Global Markets Briefing - February 19, 2026

KEY MARKET DATA AT A GLANCE

Market / Indicator	Level / Change	Direction	Key Driver
US Equities (weekly)	-1.4%	DOWN	AI disruption spreads to new sectors
Nikkei 225 (weekly)	+5.0%	UP	LDP supermajority election victory
FTSE 100	10,446	STABLE	Defensive composition holding firm
US 10-yr Treasury Yield	4.05%	STABLE	Fed rate cut shifted to June 2026
US CPI (January)	2.4%	DOWN	Lowest core reading since March 2021
GBP / USD	$1.3645	STABLE	BoE easing expectations priced in
UK Avg Home Listing	368,019 GBP	STABLE	Supply constraints supporting prices

 

Financial markets in the third week of February 2026 are telling a nuanced, multi-chapter story. Beneath the headline turbulence in US equities lies a far more interesting picture: a world in which monetary policy timelines are shifting, democratic elections are reshaping the investment landscape, and the long-running question of China's property stabilisation may finally be inching toward an answer. This briefing takes you through all five major markets — one by one — with the context and analysis that the raw numbers alone cannot provide.

For continuous coverage of all these themes, visit The Market Stories.

US stocks declined 1.4% this week as artificial intelligence disruption spread beyond the technology sector into areas of the broader market that investors had previously assumed were insulated. The selloff is not a single event but part of a slow structural repricing — markets adjusting to the reality that AI's productivity gains create losers as well as winners, and that those losers are appearing in unexpected places. Our technology section has tracked how AI disruption is rippling sector by sector, and this week's equity moves suggest the market is still working through those implications.

The more consequential development, however, may be in the inflation numbers. US headline inflation fell from 2.7% to 2.4% in January, with core inflation also retreating to 2.4% — the lowest core reading since March 2021. For the Federal Reserve, which has been navigating the tension between a cooling labour market and sticky services prices, this is meaningful progress. As Morningstar's senior US economist Preston Caldwell has noted, the Fed's 2026 decisions are expected to be driven by economic developments rather than any predetermined calendar — and softer inflation shifts the probability calculus toward earlier action.

 

KEY DATA

Headline CPI: 2.4%  |  Core CPI: 2.4%  |  10-yr Treasury: 4.05%  |  Next cut: June 2026 (market consensus)

 

Markets are now assigning the highest probability to a 25-basis-point rate cut arriving in June 2026, followed by a second cut in September. That timeline represents a modest delay from earlier expectations. The adjustment reflects lingering caution among Federal Open Market Committee members, some of whom believe it would be appropriate to hold policy steady until disinflation is firmly back on track. J.P. Morgan Global Research continues to expect the Fed to remain on hold for much of the year, with the case for rate cuts expected to build gradually rather than urgently.

— Roger Hallam, Global Head of Rates, Vanguard

The 10-year US Treasury yield stands at 4.05%, reflecting the market's recalibrated view on the pace of Fed easing. Charles Schwab's chief fixed income strategist Kathy Jones has flagged a risk premium building around questions of Fed independence, particularly with Jerome Powell's term ending in May and Kevin Warsh, nominated by President Trump in January, expected to shape the institution's next chapter. We are tracking the Warsh nomination and its policy implications closely.

For investors, the practical takeaway is straightforward: the disinflationary trend is real, the rate-cut cycle remains on track, but the pace will be measured. J.P. Morgan Asset Management's 2026 baseline sees two 25bps cuts over the course of the year — which is also what the bond market is currently pricing.

Japan's Nikkei 225 delivered the standout equity performance of the week among major global markets, gaining nearly 5% following a decisive political development: Prime Minister Sanae Takaichi's Liberal Democratic Party secured a supermajority in the February 8 lower house election, winning more than two-thirds of parliamentary seats. For equity investors, that outcome is close to ideal — it clears the runway for aggressive fiscal stimulus, targeted tax cuts, defence spending increases, and structural economic reforms that minority governments typically cannot push through.

