Key Highlights

• Riksbank keeps rates on hold but flags risks from exchange rate strength.
• Denmark optimistic on Greenland resolution after talks with the U.S.
• Brent oil hits $70/barrel for the first time since September as Iran tensions rise.

Chart of the Day

Positioning in South African assets rebounds on policy credibility and mining strength

^{Source: BNY}

The SARB meeting today will be another test of carry currency resilience, especially as the central bank is considered one with significant room to cut rates given the current path of inflation and improved fiscal credibility. After stellar performance throughout much of the last year, ZAR has struggled over the past three months. The daily flow average since the beginning of November is comfortably negative, and YTD flows have included some very strong outflows. However, the past two weeks have seen a clear turnaround, with metals and real rates driving interest.

As highlighted in our rebalancing analysis for January, the risk to ZAR performance in the near term is to the downside due to strong asset performance. At the same time, there are very few comprehensively positive stories in EM at present; given the dearth of options, any near-term retreat will probably not last long. On a structural basis, there is plenty of scope for South Africa to attract long-term allocations. Even after the strong gains last year, South African equities’ positioning (share of global equity assets in our custody program) is only marginally higher than it was three years ago, whereas the fixed income positioning figure is still lower than in the same period. Given that 2022-23 was dominated by global inflation and the Fed hike cycle, while South African fundamentals were in a very different place, such a benchmark is poor.

We see South Africa as one of the key markets that stands to benefit from inflows over the medium term. However, the asset market will need to avoid surge flow, which could lead to misalignment in terms of trade. Talk of tariffs against Indian and Chinese manufacturing imports this week is already a sign of such risks.

What's Changed?

The relentless rally in precious metals continues, even as big tech shares gain ground with stepped-up investments in AI feeding through to Q4 earnings. Global shares are mixed: EM shares in Asia fell, while EU equities have bounced back. Bonds are also mixed, with KTB yields higher along with JGBs, while the U.S. curve has continued to steepen following the FOMC meeting. USD has lost its Bessent bounce, with the focus still on government shutdown risks and economic policy doubts. Eyes will be on the EUR 1.20 and JPY 152 marks. The rise in oil, with WTI testing $65/barrel, is also adding to the mixed signals from the macro environment, where geopolitical tensions are clashing with central bank decisions’ to hold rates steady amid muted optimism on growth and inflation.

Central bankers – holds and some action. The focus on intervention remains key for JPY; however, JPY trading has been modest compared with the frenetic moves earlier this week. IDR has stabilized along with Indonesian shares following new regulatory actions after the MSCI downgraded the country to frontier status. Action in INR stands out, with intervention by India’s RBI capping the USD at a record high of 92.016. Brazil’s COPOM kept rates at 15% for the fifth successive meeting yesterday evening but telegraphed plans to start easing in March. In Singapore, the MAS has maintained its SGD NEER policy stance, while seeing upside risks for growth and inflation. The Swedish Riksbank has kept rates at 1.75%, as expected, and signaled a prolonged pause.

Step-ups for AI investments; not all shares follow. OpenAI is in talks to raise as much as $40bn from Nvidia, Microsoft and Amazon as part of a $100bn funding round. Further investment in the space was also part of Meta’s outlook for 2026, with planned expenditure of $135bn exceeding expectations. However, bigger spending and further equity gains require solid growth, as illustrated by MSFT after its earnings report.

Commodities jump up. Copper has set a new all-time high after gaining 7% on geopolitical pressures, rising demand and ongoing AI pushes. Iron ore has rebounded on the back of Chinese demand hopes, along with monsoon season supply disruption risks. Gold’s move over $5,500, setting a new record high, links back to USD weakness, the focus on Iran and debt worries globally. The rise in natural gas is also noteworthy: EU futures reached seven-month highs, up 3% on the day because of weather and supply concerns, with U.S. futures also up 3% on the same concerns.

