The Week Ahead - Taking it in Stride in the Year of the Horse?

This year, however, we may not be so fortunate. Events in just the first month of 2026 have already been of exceptional scale and consequence. They have increased geopolitical tensions worldwide. As pressures bill and the margin for error narrows, the resilience of the global system will be tested far more severely. Hello, everyone, and welcome to the week ahead on Amora podcasts. My name is Ivan Patakuelis, Chief Southeast Asia economist at Amorian Singapore. On today's Friday, the 13th of February. Geopolitical uncertainty was the focus of the start of the year, and it's certain to remain top of mind among policymakers as you heard there from Singapore Prime Minister Laurence Wong in his budget speech. But markets seem to have shifted attention to the data and other country-specific events. In the US, we had the delay jobs report which showed a drop in the unemployment rate and a significantly higher than expected non-form payroll. But market reaction was a bit mixed with US treasure yields picking up equity markets and the dollar taking it in stride. We speak to German shorts from our US economics team in New York to digest what that says about US labor market conditions and implications on Fed policy. In London, George Buckley, our chief economist for the UK and Europe, a figure UK CPI in labor market data and discuss some recent political developments as well as flashpoints to watch. In Japan, we had, of course, these toward the landside win of Prime Minister Vichy's LDP and the Yensvrenthan alongside the rally inequities, where long-end JGB yields the claim. Yuyucharo Nusaki from our economics team in Tokyo joins us to discuss our post-election thoughts on fiscal and monetary policy in particular. For the rest of Asia, China and some other market will be out for the Lunar New Year holidays but we still have a few central banks on tap, the Arbians Z, Bank Indonesia, and BSP from the Philippines which we expect to have diverging decisions and tones. That's really consistent with the central bank divergent theme that suddenly emerged globally this year and running more on local considerations. Which is why in this episode we are dedicating a special segment to zoom in on the outlook for rates markets in the region with our strategist and endrietycers and Albert Yom. So let's dive in. Okay, let's kick off with the US. Hey Jeremy, thank you again for being here. We've had the jobs report this week after some delay and paroles were significantly higher than expected. What's your assessment in the back of that of US labor market conditions at this point? Hey, you've been, yeah, it's great to be back on the podcast. You know, this was a very strong report, kind of hawker surprises across the board. And we had been above consensus on the job gains, but I think even we were pleasantly surprised to the upside. You know, that said, I think we're thinking about this report more as a normalization after some weakness last year rather than the start of a decisive trend of re-acceleration in the labor data. And there are a few factors that make us think this report was a little bit noisy. You know, for starters, you had a significant jump in education and health employment. That's been one of the strongest sectors recently. I would have actually added 137 K jobs. That's the strongest in many years for that sector. This was coming at the same time where the BLS has revamped some of their methodologies around things like birth death adjustments, how they account for new businesses and closing businesses. In a way, which we think is probably going to add some additional volatility to the data. So I think it's very reassuring that you're not getting continuation of the slowdown last year, but we don't really buy the strength of the rebound, especially in the headline job numbers. Similarly, on the unemployment rate, this was another pleasant surprise that we'd been expecting a decline to 4.3, but consensus was higher at 4.4. So you saw the move lower, but I think there's still not so many signs that you're getting a sustainable downtrend in the unemployment rate. We would again frame it more as you had some noise to the upside last year, and now you seem to have corrected lower. And the biggest factor there is we still haven't seen measures of labor demand or job finding really start to pick up momentum. So things like Joltz job openings, the consumer confidence labor differential, and other survey measures of households looking how easy it is to find a job have continued to trend lower, even as we've seen the unemployment rates stabilize. And then if you look at the guts of the household survey, I think there is some more concerning signs there as well. So fewer unemployed workers found jobs in the month. And you saw most of the decline in the unemployment rate was just driven by kind of a drop off in layoffs. So that's good news, not great news. I think there's a lot of evidence that the unemployment rate overshot last year. We think that the current readings are a little bit more consistent with broader labor data we've been seeing, but we're forecasting further declines in unemployment rate later in the year. And I'd say we've yet to get confirmation that that trend is really underway. So I think it's more likely in the near term that you just chop around. And finally, on the income numbers, those were quite strong as well. So average hourly earning surprise to the upside you had an uptick in the work week. So private labor income rose 0.8% to the strongest in several years. So that's going to support consumer spending going into the year at the same time that you're getting some additional cash flow support from the one big beautiful