Macro Wrap

The DJIA, the S&P500, and the Nasdaq Composite Index rose 0.3%, 0.6%, and 0.8% respectively. The Eurostoxx 50 jumped 1.4%. The Dollar Index rose 0.6% to 97.70 and EUR-USD dropped 70 pips to 1.1780.

The US 2Y yield rose 3bp to 3.46% and the 10Y yield rose 2.5bp to 4.08%. The German 10Y yield was flat at 2.74%. The UK 10Y yield was also unchanged at 4.37%. Brent crude oil prices jumped 4.4% to USD70.40. Gold rose 2% to USD4,978. Silver rose 5% to USD77.20.

Fed officials are split on interest rates: some favour cuts if inflation drops, others support holding or raising rates if inflation persists. Employment risks are reduced, but inflation concerns remain. Rates are unchanged at 3.5%-3.75% after last year's cuts.

UK inflation eased to 3.0% in January 2026, the lowest since March 2025, driven by slower transport and food price rises. Core inflation fell to 3.1%, its lowest since August 2021. Monthly, consumer prices dropped by 0.5%.

US housing starts rose 6.2% in December 2025 to 1.404 million, exceeding forecasts. US manufacturing output rose 0.6% in January 2026, surpassing expectations. Durable goods increased 0.8%, including motor vehicles, while nondurable goods went up 0.4%. Capacity utilization hit 75.6%, below the long-term average. Positive for USD

Recent reports indicate that any potential US military operation involving Iran would likely extend over several weeks, rather than resemble the short, targeted action previously undertaken in Venezuela. Market sentiment strengthened following indications that US intervention could occur sooner than anticipated amid limited progress in US–Iran discussions. As a result, crude prices recorded their strongest gains since October, with WTI (March delivery) rising 4.6% to USD 65.19 per barrel and Brent (April delivery) advancing 4.4% to USD 70.35 per barrel. Sentimentally negative for OMC’s.

Data watch: US weekly jobless claims, Trade balance and Pending Home sales data.