Bottom line: Expectations are high for an extended rally in risk assets. U.S. big tech earnings have beaten expectations, investment in AI continues, and the rest of the economy looks fine following FOMC Chair Jerome Powell’s sanguine view that downside risks to jobs and upside risks to inflation have both lessened. Holding in the right place allows money to flow as we approach month-end. Investors are climbing stairs, not walls today, and the step-ups are modest for extending trends, with a USD theme, gains for energy and gains for tech all expected. The wobble will be in rates, where more debt issuance, more bond-related worries about potential government shutdowns and a greater focus on the economic data today could all lead to a misstep. Gold remains the clear favorite risk barometer, but the drivers are less clear. 

What You Need to Know

Brent crude oil futures have climbed to around $70 a barrel, the highest level in several months, after President Trump issued sharp warnings to Iran over its nuclear program and threatened military action if a deal is not reached. This pushed markets to price in heightened geopolitical risk. The global benchmark rose as much as about 2.3% on the session, reflecting broader risk-on sentiment and concerns over potential supply disruptions in the Middle East. The rally runs counter to earlier expectations of downward pressure from oversupply, as ongoing tensions involving Iran and Venezuela and disruptions in Kazakhstan help to bolster crude prices. Brent +2.427% to 70.06, WTI +2.627% to 64.87.

Sweden’s central bank has left the policy rate unchanged at 1.75% and reiterated that this level will likely remain in place “for some time,” in line with the guidance provided in December. The Riksbank judged that the current rate level is supporting stronger economic activity and helping inflation to stabilize around the 2% target over the longer term. The Executive Board noted heightened geopolitical uncertainty at the start of 2026, particularly linked to U.S. foreign and trade policy. However, financial market reactions have been limited and the U.S. dollar has weakened against the krona, with SEK’s appreciation having “contributed to the weaker development in goods prices.” Swedish domestic data showed solid growth at the end of last year, with rising household consumption, inflation that was lower than expected and close to target in December, and a labor market that remains weak but is showing signs of improvement. The Riksbank is the latest central bank in Europe to begin expressing concerns over the disinflationary impact of exchange rate strength. OMX +0.857% to 3053.422, EURSEK +0.103% to 10.5775, 10y Swedish GB -1.8bp to 2.871%.

Denmark’s foreign minister Lars Løkke Rasmussen has said he is “slightly more optimistic” about resolving tensions with the United States over Greenland after holding what he described as “constructive” talks in Washington. Rasmussen confirmed he met U.S. Secretary of State Marco Rubio to resume a dialogue agreed two weeks earlier, after relations briefly deteriorated after President Trump made comments reiterating his desire to take control of Greenland. Rasmussen said discussions had returned to a calmer, low-profile track aimed at addressing U.S. security concerns without crossing Denmark’s red lines on sovereignty and territorial integrity. Rubio told Congress that the restrained format was designed to avoid a media spectacle. Rasmussen is expected to brief EU foreign ministers in Brussels as part of wider discussions on global geopolitical risks. OMX Copenhagen 20 -0.794% to 1727.688, EURDKK +0.003% to 7.4667, 10y DGB -0.3bp to 2.711%.

China has tightened a cross-border investment program to limit where global managers can allocate funds for mainland clients, a move that potentially curbs capital going into popular markets like the U.S. The restrictions apply to the decade-old $86bn Mutual Recognition of Funds scheme, which allows people in mainland China to invest in Hong Kong-based funds, and vice versa. The move is reportedly aimed at protecting retail investors flocking to the scheme since last year and applies only to new funds. In guidance issued to program participants of Hong Kong funds in the second half of 2025, the China Securities Regulatory Commission said it would beef up requirements to ensure portfolios are diversified across asset classes and geographies, based on the risk tolerance for retail investors. No such stipulations are said to have existed previously. In separate verbal communications, the regulator reportedly told applicants that no single country can make up more than 50% of an underlying fund, adding that Hong Kong was excluded from the cap. There are also limits on high-yield securities in a fund. The guidelines do not apply to existing products. CSI 300 +0.76% to 4753.87, USDCNY -0.048% to 6.9451, 10y CGB -0.3bp to 1.816%.

