The post When Does the AI Bubble Burst? appeared first on CEPR.

Hezbollah Will Stay Out Of US-Iran Fight, But Only If Strikes 'Limited'

As the Trump White House weighs its options against Tehran, Hezbollah is signaling it may not be eager to open another front - at least not immediately, issuing a rare message which seeks to calm the mood in the region.

A senior Hezbollah official told AFP that the Iran-backed group would stay out of the fight if the United States conducts only "limited" strikes against Iran - a notable caveat, but which leaves the door open if escalation goes further.

The past several years of the Gaza war saw Hezbollah enter direct, sustained conflict with Israel - after which the Shia paramilitary group saw it's leadership decimated after a series of targeted IDF strikes on Beirut, as well as the pager blast operation.

And so at this moment, Hezbollah is very much on a back foot, and likely doesn't have the resources to enter into a new round of fighting with Israel along the country's northern border.

However, it's believed that Hezbollah - which has throughout it's history stretching back into the 1980s closely coordinated with Iran - still has tens of thousands of rockets it could unleash.

The Israeli government has meanwhile conveyed its own indirect warning, saying if Hezbollah joins any US-Iran war, Lebanon will pay a steep price. Potential Israeli retaliation would once again target civilian infrastructure, including Beirut’s airport - as has happened several times in the past.

"Over the past several months, IDF troops have been operating in southern Lebanon to dismantle terrorist infrastructure and prevent attempts by the Hezbollah terrorist organization to rearm," the Israeli military (IDF) said in a fresh statement this week.

Israeli forces targeted "weapons and terrorist infrastructure, including observation and firing positions in which anti-tank launchers were located," the IDF said.

A key part of Israel's strategy has long been to pressure the entire country of Lebanon and make life miserable for its population. But the Lebanese government and armed forces are limited in their options, given Hezbollah is by far the most well-armed faction, even far and above the national army.

BIG: Hezbollah will not intervene if the U.S. launches 'limited' strikes against Iran.

Source: Hezbollah official to AFP pic.twitter.com/1MSNL39R0Y

— Clash Report (@clashreport) February 25, 2026

But should a major US-Iran-Israel war erupt, there's a high chance that Lebanon would once again feel the disastrous after effects. Hezbollah militants would likely take shots at Israel, and the IDF would respond brutally, likely with more bombing raids over Beirut and especially the south.

On Wednesday, the United States rolled out with yet more sanctions on Iran, which at this point has become a monthly, if not weekly, exercise. Iran is widely seen as a key bankroller of Hezbollah's operations in the Levant region.

Tyler Durden Wed, 02/25/2026 - 15:05

Goldman's Top DEI Exec Out Days After Bank Scraps Woke Board Policy

Days after the firm announced that they were scrapping DEI requirements for new board members, and six years after the death of George Floyd that ushered in institutionalized virtue-signaling, the bank's head of DEI is leaving. 

Megan Hogan, who's been at the firm 12 years, is taking her shtick to Morgan Stanley according to Business Insider, which Hogan confirmed via email, telling the outlet that Morgan Stanley had extended "an amazing opportunity" to her in talent development. 

She will report to Morgan's head of talent development, Susan Reid, the firm's global head of talent, and will begin in April. 

The move comes after Goldman's hard pivot away from DEI following Donald Trump's second term - retooling its diversity program, known as One Million Black Women (oh god), a multibillion-dollar commitment to invest in black businesswomen and nonprofit leaders. 

The bank also ended its requirement that companies it takes public have diverse boards, and stopped highlighting specific DEI targets in annual reports. 

Hogan is being replaced by Lauren Uranker, another managing director who has been with the firm for 14 years who will become the new sole head of talent, development, engagement and management, according to the report. Her mandate will be to concentrate on the transition to AI-supported work, team growth, and finding ways to keep top talent from fleeing. 

In early 2025, anti-DEI activist groups, which included the National Center for Public Policy Research (NCPPR), the National Legal and Policy Center and the Heritage Foundation, also targeted the bank - submitting proposals challenging their business practices, and arguing that the banks' policies have left them and their shareholders vulnerable to costly legal challenges. 

So-called anti-woke groups have seized on the 2023 Supreme Court ruling that found race-based affirmative action in college-admissions processes is unconstitutional. Since then, the groups have challenged a range of diversity policies across Corporate America, both in court and through shareholder proposals. 

...

Trump signed an executive order on his first day in office to end DEI programs across the federal government. -WSJ

The NCPPR was also a co-plaintiff in a successful ruling in late 2024 against the SEC over Nasdaq's requirement that companies listed on its exchange meet DEI requirements. 

"This is a reflection of the changing legal environment and adapting to the reality of those legal shifts," a genderless spokesperson told Business Insider, adding that the firm stands by the benefit of "diverse perspectives and experiences." 

Indeed! 

Tyler Durden Wed, 02/25/2026 - 14:45

CME Halts All Metals, NatGas Markets Due To "Technical Issues"

At around 1300ET, the Chicago Mercantile Exchange (CME) halted trading of all metals and NatGas contracts (futures and options) due to 'technical issues'.

Additionally, all day orders and GTDs with today’s date will be cancelled.

All GTCs that have been acknowledged will remain working.

Since the halt, spot prices for gold have declined...

NatGas futures trading has re-opened (lower)...

CME says that Globex Metals futures and options markets will Pre-open at 13:31 Central Time and Open at 13:45 Central Time.

Developing...

Tyler Durden Wed, 02/25/2026 - 14:26

Yen Tumbles After Takaichi Nominates Two Prominent Doves To The BOJ

It's not just Trump who is stacking his central bank with uberdoves.

After plunging yesterday following a Mainichi report that Japanese Prime Minister expressed concerns at more BOJ rate hikes, the yen has tumbled more, sending the USDJPY as high as 156.80 this morning, the highest since Feb 9, after the Takaichi administration announced two nominees to succeed the outgoing BoJ Policy Board members later this year, both of whom have a history of dovish commentary.

Toichiro Asada was presented as a successor to Asahi Noguchi (whose term ends on March 31st), and Ayano Sato has been presented as a successor Junko Nakagawa (whose terms ends on June 29th).

In both cases, the nominees’ comments over recent years had leaned towards a pro-reflation and pro-accommodative-policy stance, though neither has directly opined on the current stance of BoJ policy as of yet, according to Goldman's Stuart Jenkins. 

The outgoing Board members Noguchi and Nakagawa are both generally seen as being on the dovish end of the committee though, arguing for a more limited compositional shift in the Board’s policy preferences, though Goldman economists see the announcements as slightly lowering the odds of an H1 hike (versus their base case of July).

Policy speeches from the two nominees will be key to assessing their appetite or resistance to further hikes, but markets are likely also deriving some signal from the nominations as a ‘litmus test’ for PM Takaichi’s own policy preferences, with economists acknowledging the hurdle to policy tightening that government influence may present. 

Goldman adds that pricing around a more concerted exit from Japan’s real rate regime was a key ingredient to the Yen’s post-election rebound, but a dovish BoJ disappointment ahead remains an important risk to that, including if the Yen’s reaction itself lowers the BoJ’s urgency for hikes.

While the increased role of a fiscal risk premium across Japanese assets has driven a divergence between USD/JPY and US-Japan rate differentials (see first chart below), the pair has still exhibit a fairly high beta to front-end rate differentials (second chart below), which are increasingly coming from the Japan leg (third chart below).  

Charts of the Day: A rising Japan fiscal risk premium prior to the lower house election helps explain the recent disconnect between USDJPY and rate differentials.

USD/JPY’s beta to daily shifts in long-end rate differentials have become more muted over the past year relative to the post-YCC 2024 period – consistent with more frequent episodes of shifts in Japan’s fiscal risk premium that pushes on the Yen and JGBs in the same direction – while the pair has exhibited a higher sensitive to shifts in front-end rate differentials.

The BoJ’s hiking cycle has come alongside a gradual increase in implied Japan rates vol relative to the US, arguing for an outsized contribution from price action in Japan rates to the Yen.

Tyler Durden Wed, 02/25/2026 - 13:40

Subpar 5Y Auction Sees Biggest Tail Since July 2025, Bid to Cover Slides

After yesterday's 2 Year auction, moments ago the Treasury sold its second coupon for the week when it auctioned off $70BN in 5 Year paper in a rather lackluster auction. 

The auction priced at a high yield of 3.615%, down from 3.823% a month ago, and the lowest since November; it also tailed the When Issued 3.608% by 0.7bps, the biggest tail since last July.

The bid to cover was ugly, dropping to 2.32, down from 2.34 and the lowest since July 2025.

The internals were fractionally better, with foreign demand clearly there as Indirects took down 62.5%, up from 60.7% and the highest since October. And with Directs awarded 24.7%, down from 28.5% and the lowest since October, Dealers were left holding 12.8%, up from 10.8% last month and above the recent average of 10.1%.

Overall, this was a subpar auction, with a surprisingly big tail and sliding bid to cover, yet it could have been far worse if foreign bidders did not show up. Luckily, they did, and prevented a much worse outcome.

Tyler Durden Wed, 02/25/2026 - 13:20

Schumpeter Didn't Have This Level Of Destruction In Mind

By Michael Every of Rabobank

The tendency for the rate of things to fall

Markets are trying to get past a report on how devastating AI could be for employment. There are push-backs: it ignores resource constraints and Schumpeterian creative destruction, and echoes Marx’s Tendency for the Rate of Profits to Fall. Yet Anthropic just released desk-top plug-ins plugins aimed at HR, design, engineering, ops, financial analysis, investment banking, equity research, private equity, and wealth management, e.g., it can do all the analysis in a spreadsheet, write the report on it, and make the presentation. It seems illogical this won’t see a surge in unemployment even if AI still makes key errors that require experience to spot – the youngest cohort of workers will miss out, meaning they don’t get the experience needed to be useful later.

That’s with existing resources; Schumpeter didn’t have that level of destruction in mind for creatives; and while Marx was wrong, the period post the release of Das Kapital wasn’t one of social stability. Even Bank of England Chief Economist Pill just told Parliament, “My daughter is struggling to find work too,” though he blamed Labour’s taxes on business. The Fed’s Bostic yesterday said he didn’t think the AI threat required rate cuts as a solution even though they have an inflation AND employment mandate. Then again, Bloomberg reports the AI memory shortage may add up to 0.2 percentage points to US CPI, underlining the resource constraint view.