bill act in the tax refund checks, which are going out just around now. And yeah, interestingly, despite the surprise, it seems like markets reacted differently with the dollar and equities, seemingly taking it and stride and only you know, you strive to yield seem to picking up a bit more notably. So that's interesting. In terms of the week ahead, Jeremy, we still don't have the CPI numbers that are at the time of this recording. But what do you expect from the core PC release next? Yeah, so the January inflation data has been no easy to the upside for many years now, and we do expect that trend to continue. So we think that the residual seasonality, which pushes up US inflation data to start the year is likely to persist. Some of that is just about service sector businesses, which only adjust prices once per year, which typically is at the start of the year, and it's very difficult to seasonally adjust. So when you're in a high inflation backdrop, you tend to get these upside surprises in January. You know, on top of that, we think there's some lingering pass through of tariffs for this report, so basically businesses that are trying to be opportunistic about price increases using the period just after holiday discounting typically ends to sneak in some price resets higher. And then finally, if you recall October and November inflation data was extremely weak partly because it was poorly measured due to the government shutdown. And we think there's actually going to be some positive payback in the January numbers for that as well, in particular, a lot of inflation components are only measured every other month. So if November was artificially low, it's actually going to be in January where you get some of the payback for that. So, you know, for all those reasons, we think you're very likely to get a hot course CPI hot core PCE prints for January. This isn't going to mark a re acceleration in inflation, but we do think that it keeps the conversation about inflation risk you to the upside. We ultimately think the tariff driven inflation is going to ease through the year, but it's actually peaking right around now. So until you start to see the sequential numbers really come down, we think it's going to be important for the Fed markets to remain focused on that risk of persistence, you know, the risk that inflation does get stuck closer to 3% than 2%. Yeah, and on that note, any implications or any views on the Fed? So we're going to drive that issue home. And, you know, on top of some of the improvements in the unemployment rates beyond just the strong NFP numbers, I'd say a lot of the details of the data that had been singled out by dovish Fed members as reasons for concern actually eased as well. So unemployment rates for more cyclical groups like 16 to 24 year old workers fell. We saw a drop in the number of people who were part time for economic reasons that you six under employment measure. So a lot of these supposed canaries in the coal mine, which were noisy to the upside late last year have now corrected lower. So, you know, as I mentioned at the outset, we think the labor data was reassuring, but I think even the nuances will really help to take the firepower out of some of the dovish arguments that the Fed should continue easing rates and should remain concerned about labor market downside risks. So I think the Fed minutes, particularly because they're backward looking could help to highlight that point. So, you know, if you saw people arguing for rate cuts and then the subsequent data seems to go against them. I think that ought to be consistent with the view that they're likely to remain patients, the labor market is not telling them that they need to be in a hurry and that inflation data, even if it's just because of one off factors as likely going to keep. pressure on for policy to remain restrictive. Okay, brilliant. Yeah, thanks again Jeremy and speak again soon. Yeah, thank you. [MUSIC] All right, let's swing over to London where my next guest is joining me from. Hey George, thanks very much for joining. Hi, Yvonne, thanks for having me on. So for the week ahead we have some important UK data, CPI and Labour Market report. What do you expect and how important are these for your Bank of England call which you've changed recently? Yeah, they are very important. We did change our call just last week because the Bank of England was very dovish and we decided that the next move was more likely to be in March now. We brought that forward from April and another cut we added to the mix for June. So we now have a couple of cuts the next one next month. So you're really going to need to see some data to present itself in a weaker fashion to be able to get that. And I think it will. I mean, I think the CPI numbers, the inflation data next week will come down further now. Some of that is going to be due to base effects. But we do think that inflation is on a downward path. One interesting thing from the Bank of England last week, they published an inflation forecast and from Q3. So the second half of this year onwards, they don't have a single quarter with inflation above the target. Now that's a very big difference to what they've been publishing before. And it's very encouraging. So I think that alone will be helpful, very helpful for the Bank. But other data next week as well, we need to focus on include the Labor Market report. There'll be a lot of focus on wage growth which has been slowing and also on unemployment and employment. Unemployment, the Bank thinks is going to rise further. Employment has been softening. So lots of activity data in that report to watch out for. Other things we've got retail sales data. We've got survey news, particularly the PMI surveys, which have