Over a dozen Chinese provinces have reduced their economic growth targets for 2026, pointing to a likely downgrade of the national goal for the first time in four years. Most of the 20 regions that have so far made their plans public are setting lower targets for GDP growth vs. 2025, based on local government work reports. The vast majority, including economic powerhouses Guangdong and Zhejiang, have reduced their goals by 0.5 percentage points or shifted to a range with a lower end. Targets set across China’s 31 mainland regions usually correlate with goals eventually adopted at central level, with changes by the biggest provincial economies usually read as a strong signal of a nationwide adjustment to come. While most provinces lowered their GDP targets, Jiangxi has increased its target to 5-5.5% from around 5%. The decisions announced around the country this month may validate expectations that Chinese policymakers will also set the national GDP growth target a notch lower this year, after maintaining it at “around 5%” for three straight years.

What We're Watching

U.S. Q3 final nonfarm productivity and unit labor cost are expected to match the flash estimates at 4.9% q/q and -1.9% q/q, respectively.

U.S. weekly initial jobless claims forecast at 205k vs. 200k the week prior.

U.S. November trade balance is expected to widen to a $-44bn deficit from $-29.4bn

U.S. November factory orders forecast at 1.6% m/m from -1.3% m/m in October.

U.S. November final wholesale inventories forecast at 0.2% m/m.

South Africa’s SARB is expected to cut rates by 25bp to 6.5%.

U.S. Treasury sells $105bn in 4-week bills, $95bn in 8-week bills and $44bn in new 7-year notes.

What iFlow is Showing Us

Mood: iFlow Mood eased slightly to 0.396. Equities demand momentum continued, with a reduced pace of core sovereign bond outflows.

FX: Mixed and light flows. USD and JPY were sold against EUR and GBP inflows within the G10 complex. Demand for LatAm currencies continued, against selling pressure in EMEA, led by ILS. In APAC, INR, THB and PHP posted outflows, while CNY, SGD and IDR recorded inflows.

FI: Good demand for G10 sovereign bonds against a selling bias for the rest of the region, led by Chile, Indonesia and Philippines.

Equities: European and Swiss equities posted significant outflows, against strong buying in Peru, Czechia, South Korea and Malaysia. Light Chinese equities demand. Within developed markets, the financials and health care sectors were most sold, against buying in the materials and communication services sectors. 

Quotes of the Day

“You don’t have to see the whole staircase, just take the first step.” – Martin Luther King

“The journey of a thousand miles begins with one step.” – Lao Tzu

Economic Details

Euro area monetary developments in December showed slower money growth, with M3 growth easing to 2.8% y/y from 3.0% in November, while M1 growth slowed to 4.7% from 5.0%. Short-term deposits excluding overnight deposits contracted by 0.4% y/y and marketable instruments fell 1.0% y/y. M1 contributed 3.0 percentage points to M3 growth, while other components made marginally negative contributions. Household deposits grew by 3.0% y/y and non-financial corporate deposits by 3.4% y/y, while investment fund deposits rose sharply by 4.3% y/y. On the counterparts side, private sector credit contributed 2.8 percentage points to M3 growth. Adjusted loans to households increased by 3.0% y/y, while adjusted loans to non-financial corporations rose 3.0% y/y, both little changed from November. Euro Stoxx 50 +0.531% to 5964.7, EURUSD +0.109% to 1.1967, BBG AGG Euro Government High Grade EUR -0.6bp to 2.964%.

EU economic sentiment improved markedly in January, with the Economic Sentiment Indicator rising 1.9 points to 99.2. Meanwhile, the euro area index increased by 2.2 points to 99.4, moving closer to the long-term average of 100. Employment expectations also strengthened, reaching 99.1 in the EU and 98.2 in the euro area – the highest levels in 12 months. The rise in sentiment was broad-based, driven by stronger confidence in industry, services and retail trade and among consumers, while construction edged down slightly. Among major economies, sentiment increased sharply in France, Germany, Poland the Netherlands, Spain and Italy. Industry confidence improved on better production expectations and order books, while consumer confidence rose across all components. Construction employment expectations weakened, and overall uncertainty remained broadly unchanged.

