Stock Market Update

The S&P 500 futures currently trade 14 points above fair value.

Equity indices in the Asia-Pacific region rallied on Tuesday with South Korea's Kospi (+6.8%) and Japan's Nikkei (+3.9%) closing at fresh record highs. Japan sold 10-yr JGBs to somewhat underwhelming demand. Shanghai has set its growth target for this year at 5.0%, down from 5.4% in 2025. The Reserve Bank of Australia raised its cash rate by 25 basis points to 3.85%, as expected. The central bank hinted at the possibility of more hikes ahead due to an upward revision to the inflation outlook, causing the market to price in two more hikes for the remainder of 2026.

• In economic data:
  • Japan's January Monetary Base -9.5% yr/yr (expected -10.3%; last -9.8%)
  • South Korea's January CPI 0.4% m/m, as expected (last 0.3%); 2.0% yr/yr (expected 2.1%; last 2.3%)
  • Hong Kong's December Retail Sales 6.6% yr/yr (last 6.5%)
  • Australia's December Building Approvals -14.9% m/m (expected -6.2%; last 13.1%); 0.4% yr/yr (last 19.4%). December Private House Approvals 0.4% m/m (last 0.8%)
  • New Zealand's December Building Consents -4.6% m/m (last 2.7%)

---Equity Markets---

• Japan's Nikkei: +3.9%
• Hong Kong's Hang Seng: +0.2%
• China's Shanghai Composite: +1.3%
• India's Sensex: +2.5%
• South Korea's Kospi: +6.8%
• Australia's ASX All Ordinaries: +0.9%

Major European indices are mixed with Italy's MIB (+1.9%) outperforming by a wide margin thanks to strong leadership from banks after Standard & Poor's affirmed UniCredit's A- rating and upgraded its outlook to Positive from Stable. The French budget for 2026 has finally passed into law without a vote in parliament. Finance Minister Lescure said that the budget deficit will decrease to 5.0% from 5.4%. The European Central Bank released its lending survey for Q4, which revealed unexpected tightening in conditions that is expected to continue into Q1.

• In economic data:
  • France's January CPI -0.3% m/m (expected -0.1%; last 0.1%); 0.3% yr/yr (expected 0.6%; last 0.8%). December government budget deficit EUR124.7 bln (last deficit of EUR155.4 bln)
  • Spain's January Unemployment Change 30,400 (expected 13,400; last -16,300)

---Equity Markets---

• STOXX Europe 600: -0.1%
• Germany's DAX: +0.1%
• U.K.'s FTSE 100: -0.9%
• France's CAC 40: -0.3%
• Italy's FTSE MIB: +1.9%
• Spain's IBEX 35: +0.2%