been pretty strong for the UK. I wonder whether we're going to get some pay back there. But a lot of data from the UK, including the public finance numbers I should add, that's important because they're the last set of budget deficit data before the spring statement. Of course, the spring statement is no longer going to be a fiscal event, just purely a statement, but still they're important. Yeah, very interesting. Yeah, you'll hear later in the podcast some differentiation here with, for example, RBA already hiking and then you've got Bank of England still on a cutting cycle. What about Europe? George, what are you expecting there for the week? Had some important data as well? Some data not quite as big as the UK, but still very important. We have those PMIs and interestingly, the PMIs are much better correlated in Europe with economic growth than they are in the UK, so there'll be a lot of focus there. And I think the two bits which will be in focus in particular in the Euro area is Germany starting to be supported by some of the increased fiscal spend that we're seeing. And secondly, the French composite number was below 50 last time, might that bounce back up. So a couple of questions we need to ask there, but there's other surveys as well. The ZEW survey, we've got Euro Area confidence, data consumer confidence, and the some actual hard data in the form of industrial production and construction output all of that for next week. And finally, one more point is that we do have Euro Area wage growth numbers as well, wage settlements, negotiated pay. It's probably going to be in the low 3% for Q4 last year. That's what certainly the trackers, the ECBs and our own trackers are suggesting. Okay, great. And then finally, George, there's been quite a bit of political noise as well in the UK. How important do you think of these from markets and any quick thoughts on what flashpoints you're watching in the near term? Yeah, well to answer your question very important indeed, it looks like everyone, all the cabinet members have come out in favor of Keir Starmer, the current prime minister. He looks like he has survived this crisis, which is an encouraging political stability. But there are a couple of major flashpoints over the course of the first half of this year, which we need to watch out for very carefully. The first one is a bi-election, an election for an MP on the Thursday, the 26th of February. If Labour loses that, then it could certainly add to the Malays amongst Labour MPs. But I think even bigger than that is the May, the 7th elections, the local elections. And if Labour does very poorly there and incumbents often don't do well midterm, as we know, then there is a real risk that somebody could put their head above the parapet and decide that they want to stand for the leadership. But unlike the conservative leadership elections, you do need to have someone actually raise their hand and say, it's me I would like to stand for it, you can't just simply put some anonymous votes in a ballot box and say, we don't want the current prime minister or Labour leader, it has to be somebody deciding that. And so that makes it maybe a little bit less likely, but still something to watch out for after those local elections. Yeah, got an interesting point on incumbents because the elections we've had in Asia so far, the incumbents were doing very, very well in Japan, but also in Thailand all the weekend. So yeah, we leave it here George, thanks very much. A lot of things to watch. Siva, thanks, Yubin. Now let's go to Japan and I'm very happy to be joined by Yudic Shisan from our Tokyo office. Thanks to Yudic Shisan and welcome back to the podcast. A lot to discuss in this post election scenario. So obviously the LDP won a historic landslide with more than two thirds of the seats in the lower house. What do you think is the most important policy implication? I guess, particularly from physical policy. The LDP won two thirds of the seats, making it possible to pass in the lower house bills that were rejected in the upper house. This reduces the need to make concession to the opposition parties. The Takaiji administration had so far advocated a responsible and proactive physical policy. Since the LDP will not have to accept expansionary policy from opposition, the possibility of pressing greater emphasis on responsible has increased. After the election, super long-term JGBEUs have declined, which suggests the market is leading it in the same way. In its manifest, the LDP said it would accelerate consideration of temporally cutting the consumption tax on food items. It had stated that discussion will take place in cross-party meeting, and after the election, Takaiji has emphasized that the tax cut would be limited for two years, and would not be financed by issuing additional different covering government bonds. A election is expected to be presented before summer. In June, Takaiji administration will publish its first basic policies for economic and physical management and reform. How responsible is its fiscal policy will be needs to be confirmed through the discussions over the consumption tax cut and in that basic policy documents. In addition, Takaiji is scheduled to meet Trump in mid-March. The U.S. side appears increasingly wary that Japan is exciting upward pressure on U.S. long-term interstate. Thus, Japan now needs to be mindful of U.S. concerns when conducting its fiscal management. Okay, that's really interesting. So, fiscal responsibility seems to be the focus now. Now, when it comes to the BOJ, how does it impact our baseline forecast of rate taxes here in any and risks around that? The main channel through which fiscal policy is affecting inflation is not by improving the output gap, but