Czech Central Bank Hints at Rate Cut Despite Domestic Strength

Prime Minister Narendra Modi announced an ambitious plan to attract US$100 billion (RM395.45 billion) in investment into India's oil and gas sector by the end of the decade. Speaking via video at the India Energy Week conference, Modi outlined a strategy centered on expanding drilling into previously restricted territories.

To support this push, India also plans to increase its refining capacity by one million barrels per day, reaching a total of six million. This move signals a long-term commitment to domestic energy processing and provides a stable demand outlook for potential explorers.

Tackling India's Heavy Reliance on Foreign Oil

The new initiative aims to address a long-standing economic vulnerability. For decades, India's own oil production has failed to keep pace with its surging demand, forcing the country to import 90% of its crude oil and half of its natural gas needs.

This heavy reliance on foreign energy is a significant drain on the nation's foreign exchange reserves. In December alone, oil and gas imports comprised 17% of the total value of goods shipped from overseas.

Currently, India's domestic oil output averages just 550,000 barrels a day—comparable to the combined production of OPEC members Congo and Gabon, but only a small fraction of the country's total consumption.

A New Frontier: Opening Vast Areas for Exploration

To reverse this trend, India is opening nearly one million square kilometers of previously ring-fenced areas to oil and gas exploration. This new territory is in addition to the 170 blocks already available for drilling.

A key component of this strategy is the National Deepwater Exploration Mission, which was launched last August. The mission's goals include:

• Unlocking between 600 million and 1,200 million tonnes of oil and gas reserves.

• Drilling 40 new wildcat wells to discover new fields.

• Doubling the country's reserves by 2032.

• Tripling domestic output by 2047.

• Ultimately slashing import dependency by 88%.

Indian government bond yields surged to a nearly 11-month high on Tuesday, as concerns over heavy government borrowing and tight liquidity overshadowed central bank support.

The benchmark 10-year 6.48% 2035 bond yield settled at 6.7194%, its highest level since March 4. This was a notable increase from the previous close of 6.6635% on Friday, following a market holiday on Monday.

State Debt Supply Weighs on the Market

A key driver of the sell-off was a significant supply of new debt from state governments. States sold 398 billion rupees in bonds at slightly elevated yields, contributing to market pressure.

This is part of a broader trend, as states have announced a record borrowing plan of 5 trillion rupees for the January-March quarter. Adding to investor concerns, the central government is expected to announce its own record gross borrowing plan for the next fiscal year, estimated to be between 16 trillion and 17.5 trillion rupees. Traders fear this supply glut will continue to weigh on bond prices.

RBI's Liquidity Push Fails to Calm Nerves

The rising yields occurred despite a recent announcement from the Reserve Bank of India (RBI). After market hours on Friday, the central bank said it would inject over $23 billion of liquidity into the banking system.

However, the positive impact of this announcement was eclipsed by the immediate and substantial supply of new debt hitting the market.

Tight Liquidity Stalls Monetary Policy

Indian bond yields have been rising for weeks, even though the RBI has already cut interest rates by 100 basis points this year and engaged in record bond purchases. This reflects a difficult dynamic where debt supply is outpacing demand.

The situation has been made worse by persistently tight liquidity in the banking system, which has blunted the effect of the RBI's rate cuts.

In a note, an economist at BofA Securities observed, "Despite the RBI resuming its rate cutting cycle in December, the rate transmission has stalled meaningfully thanks to tight liquidity conditions."

Data shows India's average bank liquidity surplus was only 0.2% of bank deposits in January, with a daily average of 569 billion rupees. This is well below the RBI's stated goal of keeping the surplus within the 0.6% to 1% range, as mentioned by Governor Sanjay Malhotra.

OIS Curve Reacts to Liquidity Squeeze

The impact of tight liquidity was also visible in the overnight index swap (OIS) market, where the curve steepened.

• The one-year OIS was slightly down at 5.5925%.

• The two-year OIS rate rose 3.25 basis points to 5.76%.

• The five-year OIS rate climbed 4.25 basis points to 6.18%.

North Korea launched multiple ballistic missiles toward the sea on Tuesday in a move that coincided with high-level defense talks between the United States and South Korea. Officials in Seoul and Tokyo identified the projectiles as likely being short-range missiles, continuing Pyongyang's pattern of weapons testing.

The launch underscores regional tensions as Washington and Seoul work to modernize their military alliance and redefine the U.S. role in deterring North Korean threats.

Launch Details from Pyongyang

South Korea's Joint Chiefs of Staff reported that the missiles were fired from an area near Pyongyang at approximately 3:50 p.m. local time. The projectiles traveled about 350 kilometers (217 miles) before landing in the sea off North Korea's east coast.

Japanese authorities provided further details, with Japan's coast guard detecting the missile launch and noting a maximum altitude of 80 km. Prime Minister Sanae Takaichi confirmed the missiles would not have an impact on Japan.

Regional Condemnation and Protests

Both South Korea and Japan swiftly condemned the launch as a violation of international agreements.

