In focus today

In the euro area, we receive the first January inflation reports from Germany and Spain. Euro area inflation is expected to decline to 1.7% y/y from 1.94% y/y in December, driven by significant energy base effects despite higher energy prices in January. However, numerous one-offs and policy changes influencing the data warrant a more cautious interpretation than usual.

We also get the first estimate of euro area GDP for Q4 2025, which is likely to show that the euro area ended the year on a solid growth momentum, with strong PMIs for Q4. Preliminary GDP release from Germany showed growth of 0.2% q/q as industrial activity rebounded. Combining these pieces of information, we expect the euro area Q4 GDP growth will come in at 0.3% q/q. We also get the unemployment rate for December which we expect to show a stable unemployment rate of 6.4%.

In the US, the delayed December PPI report is due, following CPI data that came in slightly below expectations. Senate Democrats have slowed progress on the appropriations bill to fund the government. If unresolved today, a partial shutdown could occur, though such situations are often resolved last minute.

In Norway, December retail sales are released. After rising 1.3% in November, we estimate a 0.5% decline in December, partly due to seasonal adjustment issues related to Black Week shifting Christmas trade.

In Sweden, focus turns to December retail sales and November wage growth. Retail sales likely declined in December after November's sharp rise driven by Black Week shopping. Wage growth remains steady at 3.6% y/y and is expected to hold.

In China, the official PMI data from NBS will be released on Saturday. Manufacturing PMI rebounded above the 50-mark in December, and we expect it to remain broadly stable in January, supported by strong exports.

Economic and market news

What happened overnight

In the US, Donald Trump announced that he will name a replacement for Jerome Powell as Chair of the Fed today, 30 January. There is significant focus on whether the pick would be more dovish and in alignment with Trump's administration. The shortlist reportedly includes Kevin Warsh, Kevin Hasset, Christopher Waller and Rick Rieder. While Rieder had been leading predictions in recent days, betting markets shifted yesterday, with Warsh now considered the favourite, holding a 92% probability on Polymarket.

Oil prices have increased lately with Brent crude benchmark trading at USD 69.75 this morning, after briefly reaching USD 70.75 overnight. The increase has been driven by weaker USD and markets increasingly pricing in a geopolitical risk premium, as tensions continue to build up in Iran. Yesterday, the EU agreed to hit Iran with sanctions, including the designation of its Islamic Revolutionary Guard Corps as a terrorist organisation. Additionally, overnight, Donald Trump signed an executive order to establish a process for imposing tariffs on goods from countries that supply oil to Cuba.

What happened yesterday

In Norway, the unemployment rate (SA) from NAV surprised by falling to 2.1% in December, despite a clear downward trend in employment throughout Q4. While a slight drop in the labour force contributed, it cannot fully explain the decline. Our seasonal adjustment shows that unemployment was approximately 2.15% in both November and December, so that most of the fall was due to rounding. For January, we expect the unemployment rate (SA) to remain unchanged at 2.1%, with a risk that it will rise to 2.2%.

In Sweden, the Riksbank left the policy rate unchanged at 1.75%, as widely expected. The Riksbank reiterated that "the rate is expected to remain at this level for some time to come", as it assesses that the current rate supports economic activity strengthening and stabilizes inflation around the target over the longer term. For more details, see Riksbank review: January 2026, 29 January. Meanwhile, the NIER survey weakened slightly but remained solid, with minor changes from the previous month. Household sentiment continues to drag the indicator lower, while the corporate outlook remains strong. Notably, recent hard data shows a pickup in consumption.

In Germany, data from the Ministry of Finance showed that public investments fell 25% short of the target in 2025. Total public investments amounted to EUR 86.8bn in 2025 which was 17% higher than in 2024 but at the same time 25% below the targeted EUR 115.6bn. Defence expenditures amounted to EUR 87.0bn in 2025 which was 18% more than in 2024 but 7% short of the EUR 94.0bn target. The failure to reach the targets is a slightly dovish signal for the ECB but not enough to cause a rate cut in 2026 as there is still a large increase in spending. For details, see German Fiscal Tracker, 29 January.

In the US, the Chicago Fed's latest unemployment rate 'nowcast' signals a potential dip to 4.3% in the upcoming January Jobs Report. High-frequency data has been generally positive as jobless claims continue to decline, ADP's weekly data indicates jobs growth during the reference period, and online job postings have modestly increased.

Equities: Thursday saw a reversal of some of this week's key trading themes. First, tech underperformed sharply, driven by Microsoft (-10%), with other software stocks also suffering, such as Zscaler and Strategy Inc. Semiconductors, however – which have been the outperformers lately – held up well in what was largely a software-related selloff. It is also worth adding that Meta jumped 10%. This was therefore not a broad-based tech selloff like last quarter, when AI capex was in focus. Again, remember that the previous tech selloff did not coincide with earnings reports but occurred a week later, so it is too soon to draw broad conclusions. As our readers know, we prefer riding the AI wave through Asia (the Kospi is up another 1% this morning) while remaining neutral on the global tech sector.

FI and FX: EUR/USD slid through the night and is currently trading in the low 1.19's. NOK had a strong first half of yesterday's session, under a lot of volatility. As SEK trading was muted on the back of an undramatic Riksbank, with the Swedish Krona holding steady we saw NOK/SEK edge higher through the day. The sharp rally in the oil market continued yesterday, with Brent trading at the highest levels since last summer. Yesterday also saw wild swings in the metals space, with copper rising 11% whilst the price of Gold saw a sudden and dramatic fall at 16:00 CET, before eventually recouping some of the losses. Finally, reports have it that Kevin Warsh is likely to be Trump's nominee as the next Fed chair, due to be announced today.

Source: Danske Bank