 

KEY DATA

Nikkei 225 weekly gain: ~+5%  |  LDP seats: Supermajority (2/3+)  |  BoJ rate target (year-end): ~1.0%

 

Japan's equity market has been one of the standout performers of the past two years, driven by corporate governance reforms, a weak yen boosting export earnings, and growing recognition among international investors that Japanese equities represent genuine value relative to stretched US valuations. The LDP supermajority supercharges that thesis by adding fiscal firepower. Our markets coverage has tracked Japan's structural equity re-rating throughout this period.

Worth monitoring, however, is the Bank of Japan's response. Unlike virtually every other major central bank, the BoJ is expected to continue hiking rates gradually through 2026 — J.P. Morgan Global Research forecasts the BoJ policy rate rising to 1% by year-end, making it the only major developed-market central bank tightening policy in 2026. Aggressive fiscal stimulus combined with monetary tightening creates a complex macro environment, and investors will need to monitor the yen's trajectory carefully: a stronger yen, which BoJ hikes could trigger, would partially offset the earnings tailwind that yen weakness has provided to Japan's exporters.

Defence spending is a particular area of focus. Japan has been on a multi-year trajectory toward allocating 2% of GDP to defence, and the supermajority removes a significant political obstacle to accelerating that commitment. Our sectoral coverage explores the investment implications for Japan's defence supply chain.

The eurozone economy expanded 0.3% in the fourth quarter of 2025, bringing full-year growth to 1.5% — a result that is neither alarming nor inspiring, but which suggests the bloc avoided the mild recession that some economists had feared. The headline number, however, conceals a story of striking divergence across member states with significant implications for both bond markets and European equity allocations.

 

KEY DATA

Eurozone GDP Q4 2025: +0.3%  |  Full Year 2025: +1.5%  |  Spain Q4: +0.8%  |  France unemployment Q4: 7.9%

 

Spain was the star performer among larger eurozone economies, posting quarterly GDP growth of 0.8% — a rate that would be remarkable for any advanced economy and that continues a multi-year trend of Spanish outperformance. Tourism, services exports, and a relatively flexible labour market have all contributed to this resilience. We have profiled Spain's market dynamics in depth, and Spanish domestic equities have quietly become some of the more compelling stories on the continent.

The picture is considerably more difficult elsewhere. Germany's employment figures showed a small contraction, continuing the country's struggle with a structural competitiveness challenge that goes beyond cyclical weakness: high energy costs, underinvestment in digital infrastructure, and an automotive industry facing a prolonged transition to electric vehicles. Meanwhile, France's unemployment rate climbed to 7.9% in the fourth quarter — its highest since Q3 2021 — adding political complexity to an already-fraught French fiscal situation.

The European Central Bank faces exactly the kind of dilemma that makes central banking difficult. Easing to support Germany and France risks inflaming Spanish inflation; tightening to control inflation risks deepening German stagnation. J.P. Morgan's global research team expects the ECB to remain on hold through most of 2026, having largely concluded its easing cycle in the first half of the year.

The FTSE 100 is trading at around 10,446 — a level that reflects the index's defensive character in a week when global equities faced broader pressure. Sterling is holding at $1.3645 against the dollar, a rate that speaks to a measure of confidence in the UK's macro outlook even as questions about the Bank of England's easing path persist. J.P. Morgan's currency strategists expect the Bank of England to cut rates to around 3.5% by mid-year, slightly more aggressive than current market pricing — which, if correct, could apply modest downward pressure on sterling in the months ahead.

 

KEY DATA

FTSE 100: 10,446  |  GBP/USD: $1.3645  |  Avg. new home listing: £368,019

 

The UK housing market continues to exhibit its characteristic stickiness. The average new home listing price held steady at £368,019 — neither the sharp decline that some bearish commentators anticipated following interest rate moves, nor the kind of acceleration that would raise fresh affordability concerns. The stability reflects a balance between demand constrained by still-elevated mortgage rates and supply constrained by the chronic under-building that has characterised British housing for decades. The structural dynamics of the UK housing market are a topic we cover regularly.

