Concerns Over Artificial Intelligence and Geopolitical Strains Rattle Equities But Dollar and Yen Rise
February 17, 2026
In pre-open futures trading, all four major U.S. stock market indices after the three-day weekend holiday have lost ground. Japan’s Nikkei closed down 0.4%, and the German DAX and Paris CAC stock market indices are flat in contrast to slight equity gains so far in the U.K., Spain and Italy.
Central bank interest rate prospects depict a range of likely future outcomes. Minutes from the February Reserve Bank of Australia policy review express concern that labor market strains and service price stickiness will keep inflation above the 2-3% target range for some time longer. RBA officials unanimously voted to hike the Official Cash Rate at the February meeting, and these minutes do not rule out the possibility of further tightening should disinflation not resume. Decisions will be on a meeting-to-meeting basis and guided by data.
Speculation that the Bank of Japan will raise rates in April got a boost from a supporting prediction of such a move by a former member of the BOJ Board. April starts Japan’s fiscal year, and rate changes in April have occurred in past Aprils several times.
Speculation regarding a Bank of England policy rate reduction is rising also, especially after today’s release of labor market figures. British jobless insurance claims leaped by 28.6K in January, their largest monthly rise in a year and a half, and the jobless rate increased to a 58-month high of in the three months through December, its most elevated reading in 58 months. Most importantly, average wage earnings growth of 4.2% in 4Q was at a 16 month low and down from 4.9% in 3Q 2025 and a peak of 8.4% around the middle of 2023. A counterfactual is the continuing softness of British labor productivity, which dropped 0.6% last quarter and was 0.5% below the year-earlier level.
In overnight currency market trading, the dollar rebounded by 0.6% against sterling, 0.3% relative to the Australian currency, and 0.2% versus the euro, peso and Swiss franc. The yen did even better, climbing 0.3% against the dollar even as the Japanese 10-year JGB yield slumped eight basis points to 2.12%. Other 10-year sovereign debt yields dropped by four basis points in the U.K., three bps in Germany, France and Spain, and two bps in the United States and Italy.
Prices for gold, silver and Bitcoin are 1.8%, 4.3% and 1.1% lower so far today, while that of WTI oil is 1.5% stronger.
Japan’s tertiary index of service sector activity posted monthly back-to-back drops of 0.4% in November and 0.5% in December, negating a 0.9% advance in October. Compared to a year earlier, the tertiary index was up only 0.4% in each of the last three quarters of 2025.
Germany’s ZEW Institute of European economic research released results from its February surveys of investors. Regarding just Germany, investor expectations had been expected to rise about five points but instead fell back to a 2-month low. This happened in spite of a less pessimistic perception of the current economic situation. Regarding all of the euro area, investor expectations also became slightly less optimistic this month despite a less pessimistic view of current conditions. Also of note, however, price expectations that previously had been tilted toward more disinflation shifted to a neutral reading.
The second and more complete readings of German consumer price inflation in January are unrevised from the preliminary results that had shown a 0.1% monthly price price and a 3-month high 12-month increase of 2.1%. Food prices were most responsible for inflation’s rise from 1.8% in December. Core CPI, excluding both food and energy, ticked up 0.1 percentage point to 2.5%, a 2-month high.
Sri Lankan CPI inflation of 2.5% in December was up from 0.6% the month before and a reading of -1.2% as recently as September. Between August 2022 and September 2023, inflation imploded from a hyperinflationary 105.2% to -7.3%.
Canadian consumer price inflation eased last month to a 2-month overall low of 2.3% and a 5-month low of 2.6% in the core measure. Both results showed more disinflation that analysts had been anticipating.
Strong economic growth was reported in Kyrgyzstan (9.0% higher than a year earlier in January), Mongolia (+6.8% between the final quarters of 2024 and 2025), and Kazakhstan (a 14-year high of 6.5% in 2025).
The Empire State manufacturing survey compiled by the NY Fed slipped 0.6 points to 7.1 this month but was more upbeat than the -3.7 reading in last year’s final month. The U.S. NAHB housing market index will be reported later this morning. Investors get to see the FOMC minutes tomorrow, and Friday will pack a whole lot more information with the arrivals of fourth quarter GDP data including the quarter’s PCE price deflator, plus December figures for personal income, personal expenditures, and the month’s PCE prie deflator.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Canadian CPI, Euroland and German ZEW expectations index, RBA minutes
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