If employment may have a tendency to fall, sadly so do bombs. Russia threatened the UK and France with nuclear strikes after alleging the pair were trying to get a nuclear weapon or dirty bomb to Ukraine: the financial media didn’t notice. It warned of plots to destroy gas pipelines through the Black Sea, following that of the Druzhba oil pipeline to Slovakia this week, which the financial media also didn’t notice. Notably, the US also warned Ukraine not to blow Russian assets up that threaten its economic interests there. Elsewhere, Europe’s VDL insisted the EU would get round Hungary’s veto to deliver Ukraine’s €90bn loan, and an EU Commissioner stressed they were looking at ‘non-standard’ tactics to get Ukraine in faster. Also add Iceland and Montenegro, and won’t consensus EU decision making be harder to achieve, and Russia frictions rise?

In the Middle East, 11 US F-22s are now on the ground in Israel, as Reuters reports Iran is close to buying Chinese supersonic anti-ship missiles. Embassies are sending warnings to their citizens around the region; Turkey is preparing to prevent an Iranian refugee surge at its border. Yet Indian PM Modi will address the Knesset today at 4:30PM local time to signal a strategic trade, tech, and defence alliance (relatedly, Somaliland’s president announced he will make his first official Israel visit in March). It remains to be seen when this war might begin --today, or after market close Friday?-- or what then happens, but such an outcome looks more likely than a sudden Peace For Our Time deal. Either way, the impact on energy prices will be notable – either sharply up or sharply down.

In Asia, supplies of key goods have a tendency to fall: China just cut off 20 major Japanese firms off from critical minerals over “remilitarisation” – or, to put it another way, the rapid rearmament the US is pushing allies to embrace. Rather than confront the US directly ahead of a Xi-Trump summit, Beijing --angry with Takaichi-- is again testing US resolve via that channel. Taiwan’s ruling and opposition parties also just agreed to advance President Lai's $40bn special defence budget after months of deadlock: that’s going to be another pressure point given the pledged $20bn of US arms sales to it. How much room does the US have to placate China without showing its allies that it doesn’t stand behind them?

In related geoeconomics, tensions don’t have a tendency to fall: US officials warn of “deep distrust” even as they are trying to stabilize China ties ahead of that key summit. Relatedly, Bloomberg reports a $112bn gap between what China claims it’s exporting to the US and what the US says it’s buying – almost all of it is seen as due to tariff evasion.

German Chancellor Merz is in Beijing seeking “reliable and fair partnership” and to urge China to curb “unfair trade practices” amid his economy’s deindustrialisation. However, the heuristic shows net importers (as Germany now is vs China) only have the ability to pressure net exporters with the threat of tariffs. Berlin, unlike France, is opposed to them – so, what instead?

Europe is closing in on a Mexico trade deal… as the latter grapples with cartel violence and is perhaps months from being locked into a new North American trade deal with a de facto common external tariff directed by the US, as we already see with Mexican tariffs on Asian imports. Similar to the EU-Mercosur deal Europe hasn’t yet agreed to, there is an underlying clash with the realpolitik of the Donroe Doctrine ahead.

The US is eyeing Pentagon AI for its new critical minerals trade bloc’s pricing. It remains to be seen how this will work given the noted disconnect between resource availability and AI, but watch this space… and “because markets” it isn’t. Neither is China’s soon-to-be-announced new energy strategy, which will place its own security at the heart of all future development.

On the other hand, US Secretary of War Hegseth is at war with Anthropic and has given it an ultimatum. Reportedly, he has told the firm that he could not just strip it from the US defense sector if it won’t give him full access, but also label it a supply-chain risk, like Chinese firms, or invoke the Defence Production Act to force it to work with the Pentagon. For anyone but the “because markets” crowd, this kind of outcome was always obvious: new technology has historically always been centred on the military first or been driven by it.

Meanwhile, in Australia CPI doesn’t have a tendency to fall, despite pre-AI RBA models saying it would. In January, seasonally adjusted CPI was 0.5% m-o-m and remained unchanged at 3.8% y-o-y, with the largest contributors being housing (6.8%), food and non-alcoholic beverages (3.1%) and recreation and culture (3.7%). Trimmed mean inflation was 3.4% y-o-y, up from 3.3%. That almost certainly locks in a 25bps rate hike in May after the next round of quarterly CPI data are out. (And note Australia doesn’t have any tariffs: the US, with its controversial tariffs, has headline CPI of 2.4%. What do pre-AI economic models and modellers have to say about that?)

In politics, there are numerous headlines pointing to our volatile times, e.g., the Australian PM being evacuated from his Canberra residence for security. Moreover, in the US State of the Union President Trump: reiterated an aspiration to replace income tax with tariff revenue; proposed shifting subsidies from health insurers to consumers; underlined the prices of US prescription medicines are lowered by increasing the prices in other economies; stated AI datacentres will pay separate, higher electricity prices; flagged opening up the retirement scheme available to federal workers to the private sector; argued to prevent members of Congress from profiting from inside information (“Did Nancy Pelosi stand up if she’s here?”); announced a new War on Fraud under VP Vance; pushed the SAVE America Act which enforces proof of ID to vote; and claimed that 35 million people told him that the Prime Minister of Pakistan would have died in a war with India if not for his involvement. We didn’t get anything on aliens (I’m not joking).

However, Trump underlined that while he prefers diplomacy, Iran is continuing with its “sinister plans” and is refusing to say, “We will never have a nuclear weapon” - and he will never allow them to have one. That sounds like certain headlines may fall on market screens in the near future even if that rhetorical --and literal-- bomb wasn’t dropped at the end of the SoTU, as some had thought could complete its political theatre.

Tyler Durden Wed, 02/25/2026 - 13:20

"Do You See What Happens Larry...": Summers Out At Harvard After Epstein Scandal

Who could have seen this coming?

Aug 2019: Clinton Treasury Secretary Larry Summers Rode On Epstein's 'Lolita Express'

The former Harvard President and Clinton-era Treasury Secretary has been cited four times on the flight logs of Jeffrey Epstein's 'Lolita Express'. During his first trip, he was still working in the Clinton administration. And during his most recent - in 2005 - he and his wife accompanied Epstein to Epstein's private island just days after their wedding.

During his first trip on Sept. 19, 1998, (while he was Treasury Secretary) Summers flew from the airport in Aspen, Colo. to Dulles international.

His second trip didn't take place until April 15, 2004, when Summers flew from JFK to Bedford, Mass., an airport not far from Harvard, where he was president of the university at the time.

On his third trip, Summers flew from Bedford to White Plains for reasons that are unclear.

And during his fourth trip, Larry and Lisa Summers flew from Bedford to Epstein’s Island, and were accompanied by Epstein’s close confidant and alleged Madam Ghislaine Maxwell.

...and here, here, and here...

All of which led to the former Harvard President Larry Summers resigning from his academic and faculty appointments at Harvard at the end of the academic year, relinquishing his University Professorship - Harvard’s highest faculty distinction - and remaining on leave until that time, a Harvard spokesperson confirmed to The Crimson.

The Crimson reports that Summers also resigned Wednesday from his role as co-director of the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, a position he has held since 2011, according to the spokesperson. He will not teach or take on new advisees.

The resignation marks an extraordinary unraveling for Summers, long one of the most influential figures in American economics. His career spanned prize-winning research, service as United States Treasury Secretary, and the presidency of Harvard.

In a statement to The Crimson, Summers wrote that the decision to leave was “difficult” and that he remained “grateful to the thousands of students and colleagues I have been privileged to teach and work with since coming to Harvard as a graduate student 50 years ago.”

Summers, who has been on leave since November, appeared hundreds of times in newly released Epstein files.

The correspondence between Summers and Epstein - which tallies thousands of emails and phone calls - revealed an intimacy that far exceeded the bounds of a professional relationship. 

In the emails, Summers appears to ask Epstein for advice on pursuing a romantic relationship with a woman that he describes as a mentee.

In one message from 2018, Epstein refers to himself as Summers’ “wingman”.

Furthermore, in late December, a second tranche of Epstein-related records released by the Justice Department revealed that Summers had been designated as a successor executor in a 2014 draft of Epstein’s will, positioning him to oversee the financier’s estate if the primary executors were unable to serve. 

Quoting from The Big Lebowski, we comment that "you see what happens Larry..." when you correspond with a convicted pedophile.

Who's next?

Tyler Durden Wed, 02/25/2026 - 13:00

Ethereum Foundation Starts Staking ETH As Client Diversity Concerns Persist

Authored by Christina Comben via CoinTelegraph.com,

The Ethereum Foundation has begun staking part of its treasury, turning one of Ethereum’s most influential entities into a direct economic participant in network consensus.

According to a Tuesday post on X, the foundation deposited 2,016 Ether and plans to stake about 70,000 in total, with all rewards flowing back into its treasury to fund protocol research and development, ecosystem development and grants.

​In its announcement, the foundation stressed that new validators were being operated using open-source infrastructure, Dirk and Vouch, originally developed by Attestant and now part of Bitwise’s institutional staking stack. 

Dirk acts as a distributed signer, while Vouch serves as a validator client, allowing keys and operations to be split across multiple jurisdictions and operators rather than concentrated in a single machine or provider. 

The Ethereum Foundation has started staking its ETH. Source: Ethereum Foundation

Chris Berry, head of Ethereum onchain engineering at Bitwise Onchain Solutions, told Cointelegraph that Vouch and Dirk were “built with the mindset to fulfill the duties of an honest validator in the safest way possible,” with an emphasis on client diversity, non-custodial control and compliance.

Avoiding single points of failure

According to the foundation, this setup was designed to avoid a “single point of failure” and to reflect best practices for secure, non-custodial staking.

Crucially, the Ethereum Foundation says its configuration “employs minority clients” alongside a mix of hosted infrastructure and self-managed hardware in several jurisdictions. 

For Berry, those properties “really align with the core values of Ethereum,” and the EF’s adoption shows that the team is “confident in the implementation and stewardship of the software.”

The choice is also significant in the context of long-running concerns that Ethereum’s client ecosystem and validator set could become overly dependent on a handful of dominant implementations and centralized cloud providers. 

By explicitly opting for a minority client-heavy stack, the foundation appears to be using its own staking footprint to model what it wants large institutional validators to do.

Ethereum staking concentration concerns  

The move comes as Ethereum staking continues to grow and professionalize. Around 30% of the ETH supply is now staked, with liquid staking protocols and large custodians, such as Lido and Coinbase, still controlling a sizable share of validators and effective voting power. 

This has raised recurring questions about how much decentralization Ethereum can retain as more capital flows into highly optimized, institution-run staking operations.

Berry stressed that Ethereum had “always prioritized decentralization and security” at a protocol level, and that there were “many mechanisms” to ensure that Ethereum would “remain secure if large amounts of stake want to leave or do not perform their duties appropriately.”

He added that institutional staking was “very competitive,” and that allocators were increasingly focused on properties such as client diversity, infrastructure resilience and validator performance.

