Market Update as of 12 February 2026

U.S. Markets:
U.S. equities retreated sharply on Thursday as early gains faded, with the S&P 500 down 1.5%, the Dow 1.3% lower, and the Nasdaq 100 sliding 2% amid renewed technology weakness. AI-linked stocks fell on concerns over infrastructure spending returns, while Apple declined 5% , and Cisco dropped 12.3% following weak guidance. Defensive sectors outperformed as investors reduced exposure to crowded growth positions. Strong January employment data tempered expectations of near-term Federal Reserve easing ahead of CPI, reinforcing a cautious tone despite broadly resilient economic fundamentals.

Bonds and Policy Outlook:
The 10-year U.S. Treasury yield fell to 4.11%, its lowest in over two months, as investors rotated into defensive assets following the equity selloff. The move reflected positioning ahead of inflation data and expectations that price pressures may moderate. While markets still anticipate two rate cuts in 2026, stronger labour data shifted expectations toward the second half of the year. Treasury demand increased as risk sentiment softened, with investors reassessing the pace of policy normalization amid mixed growth signals.

Europe:
European equities closed lower on Thursday, with the STOXX 50 down 0.3% and the STOXX 600 falling 0.6%, pressured by weaker technology shares and earnings disappointments. AI-related capital spending concerns weighed on ASML, Prosus and Infineon, while Adyen plunged on disappointing results. The ECB kept rates unchanged and maintained confidence that inflation remains on track toward its 2% target. Eurozone GDP expanded 0.3% in Q4, lifting annual growth to 1.5%, supported by Spain and the Netherlands despite ongoing weakness in Germany.

Asia:
Chinese equities advanced on optimism around innovation-led growth and domestic AI development, supported by liquidity injections from the People’s Bank of China. Inflation remained subdued, reflecting weak consumer demand despite policy support. Japanese equities were mixed as the Nikkei edged lower while the TOPIX gained, supported by foreign inflows and expansionary fiscal signals, with producer inflation easing modestly.

Market Volatility:
Volatility increased, with the VIX rising to 20.74 for the week, near its historical average and signalling elevated but contained risk sentiment.

In the week ahead (Feb 16-20):
Markets will monitor Eurozone industrial output, U.S. retail sales, FOMC minutes, UK CPI, and U.S. GDP and personal spending data.

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