Market Report.
📈 Let’s start by looking at the most recent data on the US economy published yesterday.
🏭 U.S. manufacturing sector seems to be doing well buoyed by an AI investment boom, but still facing headwinds, while the housing market continues to struggle with affordability issues.
📦 New orders for U.S. capital goods increased more than expected in December, pointing to solid business spending on equipment. This strength was driven by a boom in investment in artificial intelligence (AI), which has fueled rapid growth in data centers and strong demand for related equipment.
⚙️ Manufacturing sector is showing signs of strength, particularly in areas benefiting from the AI investment boom, but is still facing headwinds from trade policies and the lingering effects of job losses.
🏗️ Factory production also increased by the most in 11 months in January, though output for December was revised down. However, the manufacturing sector has still lost 83,000 jobs since January 2025, as robots and automation have boosted productivity without adding workers.
🏠 U.S. housing market: Single-family housing starts increased in December, but overall housing market activity remains constrained by high costs, including tariffs on imported materials.
📊 U.S. factory production increased by 0.6% in January, the largest gain in 11 months, offering hope for the manufacturing sector. The boost from artificial intelligence (AI) spending will broaden to the rest of manufacturing, which is also expected to get a lift from tax cuts. The manufacturing sector lost over 80,000 jobs in 2025, though some segments like technology have thrived amid the AI spending boom.
🏦 Federal Reserve is deeply divided on the appropriate path forward for monetary policy, as it tries to balance fighting inflation and supporting the labor market.
📝 The minutes from the Federal Reserve’s January meeting show that Fed officials were divided on the path forward for interest rates: Some officials indicated that further interest rate cuts should be paused for now and could only resume later in the year if inflation cooperates.
⚖️ Some participants even entertained the notion that rate hikes could be appropriate if inflation remains above the Fed’s 2% target. There was disagreement over whether the focus should be more on fighting inflation or supporting the labor market.
🇯🇵 Meanwhile, the Bank of Japan (BoJ) increases the chances of an earlier rate cut. Given the state of Japanese bond yields in recent months, this could be dynamite for world markets if it gets out of hand.
📊 According to a Reuters poll, a majority of economists (58%) expect the BOJ to raise its key interest rate to 1% by the end of June 2026, up from 0.75% currently. Some economists even expect the BOJ to hike rates as soon as April, due to concerns about rising inflation and the weak yen.
🔄 The consensus view has shifted from expecting the next hike by end-September, reflecting the BOJ’s more hawkish stance.
💱 To counter further yen weakness, two-thirds of respondents expect Japanese authorities to intervene in the currency market again, with 160 yen per dollar seen as a likely trigger level.
🌍 Tensions between the U.S. and Iran, and the potential for military action, are driving significant volatility and upward pressure on global oil prices.
🛢️ Oil prices jumped over 4% after Vice President JD Vance said Iran failed to address U.S. “red lines” during nuclear talks in Geneva this week.
⚔️ Vance stated that President Trump reserves the right to use military force if the negotiations fail to stop Iran’s nuclear program. Sources indicate that a potential U.S. military campaign against Iran would likely be a full-scale war, not just limited strikes.
🚢 Iran’s Revolutionary Guard conducted military exercises in the Strait of Hormuz, a critical oil trade chokepoint, raising concerns about potential disruptions to global oil flows.
🛳️ The U.S. has deployed additional aircraft carriers to the Middle East as a show of force in case the nuclear talks with Iran collapse.
🌐 Additionally, separate but related naval drills involving Iran, Russia, and China are either just starting or imminent in the broader region under the “Maritime Security Belt 2026” framework, centered mainly in the Gulf of Oman and northern Indian Ocean.
🤝 The US is playing its cards with another key BRICS partner. In previous reports, we talked about the possibility of a strategic pact with Russia to use the dollar again in its transactions. Now a similar pact with another BRICS member to secure strategic sumunistrs against China.
🇮🇳 India could join the U.S.-led “Pax Silica” initiative, which aims to secure the global supply chain for silicon-based technologies.
💻 Pax Silica is a Trump administration effort to ensure American dominance in advanced semiconductors and AI infrastructure, rather than being primarily about countering China.
🔗 India’s participation as a core member is seen as a major win for the U.S. in shaping the global AI and semiconductor supply chains. The U.S. views India as a key partner to “de-risk and diversify” critical technology supply chains away from potential adversaries.
🏛️ To support Pax Silica members, the U.S. State Department is launching a “concierge service” to help allied governments and companies more efficiently acquire American-made AI semiconductors.
₿ Is Trump trying to help crypto traders and save Bitcoin?
🎤 A cryptocurrency conference was hosted by the Trump family’s platform, World Liberty Financial, highlighting the growing acceptance of crypto assets among Wall Street executives and government officials:
💰 The event was attended by prominent figures like Goldman Sachs CEO David Solomon, who revealed he now owns a small amount of Bitcoin, and other Wall Street veterans.
📈 The Trump family’s fortune has grown by over $1 billion from new crypto ventures, with World Liberty Financial being a key part of this wealth accumulation. Government officials, including regulators like the CFTC chairman, also attended the event, highlighting the growing policy priority around protecting and promoting the crypto industry under the Trump administration.
Market View.
📈 Wall Street futures continue to edge higher, albeit cautiously, amid ongoing uncertainty surrounding the Federal Reserve’s policy stance.
📉 E‑mini S&P 500 futures have climbed to around 6,900 points, while Nasdaq 100 futures are advancing towards the 25,000‑point level.
💵 The US Dollar Index (DXY) continues to strengthen, having reached nearly 97.80 in recent hours. This move briefly pushed EUR/USD below the 1.18 level, although the pair has since managed to recover back above that threshold.
🇪🇺 In Europe, markets remain relatively unaffected by external concerns. After a strong session yesterday, DAX futures are trading above 25,200 points, while Euro Stoxx 50 futures are holding above 6,100 points, marking fresh all‑time highs.
🛢️ The oil market is seeing strong gains amid concerns that negotiations between the United States and Iran could falter. Spot Brent crude has moved back above $70 per barrel, approaching $71.
🥇 Gold futures are also strengthening, trading above $5,025 per ounce.
₿ Meanwhile, Bitcoin remains under pressure, slipping below the $68,000 level and currently trading near $67,000.