it's by pushing the game weaker. After the January MPM, there were moves that looked like a rate check between Japan and the U.S. And recently, the game is appreciated toward dollars. So, we are not in a situation that's pressuring the BOJ to high grades earlier. Our base case is for the next hike in June, but if the game starts the beginning again, we'd consider bringing that forward to April. Also, Reuters has reported that the successor for the BOJ board member, who's term end at the end of March and June, will likely be presented on February 25. There will be Takaiji's first nomination. So, they are important for gouging its stance on monetary policy and how much it's thinking about market reaction. If more Davish members were appointed, that could increase the chance of another depreciation of the end. Okay, got it. And then finally, on the week ahead, any data points you're watching? Two things to watch next week. Mande's leaders of Q4 GDP and Friday's nationwide CPI for January. On GDP, Nomura is forecasting and annualized 1.7% quarter on quarter-grob, which is closer to market consensus. But the high-grob looks like a rebound from a temporary weakness in Q3. Looking at monetary data, KPEX is strong, but private consumption remains weak. So, I don't expect that print to be the sole of strong surprise that would force the BOJ to hurry into a rate hike. For CPI, we expect core CPI, inflation-excluding fresh food, to slow to 2.0% year-on-year. Food inflation is easing and the government measures to cut gas increases are also taking some pressure of head drying inflation. Also, we have to keep in mind that Japan is planning a CPI revision this summer. So the inflation late from January through June this year will be revised later on. There's a historical tendency for those revision to be downward. So that's something to be aware of. Okay, that's excellent. Thanks very much Yurich-san. Thank you. All right, now for this special segment, which I'm really excited about. We'll do a bit of a deep dive on Asia-Pacific rates markets. And I'm very delighted to be joined by Andrew Tysers, who you would know is a co-host of this podcast, but his day job really is our Australia and New Zealand rate strategist, along with Albert Lung, who heads up our rate strategy for AEJ based in Hong Kong. I would note both also just published very interesting anchor thematic reports recently, which I'll ask them to discuss here too. Welcome to you both. And again, special thanks to Andrew for joining despite being on the road and talking at the moment. Let's start with your special report. Maybe you guys can give me a bit of a brief overview of the main conclusions of those reports. Maybe start with Andrew and then Albert. Yes, sure. Thanks, you've been great to be with you both. So in this special report, we took a deep dive into the Australian state government bond market, or what we call the semi-bond market. That might sound a bit sort of arcane to some listeners, but it is an important liquid little bond market, about 500 billion dollars in size and it continues to grow and develop. These bonds are highly rated and offer good yield and they are treated as high quality liquid assets for regulatory purposes in Australia. Anyway, in this report, we provide a bit of background on the sector. We look at the state economic cycles to see who's doing well, who's not doing so well. We look at the state budgets, the borrowing programs, the credit ratings, upcoming elections and then we offer some thoughts on that relative value, which bonds we think are most attractive at the moment. So yeah, I think it's a pretty good special report for anyone who wants to get up to speed on the sector. There's a lot in there and even for season players in this space, I think the report's got something to offer as well. Great. Albert. So we launched this special report, which is a China race trading model, so we serve two purposes. One is to highlight the key drivers of China race and the other is to give the likely direction of China race over the next week. So for the key drivers, we back to step quite a lot of serious. So we eventually choose 11 and group them into three categories, which is liquidity, technical and macro data. So we only select a series with daily weekly frequency because most top tier data has the problem like inflation, credit and retail sales, they are only available monthly. So in the past two weeks, the model actually has given a mild receiving signal and race have indeed moved lower. And just lastly, the I'll highlight the average win ratio of this model is quite good. Like over 60% since 2023, it has higher sharp ratio than a few benchmarks trying to government bond funds. So yeah, we hope this is something that our clients find interesting. Yeah, fascinating. Yeah, thank you both. And yeah, I would encourage everyone to have a look at those reports for more details. We won't have time to sort of go through them here. And now I also wanted to get your views from both of you on the rates markets overall. But before that, we have some central banks in the region that we can preview in the week ahead. So let me start with Andrew. We have the RBNZ. What do you expect there next week and even further out? Yep. So for the RBNZ, we're very confident they'll announce an unchanged cash rate of 2.25% next Wednesday. They don't always publish a vote count. But if they do, it'll probably be a unanimous decision. But I do think the communication that comes with that decision is going to have to pivot in a more hawkish direction, recent growth and inflation data in New Zealand have been strong. And it looks like that momentum is continuing. So I think they'll have to reflect that in their language. One thing to look