📆 Monday, February 17
► European markets are trading slightly higher, with defense stocks rallying as investors anticipated increased military spending after the U.S. Vice President JD Vance criticized European allies, questioning their commitment to defense spending and calling for less reliance on U.S. military support. The Stoxx 600 rose 0.3%, led by Rheinmetall (+9.3%), as traders reacted to estimates that securing Ukraine may cost Europe’s major powers $3.1 trillion over the next decade. European bond yields rose, with German, French, Italian and Spanish (as well as UK) bonds falling on speculation of increased bond issuance to finance military expansion. The EUR and GBP are little changed. Analysts see only limited upside potential for the European currency markets, even if a ceasefire is reached between Russia and Ukraine.
► U.S. markets remain closed for Presidents’ Day, with no trading activity in stocks or bonds. Investors remain focused on developments in U.S. trade policy, particularly President Trump’s potential “reciprocal” tariffs, as well as geopolitical tensions and any updates on a potential Ukraine peace “deal”. Market sentiment remains surprisingly positive overall after last week's gains, but uncertainty about interest rate cuts by the Federal Reserve persists after hotter-than-expected inflation data.
► Asian markets saw mixed performances, with Chinese stocks moving higher while Japan’s Nikkei struggled despite positive economic data. The Shanghai composite climbed 0.27%, driven by optimism over AI developments and China’s DeepSeek app, we see investors piling into tech stocks amid speculation that AI growth will drive China’s economy. Japan’s Nikkei 225 rose 0.1%, as Japan’s GDP expanded 0.7% QoQ, surpassing expectations and boosting JPY strength, as investors raise bets on a Bank of Japan interest rate hike.
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