Italy’s November industrial and services turnover weakened m/m, with industrial turnover down 0.1% m/m in value terms and 1.1% m/m by volume, reflecting a contraction in the domestic market and modest growth abroad. Services turnover declined by 0.6% m/m by value and 0.5% m/m by volume, driven by wholesale trade and other services. Over the September-November period, industrial turnover increased by 1.2% in value terms and 1.4% by volume, while services rose 0.4% and 0.5%, respectively. On a calendar-adjusted basis, industrial turnover was flat y/y by value and up 0.5% y/y by volume, with growth abroad offsetting domestic weakness. Services turnover rose 0.2% y/y by value but fell 0.5% y/y by volume. FTSE MIB +0.665% to 45439.03, EURUSD +0.109% to 1.1967, 10y BTP -0.8bp to 3.458%

Italy’s extra-EU trade rallied m/m in December, with exports rising 1.5% m/m and imports up a stronger 4.3% m/m, driven mainly by higher intermediate goods flows. On a y/y basis, exports increased by 4.6%, reversing November’s decline, supported by strong gains in intermediate goods and capital goods, while imports fell 1.2% owing to a sharp drop in energy purchases. The extra-EU trade surplus widened to €8.4bn from €6.9bn a year earlier, as the energy deficit narrowed markedly. Over 2025 as a whole, extra-EU exports grew 2.3% and imports rose 3.4%, leaving a surplus of €56.1bn, which is slightly below 2024 levels but still healthy.

Spain’s December retail sales grew 2.9% y/y in real terms on a calendar-adjusted, seasonally adjusted basis but fell 0.8% m/m. In unadjusted terms, retail sales rose 4.7% y/y, accelerating from November. Excluding fuel stations, sales slipped 0.2% m/m, with food sales down 0.4% m/m and non-food sales falling 0.9% m/m, while e-commerce increased by 1.8% m/m. By region, sales rose y/y in 16 autonomous communities, led by Murcia at 8.0%, while Navarra recorded a 0.2% decrease. For 2025 as a whole, retail sales increased by 4.3% y/y in the adjusted series and 4.1% y/y in the original series, while retail employment rose 0.8% y/y in December and averaged 1.4% growth over the year. IBEX 35 +0.274% to 17690, EURUSD +0.109% to 1.1967, 10y Bono -0.7bp to 3.215%.

Swedish GDP contracted by 0.6% m/m on a seasonally adjusted basis in December, according to the preliminary GDP indicator. On a calendar-adjusted basis, December GDP was up 0.9% y/y. For Q4 as a whole, GDP increased by 0.2% q/q and 1.8% y/y. Statistics Sweden noted that the December decline followed strong growth in November, while overall economic activity remained on an expansionary path throughout most of 2025. Based on quarterly figures now available for the full year, the preliminary estimate of annual GDP growth in 2025 is 1.4%, reflecting continued but more moderate momentum toward year-end.

Sweden’s December financial market data showed lending to households continuing to expand. Housing loans from monetary financial institutions recorded growth of 2.6% y/y, while consumer loans grew by 6.0% y/y and accounted for 6% of total household lending. Housing loans represented 76% of household lending, while the change in housing loans from mortgage credit companies was -4.7% y/y. Against this backdrop, borrowing costs eased further, with the average floating mortgage rate declining to 2.65% from 2.68% in November, and the average interest rate on new housing loan agreements at 2.69%. Household deposits totaled SEK 2.871tn, while M3 money supply rose 3.2% y/y to SEK 5.075tn.

Sweden’s January business tendency survey showed only marginal change, with the overall barometer indicator edging down to 103.0 from 103.7 in December, but remaining above the long-term average. Manufacturing confidence eased slightly to 103.6 from 103.8, still signaling stronger-than-normal conditions. The sharpest deterioration was in construction, where the confidence indicator fell to 97.6 from 99.9, driven mainly by weaker employment plans. Trade confidence slipped to 109.6 from 110.2 but remained the strongest sector in the survey. Services confidence decreased modestly to 105.3 from 106.1, reflecting a less optimistic demand outlook. Household confidence edged lower to 95.3 from 95.6, indicating that sentiment remains weaker than normal.