out for, this will be the first policy meeting under the new RBNZ governor, Dr Anna Bremen. She's joined the Rx Bank, joined from the Rx Bank in Sweden. So the communication could come with a different sort of flavor. So it could be a few surprises there, but yeah, all up, no change to the cash rate. Very, very confident of that. Okay, great. And not quite the RBA yet, which already hyped, but slanting in terms of the tone seems like towards there. And speaking of Australia, Andrew, we have the employment report as well next week. What do you expect there and what does it do to your outlook on the RBA from here? Yeah, sure. So we've got employment rising by around 20,000 in the month of January and the unemployment rate. Staying the same at 4.1 actually took a couple of decimal places. It rises a tiny, tiny fraction from 4.10 to 4.13, but anyway, rounds to 4.1. The unemployment rate, we do have grinding higher over the course of the year. The economy here is going to be hit or face some headwinds from tight amount of true policy, tight of fiscal policy and higher currency. So we do have the economy losing momentum as we move through the year and the unemployment rate rising to about 4.5 by year end, but probably not much change in this monthly data this time. Okay, great. Thanks, Andrew. For the rest of the region, we have a couple of other center banks in the week ahead. So BSP and the Philippines and BI in Indonesia, both on Thursday. We expect BSP to cut by 25 basis points, so delivering another easing, primarily because growth has really been underperforming as a result of the ongoing corruption scandal. And inflation is also quite benign, so that gives BSP some legroom to continue to focus on supporting growth. The language, though, I think will be less dovish, which is similar to what we heard in December. So this will be a relatively hawkish cut, I suppose. And then for banking in Indonesia, we have them on hold, I think because the external backdrop is not yet supportive for a cut. And I would argue there's some balance of payments pressures that are threatening their affect stability objectives. So I think they will keep the policy rate unchanged because there's still a little bit more cautious than that. But I like the BSP, the tone will be dovish. They will retain this assessment that they still see scope to ease further because inflation is within target and they feel the need for growth to be supported as long as external conditions allow and the idea remains stable. So we have BI actually still cutting in March and June, so a total of 50 basis points are not quite over in terms of the easing cycle. But again, if these balance of payments pressures persist, I think there's a risk that they could delay the start or the restart, I should say, of the cutting cycle. Albert, just when asked specifically on Indonesia, any thoughts from a rates perspective? Yeah, thanks, you mean. So Indonesia has been moving higher since the start of the year by about 20 basis point. Offshore has also been selling. So at this level, though, I think the front end bonds up to five, here may be better supported because five year bond at the 575 now, is still around 70 basis point about the 12 month SLBI bills. So as you say, a couple more cars, and even if it is delayed, I think should still cap the front end use. But the long end, I'm a bit more negative. I think the fiscal concern is still there. I've gone supply also risk. So, yeah, so I think the 10-year point will be more negative. Okay, got it. And what about the broader Asia region? I know there's been quite a bit of divergence, like we've seen globally, particularly from a from a central banking perspective. Do you agree with markets pricing in some countries a hike already or are those overdone? But also, I want to hear your thoughts as well on the rates markets in China. Yeah, sure. So to some extent, I think some markets have been overdone like Taiwan. So it is pricing high now in both June and September. Again, it's a backdrop of stable inflation and property market as well. So it seems to be too much. But the old four Asia growth data and PMI have been solid. So for some markets like Korean India, I actually think the rate high pricing could sustain even if the central bank says that they're in a no rush to hike. So in those two markets, I think, Earth flatness could perform. And lastly on China, right? So we can probably answer you better tomorrow when the new signal from a new model comes out. But, well, of course, this is a model actually to complement our medium-term framework. So from here on, I think China is of some room to go a bit higher. So partly on the head of the March NPC, maybe more fiscal stimulus to come. And I think the old four China's risk sentiment is they okay head of the potential from sea meeting in April as well. Okay, great. So a lot really hinges on central bank decisions and their outlooks to drive market pricing. Yeah, thank you both Andrew and Albert. This has been fascinating. Thank you. Thank you, man. Well, that's it for now and thank you again for listening to our podcast edited and produced by John Dalton. Please like and subscribe to Nemuras Podcasts on Apple's Spotify and SoundCloud or your usual podcast provider. We'd love to hear your feedback. So please feel free to write a review and share this podcast to anyone you think might be interested. You can check out NemurasConnects.com for more of our research and updates. Have a great week ahead and those who celebrate, happy new year of the Firehorse. In a complex and unpredictable world, where a sunset in one market means a sunrise in another, one investment bank always looks beyond the horizon. 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