Market Report.
⚠️ Important reminder, today the US employment report NFP is published, postponed since last Friday. It is one of the data that most voltility can cause in bags.
🛍️ Yesterday, US retail sales for December were expected to reflect 0.4% growth, but instead remained flat at 0%. This adds to the possible weakness in the US labour market that we expect to see today in the delayed release of the NFP and unemployment rate.
🏦 A study by European Central Bank (ECB) economists found that U.S. tariffs are weighing on euro zone growth and inflation, but the most affected sectors are also sensitive to interest rate changes.
📉 In the latest 3 months, euro zone exports to the U.S. are down about 6.5% year-on-year, which could further weigh on inflation in the euro zone. The good news for the ECB is that the sectors hit hardest by the tariff shock, such as machinery, autos and chemicals, also respond most strongly to interest rate changes.
🏭 The ECB economists found that about 60% of the affected sectors, representing 50% of total euro zone industrial output and goods exports to the U.S., could see a strong expansion in output in response to lower borrowing costs.
💶 The problem would be that the ECB cannot bring down the interest rate much lower than the current levels, since this would mean bringing it below the current inflation rates, as they are already at 2.15%.
🤝 The European Parliament’s trade committee has agreed to advance the EU-US trade deal, but with some additional conditions. The lawmakers have agreed to include a sunset clause in the deal, which will expire in March 2028 unless prolonged. This gives the US 6 months to lower the current 50% tariff on products using steel and aluminum to 15%.
⚖️ If the US fails to lower the tariffs on these metal products to 15%, the EU will consider resuming levies on US industrial imports and some agricultural products.
🌍 The trade deal was initially put on pause last month, with EU lawmakers citing Trump’s “coercive” actions over Greenland. But after Trump retracted his threat to impose tariffs, the approval process has resumed.
💰 Even before the Greenland tariff threat, the EU-US trade deal faced a rocky path in the European Parliament, with some lawmakers opposing it from the start. Some have described the conditions offered to the European Union as humiliating, with European Commission President Ursula von der Leyen reportedly pledging $600 billion in investment into the United States, despite Washington maintaining new tariffs on the EU.
💳 The road to CBDCs continues.
🪙 The European Parliament has given its first major backing to the digital euro, endorsing the European Council’s negotiating stance for a central bank digital currency with both online and offline functionality.
📅 This endorsement is significant because the European Central Bank needs the European Parliament’s legislative approval before it can issue a digital euro, meaning the 2029 launch goal depends on lawmakers signing off.
🔄 The Parliament’s position marks a shift from earlier proposals focused solely on offline payments, signaling closer alignment with the ECB’s goal of preserving the role of central bank money and reducing reliance on non-European payment providers.
💳 European officials and payments executives are signaling concern about the continent’s heavy reliance on Visa and Mastercard, amid fears that U.S. financial infrastructure could be weaponized if transatlantic relations deteriorate.
🗣️ Martina Weimert, CEO of the European Payments Initiative (EPI), said: “We’re highly dependent and we need action urgently,” underscoring calls within Europe to strengthen homegrown payment systems and reduce strategic vulnerability.
🔍 Lawmakers also urged the ECB to step up monitoring of crypto-assets, warning that the shift to digital payments could create new forms of exclusion if left to private and non-EU providers, possibly the US stablecoins.
📉 Meanwhile, the Bitcoin crash continues. Bitcoin loses the few supports it had managed to build in recent days and falls below $68,000.
🐋 Bitcoin had drawn fresh support from its largest holders, with whale wallets accumulating about 53,000 coins in the past week. This helped steady Bitcoin prices temporarily after a steep drawdown. However, most other investors have remained on the sidelines, raising doubts about whether this buying by whales marks a true recovery or just damage control.
📊 Large Bitcoin-holding players have been net sellers over the past year, with more than 170,000 coins leaving these wallets since mid-December. BTC is still roughly 40% below its October peak.
🥇 However, what might not have ended is the bullish gold rally.
🏆 Wells Fargo believes the gold bull market is not over, and that the metal should continue to benefit from persistent geopolitical uncertainty, macroeconomic volatility, and continued central banks demand.
📈 Wells Fargo is advising clients to “buy the dip” in gold, as the precious metal has pulled back from its record highs reached in late January. The bank has raised its 2026 year-end price target for gold to a range of $6,100 to $6,300, implying at least a 20% gain from current levels.
🏢 In the corporate world, AI is back in the news.