Tyler Durden Wed, 02/25/2026 - 12:45

Trump To Iran: War Can Be Averted If It Says "Those Secret Words"

Among the most important foreign policy statements of President Trump's during his annual State of the Union address to a joint session of the Senate and House of Representatives Tuesday night came in discussing his Iran red lines.

"We are in negotiations with them. They want to make a deal, but we haven't heard those secret words: 'We will never have a nuclear weapon.'" This 'challenge' underscores that at this point it may not matter at all what Iran actually says or does, as Washington is on the war path. See the words of Iranian Foreign Minister Seyed Abbas Araghchi issued before Trump's speech - he laid out precisely this pledge using the "secret words" several hours before the world knew what Trump would say... 

2/4 Our fundamental convictions are crystal clear: Iran will under no circumstances ever develop a nuclear weapon; neither will we Iranians ever forgo our right to harness the dividends of peaceful nuclear technology for our people.

— Seyed Abbas Araghchi (@araghchi) February 24, 2026

The top Iranian diplomat had declared that it was "crystal clear" that "Iran will under no circumstances ever develop a nuclear weapon. Araghchi followed with: "We have a historic opportunity to strike an unprecedented agreement that addresses mutual concerns and achieves mutual interests. A deal is within reach, but only if diplomacy is given priority," in the statement on X.

Trump during his speech also agreed that his "preference" is "to solve this problem through diplomacy, but one thing is certain: I will never allow the world’s number one sponsor of terror, which they are by far, to have a nuclear weapon."

Iran has after the fact slammed Trump's statements as false, stressing that it has on several occasions very clearly pledged to never purse a bomb. Some pundits are saying Trump's words were hyperbolic to express a point - that in reality it must be more than just a verbal pledge, as Washington is demanding a comprehensive legal commitment to not build a bomb.

"Iran reaffirms that under no circumstances will Iran ever seek, develop or acquire any nuclear weapons."

--JCPOA (Preamble and General Provisions, para. iii)

Trump Tuesday night reiterated that Iran's nuclear program had been 'obliterated' - and so it presents the contradiction of the US wanting to once again wipe out a nuclear program which the administration says is actually no longer there.

"We wiped it out and they want to start all over again," Trump said in the address. "And they’re at this moment again pursuing their sinister ambitions."

Of the June 2025 US and Israeli attacks on nuclear sites, Trump continued "they were warned to make no future attempts to rebuild their weapons program, in particular, nuclear weapons – yet they continue."

Trump asks of Iran that it must utter the 'secret words'...

PRESIDENT TRUMP on IRAN: My preference is to solve this problem through diplomacy, but one thing is certain: I will NEVER allow the world’s number one sponsor of terror to have a nuclear weapon.

We have to be strong. It’s called peace through strength. pic.twitter.com/0CPKHtvQDt

— Department of State (@StateDept) February 25, 2026

While Iranian officials have this week said they're willing to do anything for a deal, there's also a creeping fear in Tehran that if they cede too much, the country's enemies will smell blood in the water and attack anyway. Iranian leadership fears it's in a lose-lose situation, and so if attack - however 'limited' a strike might be - would feel the need to hit back as hard as possible. This could be a recipe for stumbling into all-out war.

Tyler Durden Wed, 02/25/2026 - 12:25

One In Five California Home Sales Canceled Due To Unaffordable Insurance

Authored by Mike Shedlock via MishTalk.com,

Ponder a $44,000 insurance bill. This does not count as inflation in the CPI.

Dysfunction in California’s Insurance Market

The Wall Street Journal reports A $44,000 Bill Shows the Dysfunction in California’s Home-Insurance Market

Glenn and Lorraine Crawford paid about $500 a month to insure their home in Agoura Hills northwest of Los Angeles when they bought it in 2012.

The Crawfords say they have little alternative but to pay the bill that arrived last month, which, at more than $44,000 a year, is almost as much as their mortgage bill. The only other insurer willing to cover their home, Lloyd’s of London, quoted them $80,000 a year.

More than a year after infernos tore through Los Angeles County, millions of Californians like the Crawfords are suffering through a home-insurance crisis that has rolled on for years with eye-watering rate increases, canceled policies and rejected claims.

Two of the biggest insurers, State Farm and Allstate, aren’t selling to new customers in the state, despite getting double-digit rate increases approved for their existing policyholders. A third, Farmers Insurance, has committed to cover more homes in fire-prone areas, but only a fraction compared with the drop in its overall number of policies since the crisis began.

The insurance dysfunction has spread to California’s housing market, the country’s biggest and most expensive, with nearly one-in-five real-estate agents reporting a canceled sale last year because of clients unable to find affordable insurance, according to a survey by the trade body California Association of Realtors.

The roots of California’s insurance crisis go back years. The state’s tough rate caps kept premiums low. But home insurers eventually balked, saying they couldn’t charge enough to cover rising wildfire and other losses, made worse by climate change and development. Insurers didn’t renew tens of thousands of policies, especially in fire-prone areas.

California’s uphill battle to draw insurers back could prove a template—or cautionary tale—for other disaster-prone states. New rules implemented last year, for instance, require home-insurers in the state to pledge to sell new policies in high-risk wildfire zones, in return for allowing them to charge higher rates.

As part of a request for a 6.99% rate increase, Farmers, the second-biggest home-insurer in the state, pledged to add at least 5,596 policies in high-risk areas by September 2028. That is less than a 10th of the 59,806 reduction in Farmers’ total number of California home-insurance policies in the previous two years, according to a Consumer Watchdog analysis.

Others continue to shun the state despite winning big concessions. California regulators approved a 34% rate increase for Allstate in 2024. Yet it has no “growth aspirations” in California home insurance, Chief Executive Tom Wilson said last year, adding that it would take time to fix the market. A spokesman said that remains Allstate’s position.

The disaster also almost felled California’s biggest home insurer, State Farm General. Lara last year backed an emergency 17% rate increase to keep the State Farm subsidiary afloat. “We’re on the Titanic, and we see the iceberg,” one of Lara’s lawyers told a hearing last year.

Truflation BS

Meanwhile, Truflation reports an absolutely absurd year-over-over year inflation rate of 0.87 percent.

@truflation pic.twitter.com/1vrtJkWMFJ

— Randy Woodward (@TheBondFreak) February 18, 2026

Faster Nonsense

Truflation is nothing but more timely nonsense. Like the BLS and BEA, Truflation does not factor in homeowner’s insurance or property taxes.

Truflation’s measure of rent are ridiculous. Truflation has too high a weight on new leases rather than existing leases. Existing leases are close to 90 percent of the market.

While the price of new leases is falling in some areas, existing leases are moving much slower.

Neither the BLS nor BEA weigh food properly. I strongly suspect Truflation doesn’t either.

I don’t doubt that Truflation has better and more timely collection methods than the BLS, but like the rest of the inflation models, it’s nonsense.

Economists don’t understand why people are upset. The answer is obvious. When you exclude real prices people pay, all you are offering is garbage.

We don’t need better measures of nonsense, we need better measures of reality, and Truflation sure isn’t it.

Food at Home vs Away

Note the BLS food weights for home vs away are reversed from where people actually spend their money.

For more details, please consider Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?

Does the BLS match your budget?

Homeowners Insurance

On August 11, 2025, I asked Is Homeowners Insurance Understated in the CPI? Shop Around!

Our Insurance went up by $2,000. Then another $2,000. Here’s our story.

What’s the Insurance Weight?

The BLS says shelter is 35.473 of the CPI. Of that, Tenants’ and household insurance is allegedly 0.414 percent.

Sound right?

If you own a home, what percent of your income is spent on your homeowners’ insurance?

Under 1/2 of 1 percent?

ON January 14, I noted The Fed Has Missed Its Inflation Target on Ten Different Measures

The Atlanta Fed tracks various inflation targets. Let’s have a look.

Does that match your experience or does Truflation?

And none of the measures include homeowners insurance. It’s all nonsense, yet economists believe it.

Tyler Durden Wed, 02/25/2026 - 12:05

On Gold, Oil, & Uranium

LIVE NOW:

https://t.co/vkouSL7UhD

— zerohedge (@zerohedge) February 25, 2026

Billionaire natural resources investor Rick Rule, legendary short-seller Bill Fleckenstein, and veteran oil trader Erik Townsend join ZeroHedge this evening at 7PM ET to give their outlooks on three key commodities sectors: Gold, Oil, and Uranium.

Gold and silver have, of course, exploded in price over the last 52 weeks with gold’s price almost doubling and reaching a high of over $5500.

Silver’s price more than tripled at one point and now sits ($87.50) just under 3X where it sat in February of last year ($32.93).

Given the fast and intense rise, Rule recently reduced his silver position though remains long mining stocks.

Time to Rotate into Oil?

Oil on the other hand is down YoY, making it perhaps the most attractive commodity due to it being relatively cheap.

Oil stocks are Rule’s number one investment position due to what he says is decades of massive underinvestment, a thesis he will expand upon this evening.

Lastly, uranium mining stocks have seen a meteoric rise rivaling that of gold stock, broadly doubling with some names like Energy Fuels seeing an almost 400% increase YoY.

Townsend will speak to the emerging technology in the nuclear energy space and Rule will speak to the long-term bull case and whether the mining stocks have flown too high too fast.

We encourage commodity investors to tune in.

Visit the ZeroHedge homepage at 7pm ET tonight to watch live and commercial-free.

Or follow our Spotify and YouTube to watch after it airs.

Tyler Durden Wed, 02/25/2026 - 11:45

Software Stocks: Navigating The SaaSpocalypse

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

The recent rotation from growth to value is well documented. While the return divergences between, for instance, technology stocks and materials or industrials stocks are significant, they do not tell the whole story. There are also extreme return differentials between broad industries and their sub-industries.

In this article, we address one such divergence between the broad technology sector and the software-as-a-service (SaaS) sub-industry. The graph below shows the wide gap in returns between software, technology, the Nasdaq 100, and semiconductor stocks. Since the well-followed software ETF (IGV) peaked on September 19, 2025, it has fallen 30%. For context, the broad technology indexes (XLK and QQQ) are flat over the period, and the semiconductor ETF (SMH) is up 30%.

Narratives Drive Passive Flows

Behind every good stock or index move is a narrative. The narrative is the market’s collective explanation for why prices move. Most narratives have some truth, some degree of speculation, and include some falsehoods. The job of an individual or professional investor is to understand the narratives driving money flows, assess their accuracy, and trade accordingly.

As if evaluating the validity of narratives weren’t hard enough, we must also consider that many narratives are, to some degree, based on expectations, in which no one knows what the future holds with certainty.