Norwegian domestic credit growth accelerated markedly in December, with the public’s domestic debt rising 4.4% y/y, up from 3.9% y/y in November. Total domestic debt reached NOK 7.814tn at end-December, compared with NOK 7.790tn a month earlier. Household debt growth climbed to 4.8% y/y from 4.5% y/y in November, the fastest pace since before the policy rate hiking cycle began, and close to the level seen in September 2021 when the key policy rate was still at 0%. Household domestic debt stood at NOK 4,659bn at year-end, up from NOK 4.450tn a year earlier. Credit growth among non-financial corporations remained volatile but broadly lower than for households, while municipal debt growth was unchanged at 6.7% y/y in December. OSE +0.532% to 1758.88, EURNOK -0.17% to 11.453, 10y NGB -0.9bp to 4.18%.

Norway’s interest rates edged lower for new housing loans in December: the average rate on new mortgages backed by collateral fell 0.03 percentage points m/m to 5.09%, while rates on outstanding mortgages were broadly unchanged at around 5.10%. The average floating mortgage rate declined by 0.03 percentage points to 5.09%, whereas fixed mortgage rates increased by 0.08 percentage points to 4.95%. Deposit rates for households rose 0.02 percentage points m/m to 2.97%, while deposit rates for non-financial corporations fell 0.04 percentage points to 3.12%. Money market rates also decreased, with NIBOR down 0.16 percentage points to 4.19%. Lending margins on new housing loans increased to 0.90%, and margins on outstanding mortgages rose to 0.91%, indicating slightly wider bank spreads despite lower reference rates.

Switzerland’s December external trade weakened at the end of the year, with exports falling 4.5% m/m to CHF 22.5bn, while imports dropped 1.0% m/m to CHF 19.5bn to leave a trade surplus of CHF 3.0bn. The monthly export contraction was driven primarily by a sharp fall in chemical and pharmaceutical shipments, while imports also eased in real terms. For 2025 as a whole, exports increased by 1.4% y/y to a record CHF 287.0bn, supported by strong growth in chemistry and pharma, despite continued weakness in watches and machinery. Imports rose 4.5% y/y to CHF 232.7bn, their second-highest level on record, leaving the annual trade surplus at CHF 54.3bn. SMI +0.357% to 13070.3, EURCHF -0.093% to 0.91766, 10y Swiss GB -0.1bp to 0.259%.

Hungary’s industrial producer prices in December fell 3.4% y/y, while prices were down 0.4% m/m, reflecting broad-based disinflation at the end of the year. Domestic output prices fell 1.9% y/y, driven by a 2.6% drop in manufacturing prices and a 0.8% decrease in energy prices, although food industry prices rose 2.4% y/y. Non-domestic output prices dropped more sharply, by 4.1% y/y, with manufacturing prices down 3.6% and energy prices down 11.1%. On an end-use basis, prices fell in energy and intermediate goods and in capital goods, while consumer goods prices increased. For 2025 as a whole, industrial producer prices rose 4.1% y/y, led by stronger non-domestic price growth. Budapest SI -0.049% to 128132.4, EURHUF +0.277% to 381.2, 10y HGB -5bp to 6.51%.

South Africa’s December PPI showed final manufactured goods inflation flat y/y at 2.9%, unchanged from November, while prices rose 0.2% m/m. Food, beverages and tobacco products increased by 2.9% y/y, contributing 0.9 percentage points, while furniture and other manufacturing rose 11.9% y/y, contributing 0.5 percentage points. Intermediate manufactured goods inflation eased to 10.1% y/y from 10.7%, with the index flat m/m, driven mainly by basic and fabricated metals at 22.1% y/y. Electricity and water inflation accelerated to 16.9% y/y from 15.3%, with prices up 0.2% m/m. Mining PPI rose 25.7% y/y and 2.6% m/m, led by non-ferrous metal ores. Agriculture, forestry and fishing prices fell by 5.0% y/y and 3.0% m/m. JSE TOP 40 +0.999% to 118513.7, USDZAR -0.345% to 15.7188, 10y SAGB -0.8bp to 8.055%.

