63, beating estimates by $0.78, and revenue of $4.67 billion, exceeding forecasts by $70 million. However, online marketing revenue declined by 7%, while non-marketing revenue grew 18%, driven by AI Cloud. Japan’s Nikkei rose 0.28%, with stronger-than-expected GDP growth (+0.7% Q/Q – on Monday) boosting rate hike expectations for the Bank of Japan. Meanwhile, the AUD slipped, and the ASX 200 fell 0.66%, following the Reserve Bank of Australia’s first rate cut since 2020 but a rather hawkish outlook that reduced rate cut expectations for the RBA. The NZD showed significant weakness ahead of tomorrow's expected (yet another) major rate cut by the RNBZ.
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