The bearish software narrative, known as “SaaSpocalypse,” which is the market rationale for big drawdowns in many software stocks, has some truths, lots of speculation, and falsehoods. Let’s explore the narrative, some counterpoints, and assess whether software stocks are a steal or, as some claim, on their way to zero.

The SaaSpocalypse Narrative

The “SaaSpocalypse” story holds that the current AI wave poses a significant threat to traditional software companies because AI changes how software is built, delivered, and priced.

If generative AI can write code, automate workflows, and rapidly and cheaply create customized applications, the value of today’s established off-the-shelf software products declines, and in some cases, may approach zero. Instead of paying for software and recurring subscription fees, enterprises and individuals may soon be able to build their own software easily and cheaply.

As if that weren’t enough of a threat to traditional software companies, AI lowers barriers to entry, enabling more competitors to quickly replicate existing software. More competition should compress profit margins and weaken the “moats” that once protected large software firms.

Rebutting The Narrative

The primary rebuttal to SaaSpocalypse is that the value of software lies beyond the code. Enterprise SaaS companies derive their lasting power from durable moats such as network effects, high switching costs, proprietary data, compliance infrastructure, and trust. AI-created software or a competing software product from an AI-driven startup might replicate the look and feel of a software program, but it cannot recreate years of customer data, deep integration with other core systems, and, importantly, the confidence required for corporate deployments. Essentially, the rebuttal argues that the narrative fails to distinguish between the look and feel of software and the other attributes that can make it valuable.

Moreover, the narratives ignore that AI will help existing software companies improve their products, reduce costs, and, in some cases, make their moats even more durable. Current software producers have a huge leg up because they already have distribution networks, a customer base, and staff who understand the intricacies of their product and how customers use it.  

However, the rebuttal may not apply to all software companies. Each software product and company should be judged according to its own merits. Basic, generic products that can be easily programmed with AI are more likely to be replaceable than well-distributed products with significant usage and data connections within companies.

Strong Moats

We asked ChatGPT for examples of Saas companies with strong moats and received the following:

ServiceNow — Workflow + Enterprise System Depth

Why the moat holds up:

• Deeply embedded into ITSM, HR, security, and enterprise workflows — replacing it means re-architecting internal operations, not just swapping software.
• AI agents actually increase their value because orchestration becomes more important than standalone apps.
• Enterprise workflows contain thousands of hidden rules and dependencies that are hard for AI copilots to replicate. Research shows LLMs struggle with these types of opaque enterprise systems.

Salesforce — Data + Ecosystem Lock-In

Why it’s durable:

• Massive installed enterprise base + heavy customization.
• CRM data accumulation over many years = high switching friction.
• Ecosystem moat (partners, integrations, internal workflows, apps).

Even though AI can generate workflows or lightweight CRMs, enterprises still need:

• permission structures
• compliance layers
• enterprise data governance

Datadog — Observability Data Moat

Why this one stands out:

• Continuous telemetry ingestion creates a proprietary “data exhaust.”
• AI needs observability platforms — agents can’t fix or optimize what they can’t measure.
• Integrated logs + metrics + traces across thousands of systems = massive operational switching costs.

AI may help explain incidents, but it doesn’t replace the monitoring layer itself.

Opportunities In SAAS Stocks

We led this article with a graph showing the software ETF IGV’s gross underperformance relative to the broader technology sector. We now dig deeper to help form short-term return expectations for SaaS companies.

XLK vs IGV

The first analysis compares the software ETF IGV to the broad technology sector ETF XLK.  Within the top ten holdings of XLK, Microsoft and Palantir are the only two that are also in the top ten holdings of IGV.

The graph below shows the price ratio of the two ETFs (IGV and XLK). As shown in red/green, the most recent 100-day price ratio change is almost 4 standard deviations from the norm. 

The second graphic uses the last five years to also show how detached the sturdy relationship has drifted recently. Per the most recent weekly readings (green), either XLK is 10% overpriced, or IGV is 10% underpriced.

The statistical divergence is also significant when comparing IGV to SPY (S&P 500).

For fundamental context, we share the graph below from the Daily Shot. The P/E ratio of the software sector has fallen rapidly over the last few months, from 34 to 24. For context, the utility sector has a P/E ratio of 21.

Lastly, we present the year-to-date returns of IGV’s top 10 holdings. Based solely on the returns below, the market is betting that INTU and APP have the weakest moats and that PANW and CRWD are potentially the least negatively affected by potential AI competition.

Summary

Like most narratives, the SaaSpocalypse has some truth and some falsehoods. There is also a large degree of speculation buried within it. Furthermore, the truth shouldn’t be applied broadly to all software companies and their products. In fact, AI will make some software companies more profitable and strengthen their moats. Other companies may fail as competition becomes fierce. The goal for an investor is to figure out who the winners and losers will be. Such is not a simple task, but doing so can provide significant rewards if your research proves correct.

We caution that market rotations have been volatile, with many relationships, like those shown earlier, statistically very stretched. While that may provide comfort for some, we are also aware that in markets like this, where narratives are as strong as they are, relationships can become even more divergent. If you are inclined to buy into the software sector, we recommend taking small starter positions with a stop-loss level in mind. This way, if you are early, the losses are minimal. If the rotations start favoring software stocks and the narrative fades, such evidence may warrant increasing the starter positions. Trade with caution.

Tyler Durden Wed, 02/25/2026 - 11:25

Democrats Talk Affordability, Immigration In Rebuttal To Trump SOTU

As usual, the opposing party was ready with a rebuttal to the President's State of the Union address last night. 

Virginia Gov. Abigail Spanberger delivers the Democratic response to President Donald Trump’s State of the Union address in Williamsburg, Va., on Feb. 24, 2026. Mike Kropf/Getty Images

Speaking from the House of Burgesses in Colonial Williamsburg, Virginia Gov. Abigail Spanberger focused on affordability and immigration.

"As we watched our nation’s lawmakers gather for a joint session of Congress, we did not hear the truth from our president," she said, adding that Trump had "offered no real solutions to our nation's pressing challenges." 

"The United States was founded on the idea that ordinary people could reject the unacceptable excesses of poor leadership, band together to demand better of their government, and create a nation that would be an example for the world," she continued. "This year, as we celebrate 250 years since America declared independence of tyranny, I can think of no better place to speak to you as we reflect on the current state of our union tonight." 

Spanberger, a former US representative and member of the House Intelligence Committee, became the governor of Virginia last November by a 15-point margin. 

Last night she asked: "Is the president working to make life more affordable for you and your family? Is the president working to keep Americans safe, both at home and abroad? Is the president working for you?"

As the Epoch Times notes further, Spanberger covered the following topics:

Economics

Most of Spanberger’s speech focused on economic issues, with the governor describing Democrats as being “laser-focused on affordability.”

First, Spanberger decried what she described as Trump’s “reckless trade policies.”

Despite the Supreme Court’s recent decision overturning Trump’s authority to unilaterally impose certain kinds of tariffs, Spanberger said, “The damage to us, the American people, has already been done.”

Spanberger said these new tariffs represent “another tax hike on you and your family.”

“Republicans in Congress, they remain unwilling to assert their constitutional authority to stop him,” she said. “They’re making your life harder. They’re making your life more expensive.

Trump had said that tariff costs would not be passed onto consumers and that foreign countries are taking up the burden. He said tariffs can protect American businesses and jobs by addressing unfair trade practices and boosting domestic manufacturing.

Recently, an analysis of economic data by the Kiel Institute for the World Economy found that Americans paid 96 percent of Trump’s tariff fees in 2025. The non-partisan Tax Committee found that this added up to about $1,000 in new taxes per household in 2025.

Meanwhile, the annual inflation rate slowed to 2.4 percent in January, the lowest level since May, according to new Bureau of Labor Statistics data released on Feb. 13.

Core inflation, which strips out volatile energy and food prices, also eased to a 12-month rate of 2.5 percent, the lowest level since March 2021.

Spanberger also linked the affordability issue to the One Big Beautiful Bill Act, which included a nearly $1 trillion cut to Medicaid, a primary source of revenue for many of these types of hospitals.

“They’re even making it more difficult to see a doctor,” she said, citing rural hospital closures.

Immigration and Safety

Spanberger also discussed immigration enforcement and broader national security concerns.

Democrats’ concerns over the behavior of Immigration and Customs Enforcement (ICE) agents under Trump have been one of their primary objections to the administration.

“Our president has sent poorly trained federal agents into our cities where they have arrested and detained American citizens and people who aspire to be Americans, and they have done it without a warrant,” Spanberger said, citing the use of administrative warrants by ICE rather than court-granted judicial warrants to enter homes.

These agents, Spanberger said, “have ripped nursing mothers away from their babies. They have sent children, a little boy in a blue bunny hat, children, to far off detention centers,” Spanberger said. “They have killed American citizens in our streets, and they have done it all with their faces masked from accountability.”

More briefly, Spanberger also cited international concerns.

Trump, she said, “continues to cede economic power and technological strength to Russia, bow down to China, bow down to a Russian dictator, and make plans for war with Iran.”

She said that “through [Department of Government Efficiency] mass firings and the appointment of deeply unserious people to our nation’s most serious positions, our president has endangered the long, storied history of the United States of America being a force for good.”

Andrew Moran contributed to this report.

Tyler Durden Wed, 02/25/2026 - 11:05

"Enough Is Enough": David Tepper Slams Whirlpool For Value Destruction In "Scathing" Letter

David Tepper, the billionaire behind Appaloosa Management, blasted Whirlpool’s board in a sharply critical letter, accusing the appliance maker of eroding shareholder value and demanding a strategic reset, according to CNBC, who viewed the letter.

Tepper said he watched with “a certain astonishment” as Whirlpool moved ahead with what he described as a sizable and avoidable equity issuance that diluted investors. He argued the capital raise carried a cost of more than 10% — far above the company’s tax-adjusted borrowing costs of under 5% in public markets — despite management’s stated aim of cutting leverage.

“Over the years this management team has destroyed hundreds of millions of dollars of shareholder value. Enough is enough. There can be no more excuses,” Tepper wrote in the letter, first reported by CNBC’s Andrew Ross Sorkin.

The share sale triggered a sharp market reaction. Whirlpool stock fell 14% Tuesday after announcing plans to raise about $454.9 million through a common stock offering and $508.1 million via depositary shares.

The company also placed 435,000 shares with Guangdong Whirlpool Electrical Appliances at a discounted $69 apiece in a private deal. Whirlpool was Appaloosa’s eighth-largest position at the end of the fourth quarter, valued at $282 million, according to Verity data.

CNBC noted that shares later rebounded nearly 1%, though they remain down roughly 36% from a 52-week high reached in July.