Türkiye’s labor market showed an improvement in headline conditions in December, with the seasonally adjusted unemployment rate falling by 0.8 percentage points m/m to 7.7%. The number of unemployed people was down 286k m/m to 2.74 million, while employment softened by 42k m/m to 32.69 million, leaving the employment rate flat at 49.1%. The labor force contracted by 328k m/m to 35.42 million, pulling the labor force participation rate down by 0.5 percentage points m/m to 53.2%. Youth unemployment (15-24) fell by 1.1 percentage points m/m to 14.1%, with declines for both men and women. The seasonally adjusted underutilized labor rate edged down 0.3 percentage points m/m to 28.6%, while average weekly actual working hours rose to 43.1. BI 100 +1.807% to 13649.72, USDTRY +0.04% to 43.4256, 10y TGB -5bp to 29.3%.

The Turkish economic confidence index was flat m/m in January at 99.4, indicating no change in overall sentiment at the start of the year. Consumer confidence rose by 0.3% m/m to 83.7 points, while the services sector confidence index increased by 1.3% m/m to 113.8, pointing to improved conditions in service activities. By contrast, the real sector (manufacturing) confidence index decreased by 0.7% m/m to 103.0, and the retail trade confidence index fell by 2.4% m/m to 112.6. The construction sector confidence index rose by 1.5% m/m to 85.7. Overall, gains in consumer, services and construction confidence were offset by weaker manufacturing and retail sentiment, leaving the headline economic confidence measure unchanged.

Australia’s International Trade Price Indexes for December 2025 show the export price index rose 3.2% q/q but fell 0.3% y/y vs. -0.9% q/q, +0.1% y/y in Q3 2025. Key export price increases were in non-monetary gold (+19.5%), metalliferous ores and metal scrap (+2.6%), and coal (+3.6%). Offsets included natural gas (-5.2%) and petroleum products (-6.7%). Over the full year, gold (+55.4%) and meat (+20.3%) supported exports, while gas (-16.3%) and coal (-14.5%) fell. The import price index rose 0.9% q/q and 3.0% y/y, driven by gold (+19.7%), road vehicles (+2.9%) and crude fertilizers (+42.5%), with telecommunications equipment (-4.5%) exerting a downward pull. ASX +0.486% to 5509.05, AUDUSD +0.37% to 0.7067, 10y ACGB +2.2bp to 4.836%.

New Zealand’s December 2025 goods exports rose 15% y/y to $7.7bn, led by milk powder, butter and cheese (+$361mn, 15% y/y) and precious metals (+$223mn, 172% y/y). Key export markets saw increases: Australia (+26% y/y), the EU (+31% y/y), China (+4.6% y/y), the U.S. (+4.8% y/y) and Japan (+15% y/y). Imports also rose 15% y/y to $7.6bn, with notable increases from China (+27%), the EU (+26%) and Australia (+27%), while U.S. imports fell 16%. The monthly trade balance recorded a $52mn surplus. For Q4 2025, exports increased by 2.6% q/q to $20.7bn and imports rose 5.7% q/q to $21.6bn, resulting in a $906m deficit. The annual trade deficit narrowed to $2.2bn from $7.9bn in 2024. NZX 50 -0.479% to 13348.61, NZDUSD +0.198% to 0.6073, 10y NZGB -1.3bp to 4.615%.

New Zealand January 2026 business confidence retreated 10 points from its 30-year high of 74 in December, but remains extremely strong at 64. Expected own activity dropped 9 points, but is still very high by historical standards at 52. Past own activity eased by 3 points to 26, the second-highest reading since August 2021, while past employment climbed 3 points to +7, the highest figure since October 2022. Inflation indicators were up: the net percentage of firms expecting to raise prices in the next three months rose 5 points to 57%, the highest reading since March 2023, and the amount by which firms expect to raise prices also increased from 1.8% to 2.1%, the highest rate in two years. Wage pressures are starting to climb modestly, and inflation expectations are the highest in 15 months.

