EMEA Morning Briefing : AI Boom Back in Focus

MARKET WRAPS

Watch For:

Germany CPI; no major trading updates expected

Opening Call:

European stock futures were lower after Asia stocks broadly fell. The dollar slightly weakened and U.S. Treasurys were flat. Gold and oil fell.

Equities:

European stock futures were lower after the Nasdaq recouped some of Wednesday's losses after upbeat earnings from a supplier to the artificial-intelligence boom and two of Wall Street's biggest banks. The Nasdaq had notched its worst day in a month Wednesday as investors fretted about high valuations and regulation.

"I don't know if we're looking at the end of the AI trade," said Marta Norton, chief investment officer at Empower. "Not that we shouldn't be concerned about bubbles and unrealistic behavior, but it might be too soon to have that be a major risk factor in the markets today."

Overnight on Wall Street, Goldman Sachs and Morgan Stanley both reported forecast-beating earnings, with the former posting record annual revenue. Shares rallied, following a tough week for financial stocks.

Forex:

The U.S. dollar edged lower. There's President Trump's "endeavor to acquire Greenland and how far Europe will go to defend its boundaries," Maybank analysts said in a FX Research & Strategy report.

The Trump administration's emphasis on the "Donroe Doctrine" suggests the U.S. wants to assert its right to treat the Western Hemisphere as its exclusive backyard, the analysts say.

Meanwhile, leaders from France, Germany, Italy, Poland, Spain, the U.K. and Denmark issued a joint statement warning that existing borders are nonnegotiable and Arctic security must be achieved via NATO, the analysts noted.

Bonds:

Investors have shown great appetite for a heavy supply of eurozone government bonds so far in 2026, driven by large cash availability and as investors continue to diversify away from U.S. assets.

Gross eurozone bond supply is set to rise to a record high this year as Germany proceeds with substantial fiscal stimulus, with many other countries following suit as they seek to boost defense spending.

Bond investors are undeterred, however.

"It seems that there is a lot of fresh cash ready to be deployed in the euro area bond market in general," Jussi Hiljanen, chief rates strategist at SEB, said.

Energy:

Oil prices are likely to remain rangebound unless there is a revival in Chinese demand or a "meaningful bottleneck" in physical flows from Russia and the Middle East, said Phillip Nova's Priyanka Sachdeva in a note.

Sentiment is largely driving markets but the effect of oil-related headlines is short-lived, she says. Crude briefly climbed on Iran's intensifying unrest and supply-risk news in Venezuela before correcting soon after, the analyst notes.

Major forecasters and industry data note a growing supply surplus that will likely keep a lid on oil prices, she adds. Sanctions and headlines are therefore causing short-term volatility rather than real physical shortfalls, she said.

Metals:

Gold edged lower. According to U.S. officials, President Trump was advised that a large-scale strike against Iran was unlikely to make the government fall and could spark a wider conflict, and for now will watch how Tehran handles protesters before determining the scope of a potential attack.

A slight easing in geopolitical tensions has helped temper immediate safe-haven demand, said Kudotrade's Konstantinos Chrysikos in an email. Some investors have opted to lock in profits, the head of Customer Relationship Management said.

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Copper rose in early trade. The metal has climbed nearly 40% over the past year, supported by strong market fundamentals, including robust demand in China that is keeping imports close to record highs this week, ANZ analysts said in a note.

However, a recent surge in investor interest in real assets, including commodities, has raised concerns that speculative flows may be driving prices higher in recent weeks, they added.

TODAY'S TOP HEADLINES

Philly Fed's Paulson Says Rate Cuts Can Wait, Shows Support for Powell

PHILADELPHIA-Federal Reserve Chair Jerome Powell has become an unlikely folk hero, the subject of internet memes celebrating his stewardship of the central bank. Philadelphia Fed President Anna Paulson knows this because her 20-year-old son sends them to her.

"So many people have been impressed by his leadership, myself included," Paulson said in an interview Wednesday, her first with a national outlet since taking the job last July.

Fed's Schmid Says Inflation Warrants Keeping Interest Rates Unchanged

Kansas City Fed President Jeff Schmid reiterated his view that inflation pressures are still too evident in the economy and that interest rates should remain unchanged in a speech Thursday.

Schmid, one of three dissenters in Federal Reserve's decision for quarter-point rate cut in December, said that with inflation above the Fed's 2% target for more than four years policymakers don't have room to be complacent. Schmid won't have a vote on policy this year.

Europe Deploys Troops to Greenland in Message to Trump

Fifteen French mountain infantry soldiers marched onto a runway late Wednesday and boarded a bus labeled "Greenland Excursions," their first step in a mission to deter a U.S. invasion of the Arctic island.

At an air base 200 miles north, a Danish C-130 military plane unloaded Swedish troops, while a 13-person German Army reconnaissance team mobilized for a two-day deployment.

Verizon Gets Final California Approval to Secure $9.6 Billion Frontier Deal

Verizon Communications has received the final approvals needed to buy fiber-optic broadband provider Frontier Communications after agreeing to some concessions to California regulators, including a small-business spending commitment.

Verizon agreed to acquire Frontier for $9.6 billion in September 2024, but the path to completing the deal has been fraught. Last year it won Federal Communications Commission approval after pledging to roll back some diversity policies. But California, one of its core markets and the last state holdout to give approval, had concerns about how those changes would align with its own rules on issues including supplier diversity.

Trump to Push Plan for Tech Companies to Fund New Power Plants

WASHINGTON-The Trump administration is planning to propose that the nation's largest power grid operator hold an emergency auction in which tech companies would bid to have new power plants built, according to people familiar with the matter.

The directive, expected Friday, would be an unprecedented attempt by the federal government to check rising electricity prices within PJM Interconnection, a 13-state power market spanning from New Jersey to Kentucky. The build-out of data centers there in response to the artificial-intelligence boom is straining the grid's capacity and has resulted in substantially higher costs in several of the grid operator's recent power auctions.

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Expected Major Events for Friday

00:01/UK: Dec Scottish Retail Sales Monitor

07:00/GER: Dec CPI

08:00/SVK: Nov New orders in industry

08:00/SPN: Nov Industrial Orders & Turnover

09:00/POL: Nov Merchandise trade

09:00/ITA: Dec CPI

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

01-16-26 0019ET