Tepper also criticized Whirlpool for not fully leveraging tariffs imposed during the Trump administration, suggesting it consider alliances or mergers with foreign competitors disadvantaged by trade policy to improve its footing.

“We encourage the Board to (i) remember their fiduciary responsibilities and not accept management acting purely in its own self-interest, and (ii) invite domestic entities or foreign corporations who want to create American jobs and increase shareholder value to take an interest in Whirlpool,” the letter said.

Tepper, who founded Appaloosa in 1993, is known for aggressive, event-driven investing and outspoken activism.

He previously ran a successful distressed-debt strategy, bought the NFL’s Carolina Panthers in 2018, and has built a reputation as one of Wall Street’s most influential hedge fund managers.

Tyler Durden Wed, 02/25/2026 - 09:45

The US Dollar: From Exceptional To Average?

Authored by Eva Sun-Wai via BondVigilantes.com,

The dollar’s slide last year looks less like a sudden break and more like the culmination of pressures that have been gathering for a while. The fading of US exceptionalism has sat quietly in the background, and once the narrative started to normalise, the cracks became clearer: softer growth expectations, slower capital inflows, and valuations that had been leaning heavily on the idea that the US could keep outperforming indefinitely. The currency came into the year heavily owned and reliant on that growth premium, and when it began to erode, the dollar suddenly felt far more exposed to shifts in sentiment and positioning than it had for some time.

At the same time, the policy backdrop has turned more awkward for the currency. Markets expect the Fed to continue cutting, and the prospect of a more politically influenced leadership has introduced a small but noticeable risk premium around credibility. That is happening just as fiscal policy remains unanchored, with deficits showing little sign of narrowing and spending likely to rise into the election cycle. The steepening we’ve seen in the curve has not offered the dollar much support. Even when nominal yields tick higher, the lack of a credible fiscal path blunts the rate‑differential argument the currency would otherwise be able to lean on.

Trade policy hasn’t helped clarify matters either. Ordinarily, higher tariffs would tighten the inflation narrative and lend support to the dollar, but the market seems to be treating recent announcements with a degree of caution. The reversals, the unpredictability, and the simple fact that these things take time to feed through the system have meant the FX impact has been surprisingly muted. Rather than helping the dollar, tariff headlines have added to the broader sense of uncertainty.

Source: M&G, Bloomberg intelligence.

All of this has fed into the gentler tone around inflation expectations. Long‑dated breakevens suggest a market that is comfortable (perhaps too much so) with the idea that inflation pressures will remain contained. For the dollar, that matters: when inflation is assumed to stay under control, rate differentials compress, and one of the currency’s key supports weakens. A shift in those expectations, whether driven by tariffs or other factors, could prompt a repricing. The more challenging scenario would be one where inflation starts to firm again, yet the Fed continues to ease. That combination would weigh heavily on real yields and raise questions about policy direction and central‑bank independence at a moment when confidence is already fragile.

Against this backdrop it’s no surprise that traditional valuation anchors feel less dependable. Too many competing forces such as policy, flows, and politics, are pulling at once. If the Fed keeps cutting and differentials narrow, a softer dollar is the natural outcome unless other central banks ease more aggressively and/or for longer than expected. And while this doesn’t yet resemble a structural rotation away from the dollar, the combination of drivers could support a gradual diversification at the margins. Reserve managers are still operating within clear limits with USD markets remaining the core of the system, but increased accumulation of alternatives, particularly gold, fits with the broader theme.

Taken together, this episode looks both political and structural. Politics has accelerated the move, but the foundations were already in place: the normalisation of US exceptionalism, the awkward policy mix, and the evolving inflation and reserve‑management dynamics. How long those forces persist will shape the dollar’s path into the next decade.

It doesn’t yet feel like a dramatic turning point, but nor does it look like an interruption that will snap back quickly.

The more plausible path is a slower, uneven adjustment as the market works out what the right premium for the US actually is.

Tyler Durden Wed, 02/25/2026 - 09:25

Contaminated Meat From Brazil Hits The EU, As Mercosur Opponents Are Proven Right

Via Remix News,

Opponents of Brussels’ deal with Latin American countries to import agricultural products are being proven right, unfortunately. Meat containing a banned growth hormone has shown up in the EU, a Dutch authority has reported, leading Polish authorities to order urgent inspections by the relevant inspectorates.

EU farmers and multiple groups warned that the lack of safety regulations in use across the Mercosur countries would lead to such outcomes.

The Dutch Food and Consumer Product Safety Authority announced that it had detected Brazilian beef contaminated with estradiol, a growth hormone used to stimulate estrus in cattle that is banned in the European Union, writes Do Rzezcy.

Four contaminated shipments, containing a total of 62,781 kilograms of meat, were imported by two European companies.

A significant portion of the meat was distributed to several buyers and introduced into the EU market.

Two remaining shipments of beef from Brazil (each containing approximately 25 tons of frozen meat) were blocked by Dutch authorities from being released for distribution, the Farmer.pl website reported on Monday.

The website stressed that the detection of contaminated beef imports could become another argument for opponents of the EU trade agreement with Mercosur, a bloc of South American countries.

According to the RMF FM radio station, EU member states, including Poland, were informed by the European Commission about the distribution of contaminated meat from Brazil as early as November 11 of last year. The European Commission detected the irregularities during an audit at the end of October 2025. By Jan. 21, contaminated beef had been detected in approximately 10 countries, including the Czech Republic, Germany, and Italy.

And yet, that same day, on Jan. 21, despite the European Parliament voting to have the ECJ review the legality of the Mercosur deal, leaders in Brussels were urging for the deal to be formalized, including the German president of the European Commission, Ursula von der Leyen, and German Chancellor Friedrich Merz as well.

“We are convinced of the agreement’s legality. No more delays. The agreement must now be applied provisionally,” Merz posted on X at the time.

The Polish Ministry of Agriculture and Rural Development has ordered inspections of beef imported from Brazil.

“Due to reports of estradiol (a growth hormone) being detected in batches of Brazilian beef imported to the EU, we have ordered urgent inspections by the relevant authorities. We are monitoring the inflow of products into Poland and verifying all signals."

“At this time, there is no information that the indicated batches have reached the Polish market. We are taking preventive measures to ensure full food safety,” Deputy Minister Małgorzata Gromadzka announced on X.

Read more here...

Tyler Durden Wed, 02/25/2026 - 08:45

Futures Rise Ahead Of Critical Nvidia Earnings

US equity futures are higher into NVDA earnings release after the close, and the risk-on tone in the US yesterday has spread globally with tech giant's earnings a catalyst for maintaining the rally aided by Tech. As of 8:00am ET, S&P 500 futures were up 0.3% as with Nasdaq 100 contracts +0.4%; NVDA is up 0.6% in premarket trading and while blowout results from the company later today may soothe nerves about the AI trade, “even if they have tremendous numbers, we know the markets are really fickle,” said Mahoney Asset Management’s Ken Mahoney. Other Mag7s are also higher ex-AAPL and TSLA with Cyclicals bid, led by Fins/Industrials/Materials while Defensives mostly lower pre-mkt, ex-Healthcare, reflecting the risk-on tone. JPM says to keep an eye on Software if TMT gains positive momentum. European stocks rose 0.5%, hitting a record on a rebound in banks and miners. South Korea pushed past France in stock-market value.Bond yields are +1-3bp, the dollar slipped after President Donald Trump doubled down on his commitment to tariffs, before erasing the move, and commodities are bid led by Metals with precious outperforming base especially silver and platinum. Bitcoin rallied more than 2%. Gold and silver climbed. Today’s macro data releases are light (only Mortgage Applicatgions which rose 0.4%) ahead of tomorrow's  jobless claims and Friday’s PPI, but with multiple Fedspeakers. Yesterday we saw better weekly ADP data, weaker regional Fed data, and improving consumer sentiment.

In premarket trading, Magnificent Seven stocks are mostly higher, with Nvidia +0.8% ahead of its report (Alphabet +0.5%, Amazon +0.5%, Microsoft +0.3%, Meta Platforms +0.3%, Tesla +0.4%, Apple -0.2%). 

• Lithium stocks are rising after Zimbabwe suspended exports of lithium concentrates and raw minerals.
• AbCellera Biologics (ABCL) rises 8% after the drug developer reported total revenue for the fourth quarter that was ahead of the average analyst estimate. The firm also posted loss per share for the quarter that was narrower than Wall Street’s expectations.
• Aspen Aerogels (ASPN) falls 21% after the maker of thermal insulation used in electric vehicles reported loss per share for the fourth quarter that’s wider than expected. The company has initiated a strategic review.
• Axon (AXON) rises 15% after the Taser maker reported adjusted earnings per share for the fourth quarter that beat the average analyst estimate.
• Camping World (CWH) slides 12% after the retailer of recreational vehicles reported a larger-than-expected adjusted Ebitda loss for the fourth quarter.
• Cava Group (CAVA) climbs 11% after the fast-casual chain’s restaurant comp sales forecast for 2026 came in above the average estimate from analysts.
• Circle Internet Group Inc. (CRCL) rises 16% as profit and revenue increased more than estimated while the amount of its USDC stablecoin in circulation jumped 72% to $75.3 billion in the fourth quarter.
• First Solar (FSLR) slides 16% after the maker of electricity-producing solar modules reported a 2026 net sales forecast which missed the average analyst estimate.
• HP Inc. (HPQ) falls 5% after providing a profit outlook for the current quarter that may fall short of estimates and said full-year earnings will likely hit the lower end of a previously forecast range as the company copes with tariffs and the rising price of memory chips.
• Lowe’s Cos. (LOW) slips 3% after forecasting sales guidance for the full year that fell short of expectations, a sign the housing market will remain lackluster in the near term due to high borrowing costs and economic volatility.
• Lucid (LCID) declines 2% after the electric-vehicle maker reported adjusted loss per share for the fourth quarter that missed the average analyst estimate.
• MercadoLibre (MELI) falls 5% after the online marketplace for Latin America reported its fourth-quarter results. While analysts are broadly positive on growth trends, they noted that elevated spending will pressure the company’s margins.
• Oddity Tech (ODD) slumps 34% after the direct-to-consumer beauty and wellness company said it expects its revenue for the first quarter of 2026 to decline 30% year-over-year.
• Workday (WDAY) declines 9% after giving a subscription revenue guidance that missed expectations, adding to investor concerns that a rise of AI automation tools is disrupting traditional software vendors.

In other corporate news, DoorDash is pulling out of four countries in Asia, a sign that fierce competition and thin margins are weighing on its overseas ambitions. Anthropic has loosened its central safety policy, coinciding with a growing dispute with the Defense Department. AMC plans to close more theaters in underperforming locations.