Japanese consumer confidence rose to 37.9 points in January, from 37.2. Key components also improved: overall livelihood (36.8, +0.9), income growth (42.0, +0.7), employment (42.4, +0.9) and willingness to buy durable goods (30.4, +0.2). Price expectations for the year ahead showed 91.3% of respondents expecting prices to rise, down 0.5 percentage points from last month, while those expecting prices to stay the same or fall increased slightly to 4.2% (+0.6) and 3.1% (+0.3), respectively. Portfolio flows for the week to January 23, 2026, showed continued record YTD demand for Japanese bonds. There was net buying of ¥375bn vs. ¥1.467tn the week prior or ¥3.126tn YTD, undeterred by surging JGB yields. Buying of Japanese equities continued, keeping up with record YTD pace set in 2024. Elsewhere, Japanese investors net sold foreign equities for the first time in 2026 (-¥156bn, ¥365bn YTD), while net buying foreign bonds on a small scale (¥178bn, -¥316bn). Nikkei +0.032% to 53375.6, USDJPY-0.163% to 153.16, 10y JGB +1.9bp to 2.261%.

The Philippines’ Q4 GDP came in lower than expected at 0.6% q/q, 3.0% y/y from 0.4% q/q, 9% y/y in Q3 2025. Full-year GDP slowed significantly from 5.6% in 2024 to 4.4% in 2025, the slowest since 2011 (3.9%) if the -9.5% contraction in COVID-hit 2020 is excluded. Key Q4 contributors were wholesale and retail trade (4.6%), financial and insurance activities (5.6%) and public administration and defense (7.9%). Agriculture, forestry and fishing grew by 1.0% and services by 5.2%, while industry declined by 0.9% y/y in Q4. Household consumption rose by 3.8%, government consumption by 3.7%, exports by 13.2% and imports by 3.5%, with gross capital formation down 10.9%. Full-year gross national income increased by 6.1%, supported by a 19.1% rise in net primary income from abroad. PSEi -2.083% to 6223.36, USDPHP +0.341% to 58.95, 10y PHGB -1.3bp to 5.924%.

Singapore Monetary Authority of Singapore (MAS) update: upside risks for growth and inflation. The MAS will therefore maintain the existing rate of appreciation of the S$NEER policy band. There will be no change to its width or the level at which it is centered. The macro assessment is upbeat, with the risks to growth and inflation outlook both tilted to the upside. The MAS sees a positive output gap for 2026. Growth resilience remains anchored by the global AI capex cycle and firm domestic services, while imported inflation is contained. Risks are tilted to the upside (stronger growth, wage pass-through, geopolitics), but downside risks include a global market correction or abrupt AI investment pullback. The key takeaway from January’s MAS meeting is the upward revision of both core inflation and all-items headline inflation from 0.5-1.5% to 1.0-2.0%. This is encouraging, as it shows Singapore moving away from the threat of disinflation; however, we do not see it being sufficiently large to shift the MAS to the hawkish side. Overall, we expect the MAS to continue to maintain the status quo in the near term. STI +0.421% to 4930.03, USDSGD +0.032% to 1.2633, 10y SGB -2.9bp to 2.042%.

Singapore’s labor market continued to expand in Q4 2025, with total employment rising by 19,600. That was slower than in Q3 but stronger than in the first half and the year-earlier quarter. For 2025 as a whole, employment increased by 57,300, exceeding 2024, with resident gains concentrated in financial services and health and social services, and non-resident growth led by construction work permit holders. Unemployment remained stable and low, with December rates at 2.0% overall, 2.9% for residents and 3.0% for citizens. Retrenchments remained low at 3,600 in Q4, or 1.5 per 1,000 employees, while full-year retrenchments rose to 14,400 due to restructurings earlier in the year. Hiring intentions eased slightly entering 2026, though wage expectations increased.

Thailand’s industrial production expanded by 2.52% y/y in December, with the manufacturing production index at 93.27. This was supported by continued growth in motor vehicle output, resilient industrial exports and government measures underpinning domestic demand. For the full year, the industrial production index averaged 95.81, contracting by 0.78% y/y and representing a small annual fall despite December’s improvement. Authorities highlighted preparations for the EU’s Carbon Border Adjustment Mechanism, which will begin charging fees in 2026, and urged producers to accelerate the transition of the steel industry toward Thai Green Steel under a three-phase roadmap aimed at reducing carbon emissions and complying with emerging green trade rules. SET -0.508% to 1332.1, USDTHB +0.277% to 31.138, 10y TGN -1.7bp to 1.926%.