For equity investors, the FTSE 100's composition — heavily weighted toward global miners, energy majors, pharmaceutical companies, and international financial services firms — means that UK domestic economic conditions are often less important to index performance than global commodity prices, dollar strength, and the US interest rate outlook. In that sense, the index's relative stability this week reflects steady global commodity markets as much as any particular confidence in the UK economy itself.

China's property market offered one of the week's most carefully watched data points: the decline in second-hand home prices slowed in January, marking the smallest monthly drop in eight months. This is a tentative signal, and investors who have been burned by premature China property recovery calls in previous years will rightly approach it with caution. But it is also a meaningful data point — the smallest monthly decline in eight months suggests that the floor of price falls may finally be within sight, even if a meaningful recovery in volumes and prices remains some way off.

 

KEY DATA

Jan property price decline: smallest drop in 8 months  |  PBOC stance: Moderately Loose  |  Tools: RRR + rate cuts signalled

 

The People's Bank of China reinforced the dovish backdrop by reaffirming a 'moderately loose' monetary policy stance for 2026 and signalling that further reductions in both the reserve requirement ratio and benchmark interest rates remain possible. That combination — cautious optimism in the housing data, active monetary easing, and a central bank communicating that more support is available — represents about as constructive a short-term picture as the China property thesis has managed in several years. Our ongoing coverage of China's property cycle and its spillover effects on Asian equities is updated regularly.

— The Market Stories Global Markets Desk, February 2026

The deeper structural questions, of course, remain unresolved. China's property sector became so large relative to GDP — at its peak accounting for perhaps a quarter of the entire economy including ancillary industries — that a return to previous activity levels is neither possible nor desirable. The challenge for Beijing is managing a long-term structural deflation of the sector while avoiding the sharp demand collapse that would pull down construction employment, local government revenues, and the banking system simultaneously. The January data suggests management is improving — but the journey is long. We examine China's longer-term economic transition and its implications for global growth in our economy section.

 

INVESTOR OUTLOOK: KEY WATCHPOINTS FOR THE COMING WEEKS

PCE Inflation (Friday): The Fed's preferred price gauge. A reading in line with January's CPI softness would strengthen the case for a June rate cut and could lift US equities from their recent weakness.

Federal Reserve Communication: Watch for detailed guidance on what it would take for FOMC members to support further easing — and how united or divided the committee actually is on the June timeline.

Kevin Warsh Confirmation: Jerome Powell's term ends in May. Markets are watching Warsh's early public statements on monetary philosophy and Fed independence for signals on the institution's policy direction.

Bank of Japan Rate Decision: With fiscal stimulus coming and the LDP supermajority secured, the BoJ's gradual hiking path grows more complex. Any deviation from the expected pace will move the yen sharply.

China February Property Data: One month does not make a trend. Confirmation that January's slowdown in price declines was not a one-off will be essential to any constructive view on Chinese equities and the materials sector.

Eurozone PMI Readings: Preliminary purchasing managers' index data will give the clearest near-term read on whether Q4 2025's 0.3% growth represents a floor or a ceiling for the eurozone recovery.

 

Taken together, this week's global market picture is one of managed complexity. The US is in a genuine disinflation trend, but the Fed's response will be gradual and data-dependent. Japan's political outlook has turned sharply more positive for growth assets. Europe is recovering unevenly, with Spain providing the bright spot that Germany is struggling to supply. The UK is stable but not dynamic. And China — as ever — is the story that could move everything if its property stabilisation proves durable.

For investors with globally diversified portfolios, the week's data offers more reasons for measured optimism than for alarm — with the important caveat that Friday's PCE reading could reframe the entire US narrative before the weekend. Stay with The Market Stories for real-time updates, deep-dive analysis, and expert commentary on all of these themes as they develop.

 

Morningstar — What's Next for the Fed in 2026

J.P. Morgan Global Research — Market Outlook 2026

J.P. Morgan Asset Management — Notes on the Week Ahead

Charles Schwab — Four Market Pitfalls to Watch in 2026

T. Rowe Price — Global Markets Review Q4 2025

The Market Stories — Full Markets Coverage