Expectations are high for Nvidia as customers have announced huge capex plans, but a positive stock reaction is key for the Nasdaq after recent underperformance, said Arnaud Girod, head of cross-asset strategy at Kepler Cheuvreux. “We’re in the thick of uncertainty about the disruption of AI with the market de-rating entire segments of the stock market.”

To reinvigorate its stock performance, Nvidia will at least need to beat its prior outlook and set new targets above current Wall Street estimates. While the company has done this repeatedly, concerns have grown that the AI spending wave isn’t sustainable. “Nvidia’s results are expected to be good given the massive capex announced by its clients, but it’s all about how the market will react,” said Arnaud Girod, head of cross-asset strategy at Kepler Cheuvreux. “The Nasdaq needs Nvidia if it is to limit its current underperformance.”

Another key earnings event on Wednesday is Salesforce, the cloud-based customer-relationship firm whose stock has plunged 30% this year after getting caught up in the selloff of software companies on fears that AI could render their services obsolete. Analysts, on average, project that the company will post its best quarterly revenue growth rate in three years. Still, highlighting the risks for software-as-a-service firms, Workday Inc. slid nearly 10% in early trading after subscription sales fell short of estimates.

Turning to Trump's State of the Union address, the President talked up the economy saying that the nation is back, bigger, better and stronger than before, while he added that we've seen nothing yet and this is the golden age of America.

• Trump said they have achieved a transformation like never before and a turnaround for the ages, as well as stated that low interest rates will solve the housing problem, and they want to protect home values and keep them up.
• He also commented that inflation is plummeting, salaries are rising, and the roaring economy is roaring like never before.
• Regarding tariffs, Trump said the Supreme Court decision on tariffs is very unfortunate, but added that tariffs will remain in place and nearly all countries want to keep the trade deals, while he also stated that congressional action won't be needed on tariffs.
• Trump also commented on Iran, which he claimed is working on missiles that could soon reach the US, and noted Iran wants to make a deal but hasn't yet said that it won't pursue nuclear weapons, while he reiterated that his preference is to resolve Iran's nuclear issue through diplomacy.

Out of the 450 S&P 500 companies that have reported so far in the earnings season, 74% have managed to beat analyst forecasts, while 21% have missed. TJX, Bank of Montreal and Lowe’s are among companies expected to report results before the market opens. Wall Street expects TJX’s fourth-quarter results to have received a boost from a strong holiday shopping season, with comparable sales estimate of +3.7% (Bloomberg Consensus). Earnings from Nvidia and Salesforce follow later with Wall Street eager to hear what it has to say about potential disruption to software makers from AI upstarts like Anthropic.

Rates on Japan’s longer-term bonds climbed further after Prime Minister Sanae Takaichi’s government nominated two new Bank of Japan policy board members who are seen as dovish. The yen fell 0.5%, the worst performance among major currencies.

European stocks are higher across the board with the FTSE 100 outpacing peers as post-earnings gains in HSBC send the index to a record high. Mining and banking shares are leading gains. Meanwhile, food and beverage as well as personal care stocks are the biggest laggards. Here are the biggest movers Wednesday:

• HSBC shares advanced as much as 6.1% in London to a fresh high after the lender reported strong earnings ahead of estimates and offered new guidance figures that analysts say are above expectations
• Relx shares rise as much as 5.3% after the professional publisher says it’s integrating an Anthropic automation tool into its legal research platform
• Anglo American rallied as much as 4.4% in London after DZ Bank upgraded the miner to buy from hold, saying that the merger with Teck Resources to become one of the world’s biggest copper producers is going as planned
• Lion Finance Group shares climb as much as 9.8% to the highest level on record, after the Georgian lender reported strong fourth-quarter results
• Temenos shares rise as much as 8.6%, the most since October, after the software firm raised its mid-term targets for annual recurring revenue, free cash flow and Ebit, while issuing fiscal 2026 guidance that met expectations
• St James’s Place shares climb as much as 7.3%, the most since July, after the British wealth manager reported underlying cash profit for the full year that beat the average analyst estimate
• Diageo shares fall as much as 7.1% after the maker of Guinness stout and Johnnie Walker whiskey cut its sales guidance due to further weakness in the key US market, and reduced its dividend
• Haleon shares drop as much as 5.6% after the consumer healthcare firm delivered weaker-than-expected organic growth in the final quarter of 2025 and issued guidance that was below its mid-term ambition
• Iberdrola shares slip as much as 1.5%, ceding earlier gains, after the Spanish power company’s fourth-quarter net income missed estimates, overshadowing a 12% rise in full-year 2025 results

Earlier in the session, Asian stocks rise for a third straight day, led by tech stocks, as investors pared concerns over potential disruption from artificial intelligence. The MSCI Asia Pacific Index gained 1.1% at the close to remain near record highs, with  chipmakers TSMC and Samsung continuing to drive advances. Benchmarks in Japan and Taiwan rose more than 2%, while Australian and Korean shares also gained over 1%. Asia’s equity markets have avoided some of the volatility sweeping Wall Street in recent weeks, as investors remain confident about the region’s role in supplying essential AI components to the US. On Wednesday, the region’s tech firms were further supported by comments from Anthropic PBC that it plans to build partnerships with existing businesses. 

“Today’s firmer Asia open, following the US rebound, looks like a reset from oversold levels,” said Ritesh Ganeriwal, head of investment at Syfe Pte in Singapore. “The bounce in US tech is providing near-term relief to sentiment.” “That said, we would characterize this as tactical stabilization rather than a full reset of positioning. Markets are still digesting valuation, earnings visibility, and AI monetization assumptions.”

In FX, the Bloomberg Dollar Spot index is now up a touch as yen weakness helped the greenback shrug off initial downside. The yen was sold and the JGB curve steepened after Japanese PM Takaichi nominated two dovish reflationist academics to join the BOJ board.

In rates, treasuries are slightly cheaper in early US trading as stock futures advance and investors set up for 5-year note auction at 1pm New York time.US yields are 1bp-3bp higher and curve spreads are within 1bp of Tuesday’s close. 10-year near 4.05% is 2bp cheaper, lagging German counterpart by around 1bp.$70 billion 5-year note auction follows solid results for Tuesday’s 2-year; WI 5-year yield near 3.618% is ~20.5bp richer than last month’s auction, which tailed by 0.3bp. Elsewhere in the rates space, US yields are up 1-2bps across the curve with modest upside also seen in German and UK borrowing costs.

While Treasuries showcased their haven status during Monday’s tech selloff, longer-term pressures including uncertainty over inflation, tariffs and fiscal questions remain, according to Laura Cooper, head of macro credit at Nuveen. “We are unlikely to see the resumption of rate cuts until we see greater signs of disinflationary pressures coming through, which to our mind is more of a second-half-of-2026 story,” Cooper told Bloomberg TV. “All of the factors suggest we are in a higher-for-longer yield backdrop.”

In commodities, WTI crude is up 0.3%, but down from highs. US President Donald Trump stated that Iran is working to reconstitute its nuclear program. Spot gold and silver are up 0.5% and 3.5% respectively. Bitcoin is up 2.1% after a recent run of losses. 

The US economic data calendar is blank, while Fed speaker slate includes Barkin (10:40am), Schmid (11am) and Musalem (1:20pm)

Market Snapshot

• S&P 500 mini +0.1%
• Nasdaq 100 mini +0.2%
• Russell 2000 mini +0.4%
• Stoxx Europe 600 +0.6%
• DAX +0.4%
• CAC 40 +0.4%
• 10-year Treasury yield +2 basis points at 4.05%
• VIX little changed at 19.51
• Bloomberg Dollar Index little changed at 1189.37
• euro +0.1% at $1.1786
• WTI crude +0.4% at $65.89/barrel

Top Overnight News

• Donald Trump accused Iran of reviving its nuclear program in his State of the Union address, adding to speculation of new US strikes. BBG
• Trump pledged a new retirement savings plan for workers without 401(k)s. It would be modeled after the federal Thrift Savings Plan, with a government match of up to $1,000 annually. BBG
• US House Speaker Johnson said codifying some of the tariffs would be difficult and will have discussions on tariffs in coming weeks, via Fox Business Interview.
• The Pentagon threatened to invoke a Cold War-era law against Anthropic unless it allows unrestricted military use of its technology by Friday, people familiar said. Anthropic said in a blog post that it’s loosening its hallmark safety pledge.
• Nvidia Corp. has yet to sell any of its H200 chips to China two months after President Donald Trump’s decision to allow shipments of the artificial intelligence processors to the world’s second-largest economy. BBG
• Two Federal Reserve officials on Tuesday signaled no near-term appetite to change the setting of central bank interest rate policy. Markets expect the Fed to lower rates again this year but officials, faced with a stabilizing job market and uncertainty over whether inflation pressures will moderate back to target, have not given much guidance about the prospect for more reductions in the cost of short-term borrowing. RTRS
• Japan must keep raising interest rates and tighten fiscal policy as the economy is already in "great shape," former central bank chief Haruhiko Kuroda said, warning that Premier Sanae Takaichi's big spending plan could stoke an inflationary upswing. RTRS
• Japan’s government has nominated candidates for two positions at the central bank, a move that could be viewed as a chance to influence monetary policy in a more dovish direction. WSJ
• The Aussie gained as January core inflation came in stronger than expected. The Bank of Thailand unexpectedly cut rates to 1%. BBG
• Consumers expecting a drop in prices after the U.S. Supreme Court struck down the White House's emergency tariffs are likely to be disappointed, as businesses plan to use any relief to offset elevated costs and gird themselves to chase refunds. RTRS

Trade/Tariffs

• China's Commerce Ministry, on USTR Greer comments, said that China has fulfilled obligations of China-US phase one agreement.
• China's Commerce Ministry announces that the country encourages imports of services related to chip research, development and design.
• Chinese Premier Li said in meeting with German Chancellor Merz that China is willing to bolster dialogue, communication and mutual trust.
• German Chancellor Merz on trade with China said, they welcome any further market opening and it is in their mutual interest.
• US President Trump said Supreme Court decision on tariffs is very unfortunate, but adds that tariffs will remain in place and nearly all countries want to keep the trade deals, also said congressional action won't be needed on tariffs.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded higher as the region took impetus from the rebound on Wall Street after Anthropic's presentation helped soothe some AI/software concerns, and with tech also bolstered by the USD 60bln Meta-AMD chip deal. ASX 200 advanced with gains led by notable outperformance in the tech, consumer staples and mining sectors, while participants continue to digest an overload of earnings and are unfazed by firmer-than-expected CPI data. Nikkei 225 rallied to a fresh record high as exporters benefitted from recent currency weakness after it was reported that Japanese PM Takaichi relayed to BoJ Governor Ueda her reservations about further rate hikes. Hang Seng and Shanghai Comp conformed to the broad upbeat risk sentiment, with attention in Hong Kong on the annual budget and with the mainland underpinned with the PBoC conducting a CNY 600bln MLF operation.