• South Korea: The Office of National Security labeled the test a "provocative activity" and urged North Korea to immediately stop its ballistic missile launches, which defy U.N. Security Council resolutions.

• Japan: The Japanese government issued a statement calling the repeated launches a threat to the peace and security of Japan, the region, and the international community. Tokyo lodged a strong protest with Pyongyang, describing the action as a grave issue affecting public safety.

Strategic Context: Defense Talks and Arms to Russia

The missile test occurred as a senior U.S. Defense Department official was visiting South Korea to discuss the future of the two countries' combined defense posture. The talks have focused on modernizing their alliance, with Washington reportedly exploring a more limited role in direct defense efforts against North Korea.

In recent months, North Korea has frequently tested short-range missiles and multiple-launch rockets, which it claims are essential for its tactical nuclear arsenal.

Global interest in Pyongyang's short-range ballistic missiles and artillery has intensified after it began supplying these weapons to Russia. Under a 2024 mutual defense pact, North Korean arms have been used in the war against Ukraine, raising the stakes of its continued weapons development.

Source: AP

Spain's unemployment rate dipped below 10% at the end of 2025, the lowest level in almost 18 years.

Joblessness was 9.93% in the three months through December, the statistics office said Tuesday, adding that almost 22.5 million people are now employed in Spain.

In the past 45 years, there have only been four years during which the unemployment rate has fallen below 10%, according to data from the national statistical office.

Spain's economy has outperformed its euro-area peers in recent years as politicians embraced immigration to boost growth. In a further push Tuesday, the government is set to grant resident permits to about 500,000 undocumented migrants.

The measure is expected to offer legal status to people who were in the country before Dec. 31, have no criminal record and can prove at least five months of uninterrupted residence.

This week's positive jobs data underscore the resilience of the euro zone's fourth-biggest economy and may also shift some attention away from recent fatal train accidents that have put pressure on Prime Minister Pedro Sánchez.

He's also struggling to push through his legislative agenda. Spain hasn't passed a budget since 2023 and the premier needs the backing of at least eight political parties to get anything through parliament.

Source: Bloomberg Europe

German companies poured more than €7 billion into China in the first eleven months of 2025, marking a four-year peak and a clear pivot in global investment strategy. This figure represents a massive 55.5% increase from the €4.5 billion invested in both 2023 and 2024.

According to new data from the IW German Economic Institute, the surge highlights how aggressive U.S. trade policies under President Donald Trump are pushing industries in Europe's largest economy to strengthen business ties elsewhere.

US Trade Tensions Fuel Investment Boom

The sharp rise in German investment in China is directly linked to the Trump administration's trade policies, which have included significant tariffs on EU imports. This has prompted German firms to actively shift their focus toward China as a more stable alternative for growth.

The trend is further underscored by a corresponding decline in capital flows to the United States. A previous Reuters report revealed that German companies nearly halved their U.S. investments during the first year of Trump's second term. This shift helped China reclaim its position as Germany's top trading partner last year, overtaking the U.S. after a brief period.

This redirection of capital isn't unique to Germany. Governments and industries across the globe, from Britain to Canada, are actively seeking to expand trade relationships with Asian and South American markets to navigate the changing geopolitical landscape.

De-Risking with a "China for China" Strategy

The investment surge is not just about finding new markets; it's a calculated move to de-risk operations by building resilient, localized supply chains.

"German companies are continuing to expand their activities in China – and at an accelerated pace," said Juergen Matthes, head of international economic policy at the IW institute. He noted that growing concerns about "geopolitical conflicts" are prompting companies to make their Chinese operations more independent in case of major trade disruptions.

The core logic is to produce goods in China specifically for the Chinese market. As Matthes explained, "Many companies say: 'if I'm only producing in China for China, I'm reducing my risk of being affected by possible tariffs and export restrictions'."

Automakers and Manufacturers Lead the Charge

Germany's industrial giants remain heavily dependent on the Chinese market, which is the world's largest for cars and chemicals. Major players like BASF, Volkswagen, Infineon, and Mercedes-Benz are all deepening their commitment.

Volkswagen, Europe's largest automaker, stated that while both the U.S. and Chinese markets are strategically important, its investments are guided by local strategies. The company noted that technologies developed in China are now being used to strengthen its global presence in other regions, including Southeast Asia and South America.

The strategy extends beyond the automotive sector. The German fan and motor manufacturer ebm-papst invested €30 million last year to expand its Chinese operations, accounting for over a fifth of its total investments. The company's goal is to produce more where its customers are located.

"This model has proven to be an important anchor of stability, especially in times of tariffs and geopolitical tensions," the company said, adding that it also plans to expand its U.S. business this year.

The overall investment figure for 2025 not only marks a four-year high but also surpasses the €6 billion average recorded between 2010 and 2024, according to the IW report, which used data from Germany's Bundesbank. The trend reflects a broader strategic realignment, as highlighted by German Economy Minister Katherina Reiche, who recently emphasized the need to seek new alliances as established economic relationships become more fragile.