Key Takeaways
- UK unemployment rose to 5.2% in the three months to December, exceeding estimates of 5.1%, while average weekly earnings growth cooled to 4.2%, triggering a surge in Bank of England (BoE) rate cut bets.
- Traders have now fully priced in two interest rate cuts from the BoE this year as labor market tightness eases more rapidly than anticipated.
- Bank of America's (BAC) latest Fund Manager Survey flagged an "AI Bubble" as a key tail risk, even as earnings optimism reached its highest level since August 2021.
- Antofagasta (ANTO) reported FY 2025 revenue of $8.68 billion, beating analyst estimates, though pretax profits of $3.16 billion slightly missed the $3.19 billion consensus.
- German inflation remained stable at 2.1% YoY in January, matching expectations and providing a steady backdrop for the European Central Bank's policy considerations.
UK Labor Market Cooling Shifts BoE Outlook
The UK labor market showed significant signs of cooling in the final quarter of 2025 and early 2026. The ILO Unemployment Rate climbed to 5.2%, up from the previous 5.1%, while Employment Change for the three months to December came in at 52,000, far below the 108,000 analysts had expected.
Wage pressures are also receding, with Average Weekly Earnings (including bonuses) slowing to 4.2% compared to the previous 4.7%. This combination of rising unemployment and slowing pay growth has led markets to fully price in two 25-basis-point rate cuts by the Bank of England before the end of 2026. Traders are increasingly betting that the central bank will need to pivot sooner to support a flagging economy.
BofA Survey: AI Bubble Fears and "Crowded" Gold Trades
The February Bank of America (BAC) Fund Manager Survey (FMS) revealed a complex sentiment landscape. While earnings optimism is at a multi-year high, institutional investors are growing wary of a potential AI bubble, citing it as a top tail risk alongside high private credit risk.
The survey also noted that the "Long Gold" trade has become increasingly crowded, as investors seek hedges against geopolitical instability. Despite these concerns, fund managers have pushed cash levels down to 3.4%, rotating heavily into commodities and equities, which have reached multi-year overweight highs. The record levels of overinvestment concerns suggest a market that is leaning heavily into risk despite underlying structural fears.
Corporate Highlights and Global Macro Data
Mining giant Antofagasta (ANTO) released its FY 2025 results, posting a 60.3% EBITDA margin on revenues of $8.68 billion. The company issued 2026 copper production guidance of 650,000 to 700,000 tons, signaling a steady outlook for the copper market. Meanwhile, Deutsche Bank (DB) raised its price target for Sobi to SEK 450, reflecting positive sentiment in the European biotech sector.
In Europe, Germany's Harmonized CPI remained unchanged at 2.1% YoY for January, suggesting that the disinflationary trend in the Eurozone's largest economy is stabilizing. In Turkey, the House Price Index saw a monthly jump of 3.7%, though the year-on-year growth slowed slightly to 27.7%.
Geopolitical Tensions in the Strait of Hormuz
Geopolitical risks remain on the radar as Russia, Iran, and China reportedly dispatched naval vessels to the Strait of Hormuz. The ships are participating in the "Security Belt 2026" joint maneuvers, a move that could heighten tensions in one of the world's most critical oil transit chokepoints. Market participants are closely monitoring these developments for potential impacts on energy prices and global trade stability.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.