Top Asian News

• China aims to boost output of relatively advanced chips to 100,000 wafers in 1-2 years, according to Nikkei; China has set target of adding an additional 500,000 wafers of capacity by 2030.
• Shanghai City relaxes home buying rules for non-residents effective on Thursday and will exempt property tax for certain home buyers.
• Japanese PM Takaichi said closely watching FX moves with a high sense of urgency.
• Major Japanese brokerage warns that yen could test post-election low if BoJ appointments are dovish.
• Hong Kong Financial Secretary Chan said in Budget Address that 2025 GDP rose 3.5% and the domestic economic trend is to continue to be good in 2026. Sees 2026 GDP at 2.5%-3.5% and average growth of 3.0% per year in real terms for 2027-2030.
• Hong Kong budget is speculated to include funding for tech hub and aerospace sector incentives, according to SCMP.

European bourses (STOXX 600 +0.6%) are entirely in the green, with the FTSE MIB and FTSE 100 (+0.9%) gaining, helped by positive HSBC earnings. The SMI (+0.1%) is the slight laggard, weighed down by Alcon (-1.1%) after the Co. missed on Q4 revenue and core EPS. European sectors are broadly in the green. Banks (+1.8%) and Basic Resources (+2.2%) sit comfortably at the top of the table, while Food, Beverages and Tobacco (-0.7%) is soft as poor Diageo guidance hits the rest of the sector (Pernod Ricard -2.9%, Heineken -0.3%). HSBC shares (+5.5%) are higher today for three reasons: 1) beating market estimates for its top line metrics, 2) lifting its annual 2026-28 ROTE to 17% or greater, and 3) stating its USD 1.5bln cost-saving target will be hit ahead of schedule. This, alongside an update from Santander (+2.7%), in which they expect 2028 net income at EUR 20bln (exp. EUR 18.6bln), lifts the Banking sector.

Top European News

• UK Chancellor Reeves is facing renewed called to cut bank tax as UK competitiveness lags, according to City AM.
• German lawmakers are reportedly set to approve EUR 540mln order for attack drones, Bloomberg reported citing sources.

FX

• DXY trade flat intraday and off worst levels within a current 97.643-97.867 range after briefly dipping under yesterday's 97.695 low, with little reaction to US President Trump's State of the Union Address, where he defended his leadership and described the past year as a “turnaround for the ages”; he promoted tariffs as strengthening the US economy, and said they would “substantially replace” income taxes; he offered limited details on Iran, China and Ukraine. Aside from that, newsflow this morning has been on the lighter side. Focus ahead will be on Fed speak and then NVIDIA earnings.
• JPY underperforms with recent developments seeing PM Takaichi nominating academics Ayano Sato and Toichiro Asada to the BoJ policy board, replacing Asahi Noguchi and Junko Nakagawa; analysts said the picks are viewed as reflationist and dovish, and may reduce expectations of near-term rate hikes. Further, JPY weakness coincided with reports that Japan's FTC conducted an on-site inspection of Microsoft (MSFT) on suspicion of violating the Antimonopoly Act, Nikkei reported, potentially stoking some Big Tech-related bilateral tensions. USD/JPY resides in a 155.34-156.64 range after topping Tuesday's 156.28 high.
• AUD is the G10 outperformer following firmer-than-expected monthly CPI data from Australia. The upside in consumer inflation was driven by electricity and garments & footwear offset somewhat by a larger than expected fall in holiday travel and a smaller than expected rise in health. Analysts at Westpac note "Consistent with our preliminary review we see little risk to our current inflation profile." AUD/USD resides closer to the top end of a 0.7057-0.7117 range at the time of writing.
• GBP and EUR trade with mild gains despite a flat DXY, possibly more a function of JPY weakness as GBP/JPY hovers around 211.50 and EUR/JPY meanders around 184.50. Aside from that, specifics for GBP and EUR are light, with the latter eyeing EZ final inflation metrics.

Central Banks

• Former BoJ Governor Kuroda said Japan need to move toward tighter fiscal and monetary policy as the economy is already in great shape. Recent USD/JPY levels near 157 is somewhat too weak. BoJ can probably hike rates around twice a year in 2026 and 2027 to around 1.5-1.75%. PM Takaichi's administration spending and tax-cut plans could fuel inflation and push up bond yields.
• Japan nominates professors Toichiro Asada and Ayano Sato to replace outgoing BoJ board members Noguchi and Nakagawa.
• Japanese Deputy Chief Cabinet Secretary said aware of report that PM Takaichi voiced apprehension to additional BoJ rate hikes, adds Takaichi did not have a specific request and there is 'nothing more or less than that'.
• RBA Governor Bullock said patience is required in assessing policy.
• China may see lower rates from Q2, according to experts cited by China Securities Journal.
• Thai Central Bank unexpectedly cuts its rate by 25bps to 1.00% (exp. a hold at 1.25%); 4-2 voted in favour of the cut; said downside risks to headline inflation are expected to increase relative to previous assessment.

Fixed Income

• Global benchmarks are broadly lower this morning. Pressure which also comes alongside JGB selling, which are currently lower by around 50 ticks. The situation is Japan appears to be shifting from optimism surrounding political stability, after PM Takaichi’s landslide victory, to one where traders are questioning “reflationist” policy; this refers to government’s ability to boost spending whilst also allowing inflation to run higher. Fears which were sparked by reports on Tuesday, that PM Takaichi expressed her apprehension to further BoJ hikes. Moreover, overnight it was reported that the government had recommended two academics, who have been described as “staunch reflationists”, by Chief Fixed Income strategist SBI Securities.
• USTs are lower by a handful of ticks and currently hold within a 113-05+ to 113-10+ range, with price action ultimately sideways for much of the morning. Pressure this morning in tandem with easing AI disruption related fears, after Anthropic announced a slew of new partnerships. Overnight, markets tuned into President Trump’s State of the Union Address, in which he largely talked up the US economy; on trade, he suggested that tariffs will remain in place and nearly all countries want to keep the trade deals. On the Iran situation, he suggested that Iran wants to make a deal, and reiterated his own preference to solve the situation through diplomacy. Overall, his comments did not spur a reaction in US paper.
• Bunds initially held around the unchanged mark early doors, before slipping slightly into the red; currently off by around 10 ticks, to hold within a 129.50-129.71 range. Earlier, Final German GDP (Q4) figures were unrevised, whilst the GfK Consumer Confidence metrics deteriorated from the prior vs expectations of a slight improvement. Little move to the release of Final EZ HICP metrics.
• Gilts follow peers lower, and currently lower by 10 ticks within a 92.94-92.84 range. Focus on Tuesday was on the BoE, where several MPC members appeared at the TSC hearing. Governor Bailey noted that would go into coming meetings asking if a cut is justified, adding that a rate cut at the next meeting is a genuinely open question. Market pricing was little moved following the hearing and are still yet to definitively determine if the next cut will be in March or April. Elsewhere, CityAM reported that UK Chancellor Reeves is facing renewed calls to cut the bank tax as UK competitiveness lags.

Commodities

• Crude benchmarks remain underpinned, with WTI and Brent trading within the ranges of USD 65.45-66.60/bbl and USD 70.45-71.60/bbl, respectively. Ongoing geopolitical tension between the US and Iran will likely keep oil prices volatile in the near term. At the time of writing, the latest update includes US Senator Cruz suggesting that they are likely to see limited strikes on Iran in a matter of days. Meanwhile, Iranian Foreign Minister Araghchi said Tehran will resume talks with the US in Geneva tomorrow. In Russia and Ukraine, Washington warned Ukraine not to strike targets within Russia that could hit US economic interests, according to the FT.
• In the precious metal space, XAU and XAG continue to surge, trading at the upper range of USD 5128.3-5310.7/oz and USD 86.22-87.10/oz, respectively. The yellow metal has been underpinned by recent dollar softness as well as continuous haven demand over geopolitical uncertainty between the US and Iran.
• Copper prices are slightly firmer this morning, tracking global risk sentiment from Wall Street and APAC, which finished higher, as well as the European session, which is trading mostly positive thus far this morning. At the time of writing, 3M LME copper is trading at the upper end of a USD 13.19-13.29k range.
• Russia and Iran are cutting its oil prices to China, Bloomberg reported citing traders; Russia's Urals grade is selling USD 12/bbl below ICE Brent (prev. USD 10/bbl below), Iranian Light selling USD 11/bbl below ICE Brent (prev. USD 8-9/bbl).

Geopolitics: Ukraine

• Ukraine President Zelensky's negotiators will meet with US counterparts on Thursday and is targeting a leaders summit in March.
• Washington warns Ukraine over striking US economic interests in Russia, FT reported. Kyiv’s ambassador to Washington said the Trump admin has formally warned Ukraine not to strike targets within Russia that could hit US economic interests.

Geopolitics: Middle East

• US President Trump said Iran is working on missiles that could soon reach the US, and noted Iran wants to make a deal but hasn't yet said that it won't pursue nuclear weapons, reiterates his preference is to resolve Iran nuclear issue via diplomacy.
• Iran's Parliamentary Speaker said, with relation to US-Iran talks, all options are on the table. Ready for dignified diplomacy, also ready for defence.

US Event Calendar

• 7:00 am: United States Feb 20 MBA Mortgage Applications, prior 2.8%
• 10:40 am: United States Fed’s Barkin Speaks on Panel
• 11:00 am: United States Fed’s Schmid Speaks on Monetary Policy and the Economy
• 1:20 pm: United States Fed’s Musalem Speaks on Role of Fed

DB's Jim Reid concludes the overnight wrap

Markets recovered their poise over the last 24 hours, with the S&P 500 (+0.77%) advancing thanks to positive US data and a rebound in software stocks. Clearly that mood could change with Nvidia’s results after tonight’s close, but the news led to a bit more confidence in the near-term outlook, and the financial stress at the start of the week eased across several asset classes. Moreover, inflation concerns also fell back after Brent crude oil prices (-1.01%) declined for a second day. So there was a much more positive tone relative to Monday’s selloff, and futures on the S&P 500 (+0.01%) are just about higher as well this morning.

In terms of the latest on the AI side, there wasn’t much in the way of fresh headlines to drive markets yesterday, but we did see software and other tech stocks pare back their Monday losses. For instance, the NASDAQ (+1.04%) and the Magnificent 7 (+1.14%) both put in a decent performance, and the S&P 500’s software component (+1.28%) picked up from its 10-month low on Monday. Meanwhile, AMD (+8.77%) was the second-best performer in the S&P 500 after it was announced that Meta would acquire AMD chips with a total capacity of 6 gigawatts. So it was a strong session for tech stocks, which also supported broader US equity gains. By the close, more than 70% of the S&P 500’s companies were higher on the day, with consumer discretionary (+1.58%) and industrials (+1.23%) sectors leading the way. However, there were more concerns in the credit space, with US IG and HY spreads both edging +1bps higher, reaching their widest levels since December.

