Global Economy
European Markets Edge Higher While AI‑Related Volatility Persists
European equities are expected to open modestly higher on Friday, with the CAC 40 set to gain about 0.2 % and the STOXX 600 edging up 0.07 %. The rally is tempered by renewed uncertainty around massive AI spending by tech giants, which has sparked a sell‑off in the sector. In the United States, the Fed’s upcoming data release and a relatively dovish stance from the central bank have lifted bets on a rate cut, while the ECB and BoE keep rates unchanged but signal possible easing later in the year. Commodity prices are climbing ahead of the U.S.–Iran oil talks, and the crypto market remains volatile.
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European Outlook
European equity markets are projected to open with a modest gain on Friday. The CAC 40 is expected to rise about 0.24 % at the opening bell, while futures point to a 0.18 % increase for the DAX in Frankfurt. The FTSE 100 in London is the outlier, with a predicted drop of 0.37 %. The broader STOXX 600 should edge up 0.07 %.
Market sentiment is being squeezed by concerns that the colossal capital allocations toward artificial intelligence (AI) may not deliver the expected returns. Investors worry that the rapid expansion of AI could strain business models in software, data and advertising.
- Alphabet disclosed on Wednesday that its 2026 capital budget could double.
- Amazon announced a planned +50 % increase in cap‑ex this year to upgrade AI infrastructure.
U.S. labor market data released on Thursday added to the unease: new unemployment claims rose above forecasts for the week ending 31 January, and job openings fell to a five‑year low in December.
The scheduled non‑farm payroll report for January was postponed to 11 February after a brief U.S. government shutdown, pushing the market to price in a higher probability of a Fed rate cut at the next meeting, even though most traders still expect rates to stay steady.
Central Bank Updates
The European Central Bank (ECB) held policy rates unchanged on Thursday, reiterating that inflation is expected to converge toward its target and that a strong euro will not force premature tightening.
The Bank of England (BoE) left its benchmark rate at 3.75 % but signalled openness to a future reduction if inflation eases sustainably. The vote was tighter than anticipated, sharpening market expectations for a potential March rate cut.
Wall Street
U.S. equities closed sharply lower on Thursday. The Nasdaq Composite slipped to its lowest level since November, dragged down by losses at Microsoft, Amazon and other tech heavyweights after Alphabet’s cap‑ex outlook. The Dow Jones Industrial Average fell 1.20 % to 48,908.72 points, the S&P 500 dropped 1.23 %, and the Nasdaq lost 1.59 %.
Asian Markets
In Tokyo, the Nikkei climbed 0.81 % amid tech‑related worries and ahead of Japan’s parliamentary election on Sunday, a crucial test for Prime Minister Sanae Takaichi.
China’s market sentiment was muted by technology concerns and a steep fall in silver futures. The CSI 300 slipped 0.15 %, while Shanghai’s SSE Composite ticked up 0.18 %. Hong Kong’s index fell 0.8 %.
Rates
U.S. Treasury yields retreated: the 10‑year note fell 1.6 basis points to **4.1941 %**, and the two‑year note slipped 1 basis point to **3.4728 %**.
Currencies
The dollar weakened **0.05 %** against a basket of major currencies, staying near its two‑week high. The greenback has firmed since President Donald Trump named Kevin Warsh as Fed Chair, easing worries about political pressure on interest‑rate policy.
The yen rose **0.1 %** to 156.85 per dollar, the euro gained **0.2 %** to $1.1798, and the pound strengthened **0.35 %** against the dollar.
Commodities
Oil prices rose ahead of the U.S.–Iran talks scheduled for later today in Oman. Brent crude jumped **1.38 %** to $68.48 per barrel, while U.S. West Texas Intermediate (WTI) climbed **1.49 %** to $64.23.
Precious metals rallied after earlier steep drops. Silver surged more than **4 %** to $74.60, and gold advanced **2 %** to $4,873.32 per ounce.
Cryptocurrency
Risk‑off sentiment hit digital assets, with Bitcoin hovering around $66,552 after slipping below the $70,000 mark for the first time since November 2024.
Source: Reuters