Geopolitical Strains Weigh on Stock Markets
February 19, 2026
Equity markets in the U.K., Germany, France, Italy, Spain and India are showing losses so far this Thursday that range between 0.8% and 1.5%, and futures trading in major U.S. indices point to a lower open in the United States. Exceptions to this trend include South Korea, Australia, New Zealand and Singapore, while several other stock markets in the Pacific Rim remain shut for the lunar new year.
A U.S. military attack on Iran is looking increasingly likely and less focused and brief than the bombing last year of that country’s nuclear facilities. Despite ongoing negotiations, fighting between Russia and Ukraine remains fierce, and strains continue to deepen between the United States and Canada. All this geopolitical uncertainty has lent the dollar some support, with gains overnight of 0.2% against the yen, won and sterling and 0.1% relative to the loonie and Swiss franc.
The U.S. currency is 1.6% and 0.6% above its end-January levels against sterling and the euro. The dollar has been additionally buoyed by indications that it may take more compelling indications, as confirmed in yesterday’s release of FOMC minutes, of resumed disinflation in the United States to persuade Fed officials to cut their interest rate target and that the scope of rate reduction in 2026 is quite limited in any case.
Ten-year sovereign debt yields have risen today by two basis points in the U.K., France and Italy, three basis points in Switzerland, and a basis point in the United States, Germany and Spain.
The price of West Texas Intermediate oil has climbed 1.6% today, while gold, silver and Bitcoin prices are little changed.
There has been another interest rate cut at the Central Bank of the Philippines, the sixth in a row for this monetary authority that reviews its policy stance on a bi-monthly basis. At 4.25%, the new rate level will be back to its lowest level since November 2022 and 225 basis points below the 6.5% peak maintained from October 2023 until August 2024. Today’s rate reduction was done in spite of an 18-month high of 2.8% in Filipino core consumer price inflation and a slight uptick as well last month in overall CPI inflation. According to a released statement, inflation “forecasts have risen slightly for 2026 due mainly to supply-side pressures,” but is seen likely”to return close to the 3 percent target by 2027.” Moreover, inflation expectations are well-anchored, and both GDP growth and domestic demand have under-performed officials’ forecasts.
A scheduled policy review at Bank Indonesia, in contrast, left the 7-day reverse repo rate unchanged at 4.75%. Six prior 25-basis point cuts from September 2024 through September 2025 sliced the policy rate from 6.25% to 4.75%. Indonesian consumer price inflation had imploded from a 5.95% peak in September 2022 to -0.1% by February 2025, but such printed at a 32-month high of 3.55% last month, and officials are also concerned about depreciation in their rupiah.
In Japan, core machinery orders advanced 7.9% last quarter but are projected to drop 4.5% this quarter.
Australian labor market statistics from January showed a reduced increase of jobs (17.8k versus 68.5k in the prior month) as well as lower labor participation, but the jobless rate held steady at 4.1% instead of inching higher as analysts were predicting.
Euroland’s current account surplus rebounded 64% in December on a seasonally adjusted basis, but the full-2025 surplus of EUR 255 billion was well down from EUR 406 billion in 2024. As a percentage of GDP, the surplus declined from 2.7% in 2024 to 1.6% in 2025.
Construction output in the euro area rose 0.3% last quarter but was 0.5% below its year-earlier level, and construction in 2025 as a whole was the same as in the prior year.
The Swiss trade surplus of CHF 3.6 billion last month and 20% smaller than the monthly average in 2025.
In yet another sign of the impact of U.S. tariffs on other countries, Spain’s trade deficit widened to EUR 57 billion in 2025 from EUR 40 billion in 2024.
In Great Britain, the orders component of the February industrial trends survey rose 2 index points to -28, its least negative reading in five months but still low enough to convey weakness. The reading has been sub-zero since August 2022 in contrast to a reading of +20 in August 2021.
Consumer price inflation in January printed at a 4-month low of 2.7% in Ireland and a 3-month low of -0.2% in Finland. Malaysian CPI inflation in January matched the 11-month high of 1.6% in December.
Producer price inflation rates in January were negative in both Portugal (-2.1%) and Poland (-2.6%).
Reported measures today of consumer confidence this month of February touched a 13-month high of -13.1 in Denmark, a 2-month low of +4 in Belgium, a 2-month low as well of -2.2 in Slovenia, a 4-month low of -24 in the Netherlands and an 11-month high of 85.7 in Turkey.
In yet another sign that softer U.S. labor market trends aren’t gaining momentum,U.S. weekly jobless insurance claims fell much more sharply than anticipated in the second week of February to a 5-week low of 206k from 229k in the prior week and 232k in the final week of January. Meanwhile, the Philly Fed manufacturing survey reading in February improved sharply to a 3-month high of 42.8 and was not far below November’s one-year high of 49.5.
The U.S. goods and services trade deficit unexpectedly widened in December by roughly a third to $70.3 billion, and after all the fanfare behind the tariff initiative meant to immensely slash the deficit, the shortfall for all of 2025 of $901.5 billion was barely smaller than the 2024 goods and services deficit of $903.5 billion.
Canada has been a particular object of the U.S. tariff war. Although the trade gap of C$ 1.31 billion in December was only half the size of November’s deficit, the full-2025 shortfall of C$ 31.3 billion was only exceeded in 2020, when global trade was distorted by the Covid pandemic.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bangko Sentral Ng Pilipinas, Bank Indonesia, British industrial trends survey, Euroland current account, U.S. and Canadian trade deficits
ShareThis