Risk assets got further support from the latest US data, as the Conference Board’s consumer confidence reading picked back up to 91.2 in February (vs. 87.1 expected). Moreover, the expectations component also rebounded to 72.0, up from a 9-month low the previous month. There were also promising signs on the labour market, as the ADP’s weekly private payrolls series hit a 2-month high, showing 4-week average growth of +12.75k in the period to February 7. So at the margins, that leant positively against the recent talk of AI-driven unemployment.

Given the more positive data and the tech stock rebound, investors also priced in a slightly more hawkish path for the Fed over the year ahead. For instance, the probability of a rate cut by the June meeting fell to just 52%, the lowest so far this year. And looking further out, just 55bps of cuts are now priced in by the December meeting, which was down -3.9bps on the day. So in turn, that pushed up front-end Treasury yields, with the 2yr yield (+2.3bps) up to 3.46%, although the 10yr yield (-0.2bps) was basically flat at 4.03%. Comments from Fed officials also leaned against imminent rate cuts, with Chicago Fed President Goolsbee warning that 3% inflation “is not good enough” and that they needed to make more progress. And Boston Fed President Collins said rate were likely to stay unchanged “for some time” and that she was looking for more confidence that disinflation resumes. There were also discussions around AI-related job losses too, with Governor Cook saying that “our normal demand-side monetary policy may not be able to ameliorate an AI-caused unemployment spell without also increasing inflationary pressure”.

Another supportive factor yesterday was the latest dip in oil prices, which helped to ease concerns on the inflation side. In part, that was driven by growing hopes for some sort of deal between the US and Iran that would avoid a military escalation. Indeed, Trump himself had posted on Monday evening after the US close that “I would rather have a Deal than not”. So that took a bit of the geopolitical risk premium out, with Brent crude down -1.01% to $70.77/bbl, whilst gold prices fell -1.60% to $5,144/oz. Trump echoed that rhetoric on a deal in last night’s State of the Union address, saying that his “preference is to solve this problem through diplomacy”.

Over in Japan, the yen weakened yesterday after the Mainichi newspaper reported that PM Takaichi was apprehensive about more rate hikes in a meeting last week with BoJ Governor Ueda. So it was down -0.78% against the US Dollar yesterday, making it the weakest-performing G10 currency. Then this morning, Japanese equities have seen a strong outperformance after the government nominated two reflationists to join the Bank of Japan’s board, who were seen as favouring more stimulus. So the Nikkei is up +2.60% this morning, on course for another record high, and bringing its 2026 gains to +16.83% already.

That optimism has been clear elsewhere in Asia, building on the overnight gains seen on Wall Street. So in South Korea, the KOSPI (+1.79%) is up for a 5th consecutive session, and also on track to close at a record. Similarly in Australia, the S&P/ASX 200 (+1.17%) is on course for an all-time high as well, despite a stronger-than-expected CPI report this morning, with inflation remaining at +3.8% in January (vs. +3.7% expected). So that’s seen investors price in more RBA rate hikes at the next few meetings, and the Australian Dollar has strengthened against every other G10 currency this morning, up +0.73% against the US Dollar. Otherwise, there’s also been gains for the Hang Seng (+0.72%), the Shanghai Comp (+0.99%) and the CSI 300 (+0.86%).

Earlier in Europe, most assets had also put in a decent performance yesterday, with the STOXX 600 (+0.23%) paring back some of Monday’s losses as well. That came as longer-dated yields continued to fall across the continent, with yields on 10yr gilts (-0.9bps) and BTPs (-0.5bps) at their lowest since December 2024, whilst 10yr OAT yields (-0.8bps) reached their lowest since July. For 10yr bund yields (-0.4bps) there was a comparatively smaller fall, but yields still closed at their lowest since November.

Looking at the day ahead, one of the main highlights will be Nvidia’s earnings after the US close tonight. Otherwise, central bank speakers include the Fed’s Barkin, Schmid and Musalem, and the ECB’s Vujcic. There’s not much data, but we will get the final Euro Area CPI print for January, along with the final Q4 GDP release from Germany.

Tyler Durden Wed, 02/25/2026 - 08:33

"I Did Nothing Illicit": Bill Gates Begins Apology Tour Over His Epstein Ties

A week after Bill Gates abruptly pulled out as a keynote speaker at a high-profile global AI summit in India, the left-wing billionaire finally mustered enough nerve to "take responsibility for his actions" over his ties to late financier and sex offender Jeffrey Epstein during a town hall meeting with Gates Foundation employees.

The Wall Street Journal reports that Gates told employees at a town hall event for the foundation on Tuesday that he never spent time with Epstein's victims, and never visited Epstein's island.

He revealed that Epstein later learned about two affairs he had with Russian women, but said those relationships did not involve Epstein's victims. Gates said photos in the Epstein files show him with redacted women were taken by Epstein's assistants after meetings.

Did Gates fall into a Russian honeypot?

"I did nothing illicit. I saw nothing illicit," Gates emphasized, according to a recording reviewed by WSJ journalists.

Gates continued, "To be clear, I never spent any time with victims, the women around him."

"It was a huge mistake to spend time with Epstein" and bring Gates Foundation executives into meetings with the sex offender, Gates said, adding, "I apologize to other people who are drawn into this because of the mistake that I made."

Last week, the $86 billion philanthropic body's last-minute decision to yank Gates was a major embarrassment and came as the Epstein fallout worsened, with many high-profile people under fire.

Related:

• "Law Must Take Its Course": King Charles Responds To Arrest Of Former Prince Andrew

• Goldman Sacks Ruemmler As Epstein Scandal Claims Obama's Former Lawyer

• Watch: GOP Releases Full Les Wexner Epstein Deposition

"Knowing what I know now makes it, you know, a hundred times worse in terms of not only his crimes in the past, but now it's clear there was ongoing bad behavior," Gates said. He gave credit to his ex-wife, who "was always kind of skeptical about the Epstein thing."

Gates told staff he began meeting Epstein in 2011, despite the financier's 2008 guilty plea for soliciting a minor for prostitution. He said he was aware of the "18-month thing" that had restricted Epstein's travel, yet continued the relationship, even after his then-wife, Melinda French Gates, raised serious concerns in 2013.

He said the relationship continued through 2014 and that he flew on a private jet with Epstein and spent time with him in Germany, France, New York, and Washington. "I never stayed overnight," he said, or visited Epstein's island.

He said Epstein "talked about the kind of intimate relationship he had with a lot of billionaires, particularly Wall Street billionaires," and that he could help raise money for global health nonprofits.

"It definitely is the opposite of the values of the Foundation and the goals of the Foundation," he said. "And our work is very reputation-sensitive. I mean, people can choose to work with us or not work with us."

No matter what, the Gates Foundation has a dark cloud hanging over it because of Gates' involvement amid the deepening Epstein fallout.

Gates is worth billions, so why would he need Epstein to raise money for global health nonprofits? Something doesn't pass the sniff test in this damage-control town hall he held for his foundation's employees.

Tyler Durden Wed, 02/25/2026 - 08:05

Spacecraft Builder That Beats Big Defense Primes On Cost And Speed: Here's How To Profit

Provided continued AI disruption, indiscriminate software stock selling, and credit market risks do not trigger a broader risk-off market event in the coming weeks or months, a June SpaceX IPO could become the bedrock for the grand reopening of the IPO market. The second-order effects of a SpaceX IPO would be improved sentiment toward AI companies going public and potentially a serious investor appetite for the low-Earth-orbit space industry.

Continuing our ever-evolving "how to profit" space theme, a newly listed company on U.S. exchanges is York Space Systems.

YSS is a U.S. government-focused Space Prime that builds standardized satellite buses (spacecraft platforms) at scale, integrates customer payloads, and supports the rest of the mission, launch coordination, the ground segment, and in-orbit operations.

"Its vertically integrated design and manufacturing process means its SVs can be produced at 50% of the cost and 20% faster than defense primes," Goldman analyst Anthony Valentini wrote in a note on Monday.

Valentini told clients her markets team has begun to "initiate coverage of YSS at Neutral with a $29 price target."

YSS' ability to build spacecraft and offer aligned services at not just half the cost but in a quicker timeframe checks all the boxes that the U.S. military is searching for these days, especially with the DOGE unit at the Department of War resetting the procurement program away from big, bloated legacy primes to startups.

Valentini gives three reasons why her markets team favors YSS:

1. Growth: alignment to the growing space economy and shifting DoW purchasing preferences could lead to fast growth;

2. Business model: the business is capital light and structured to control cost, enabling lowest price solutions to customers;

3. Potential sticky high margin revenue: potential for recurring high margin software revenue as the installed fleet increases.

YSS was founded in 2012 and went public at the start of this year. Valentini described a little bit more of its operations:

The company bids as the Prime, under fixed-price contracting terms, manufactures satellite buses, and integrates the payload into its spacecraft for the customer. York serves the customer through the full mission life cycle; the company manufactures the satellite bus, integrates the payloads, organizes launch services, and provides mission operations post-launch.

How YSS benefits from the space industry:

• "Left of Launch": York bids on a contract as the prime, builds the satellite bus, integrates the payload, and delivers it to the launch provider so that the customer can then operate the satellite and receive data from the payload.

• "Right of Launch": York offers software services to operate the satellite for its customer. This is potentially a significant lever for the business because it is high-margin recurring revenue, but currently this offering forms less than 5% of the backlog.

The proliferation of space architecture provides a significant growth opportunity.

The space ecosystem has experienced significant growth in recent years as innovations in launch have reduced the cost to get to orbit, and militaries look to gain the high ground to ensure national security. The SDA has spent ~$14bn on SVs for the PWSA program, and the U.S. government funded ~$25bn for Golden Dome. The company expects that the intel community opportunity is 2x PWSA, and it can service $65bn of the potential $175bn for Golden Dome, leading to a TAM of $140bn.

YSS is one to track.  

Whether the catalyst is the incoming space boom or federal "Golden Dome" spending, YSS stands to benefit from both themes. Investors are already signaling bullish appetite for the space trade, as seen in the recent blast-off in a stock tied to a Korean broker that holds about $400 million in private shares of SpaceX and xAI.

Professional subscribers can read much more of the Goldman note here at our new Marketdesk.ai portal

Tyler Durden Wed, 02/25/2026 - 07:45