🤖 The capabilities of AI systems are growing and now are able to tackle tasks previously considered too complex for automation, like tax planning.
💼 Tech platform Altruist announced a new AI-powered tool that claims to help users carry out tax planning within “minutes”, a task traditionally seen as highly complex.
📉 The announcement caused financial stocks like LPL Financial, Charles Schwab, and Morgan Stanley to decline, as investors fear these AI tools could replace or diminish the value of established advisory firms and banks.
🤖 Meamwhile, Alibaba has launched a new AI model called RynnBrain, which is designed to power robotics and help robots comprehend the physical world around them. Alibaba realise a video showing a robot using RynnBrain to identify fruit and put it in a basket, demonstrating the model’s ability to enable complex robotic tasks.
🚀 Robotics and “physical AI” are fast-growing areas, with tech giants like Nvidia, Google, and Tesla also developing their own AI models and systems for powering robots and autonomous machines. Nvidia’s CEO has described AI and robotics as a “multitrillion-dollar growth opportunity”, highlighting the industry’s potential.
🌏 Alibaba is pursuing an open-source strategy with RynnBrain, allowing developers to use the model for free, which has been a key approach for expanding the adoption of its AI technologies. China is seen as forging ahead of the U.S. in the development of humanoid robots, with companies planning to ramp up production this year.
Geopolitics.
🇵🇱 Poland begins to buy German companies. The decline of Germany manifests itself.
🏭 Polish companies are increasingly acquiring businesses in Germany, reflecting the growth of Poland’s $1 trillion economy and its emergence as a regional powerhouse. Data shows Polish firms announced 22 acquisitions in Western Europe in 2025, the highest on record, with 9 deals in Germany spanning industries like automotive, IT, and food production.
📊 This acquisition spree highlights how Poland’s economy has caught up with Germany’s, with its GDP per capita now about half of Germany’s, compared to just a quarter when Poland joined the EU in 2004.
🇬🇧 The Epsetin crisis continues to hit the British government.
🏛️ UK Prime Minister Keir Starmer has weathered a dramatic day in Westminster where his leadership was threatened, but he appears to have secured a temporary reprieve for now.
⚠️ Starmer faced calls to resign from the Scottish Labour leader Anas Sarwar, but he was able to shore up support from his cabinet ministers, including potential rivals like Wes Streeting and Angela Rayner.
📌 Starmer’s latest troubles stem from his controversial appointment of Peter Mandelson as UK ambassador to the US, despite Mandelson’s known links to convicted pedophile Jeffrey Epstein.
⏳ While Starmer has survived the immediate crisis, he faces more challenges ahead, including a by-election this month and local/regional elections in May that could further undermine his position if Labour performs poorly.
💷 The prospect of a leadership challenge or Starmer’s resignation is seen as a major risk for the UK bond market, with investors warning it could create significant volatility and uncertainty.
📰 CNBC describe the leadership uncertainty as a “Damocles sword hanging above gilt traders” until it’s clear who will succeed Starmer. The bond market prefers Starmer and his finance minister Rachel Reeves to remain in their positions, as their fiscal policies and rules are seen as market-friendly.
📉 The UK already has the highest long-term borrowing costs among G7 nations, and further political turmoil could drive those costs even higher through increased bond market volatility.
🛢️ Bloomberg reports that Venezuela has sent oil to Israel for the first time since the fall of Nicolás Maduro, marking a notable shift in Caracas’ export patterns and geopolitical alignment.
Market View.
📊 E‑mini S&P 500 futures have once again slipped below the 7,000‑point level, failing to break decisively above this barrier in recent sessions. The contract is currently trading around 6,975 points.
💻 Nasdaq 100 futures are also struggling to clear the 25,400‑point resistance, retreating to approximately 25,270 points.
💵 The US Dollar Index (DXY) has weakened again, allowing EUR/USD to climb towards the 1.1920 area, as markets await today’s US employment data.
🇩🇪 In Europe, DAX 40 futures have paused after approaching the 25,100‑point level, currently trading near 25,070 points. Meanwhile, Euro Stoxx 50 futures are holding above 6,050 points, continuing to show relative optimism.
🛢️ The oil market is edging higher, with spot Brent crude trading slightly above $69.50 per barrel.
🥇 Gold futures continue to strengthen and are increasingly close to breaking above the $5,100 per ounce level.
₿ As noted in the News section, Bitcoin is weakening again, losing its most recent support around $68,800.
Gonzalo Canete – Economist & Global Chief Market Analyst
