Economy February 12, 2026

Market Overview

Global financial markets are navigating a mixed macro backdrop where technology-led optimism, political shifts in Japan, ongoing Chinese real estate weakness, and anticipation of key US economic data are together shaping risk appetite. Equity reflation tied to AI narratives has supported higher valuations in tech and conglomerates, while fixed income markets are relatively steady as investors await US jobs and inflation signals that will inform policy expectations [2][5][13][24][29]. Meanwhile, structural concerns — notably China's housing sector and semiconductor supply-chain geopolitics — are acting as a drag on regional growth confidence [3][8].

Key Developments

1) AI and corporate earnings momentum: SoftBank’s stock jump after its telecom arm lifted guidance and renewed investor enthusiasm for Arm underscores how AI-related narratives continue to drive market moves and capital allocation toward semiconductors and software platforms [2]. Major tech firms are also recalibrating capital structure and risk disclosures around AI investment — for example, Alphabet identified AI-related business risks while tapping debt markets to fund expansion, signaling sizable near-term spending needs that market participants must price [7][19].

2) Japan politics and currency/market dynamics: Prime Minister Sanae Takaichi’s decisive victory and the so-called “Takaichi trade” are reinforcing expectations for looser monetary policy and a weaker yen, supporting a rally in the Nikkei and export-oriented equities. Markets are already pricing potential policy divergence between Japan and other major central banks, contributing to equity and FX volatility [5][12][13][26].

3) China real estate deterioration: S&P’s warning that primary property sales may drop 10–14% this year signals deeper-than-expected structural weakness in Chinese housing, with implications for growth, bank asset quality, and commodity demand across the region [8]. This remains a key downside risk to China-linked growth and global supply chains.

4) Geopolitics and supply chain constraints: Taiwan’s pushback on Washington’s proposal to relocate 40% of its semiconductor supply chain underscores the practical and economic frictions inherent in large-scale reshoring — indicating supply-chain diversification will be incremental, costly, and politically sensitive [3].

5) Credit and funding landscape: Private credit markets are showing renewed stress as AI-driven disruption raises uncertainty for software firms and cash flows, while large private financing rounds (e.g., Databricks) and banks’ heavy technology investments illustrate divergent funding pathways for growth and incumbents [14][18][22]. Treasury yields have been stable ahead of critical US economic releases that will influence financing costs and risk premia [24][29].

Financial Impact

- Equities: AI exposure is bifurcating equity performance. Companies tied to AI compute and chip design (and parent investors like SoftBank) are enjoying re-rated multiples, while firms exposed to cyclical end-markets or China property contraction face valuation pressure [2][8]. Political-driven FX moves in Japan are supporting local equities but raise earnings translation risks for exporters [5][13].

- Credit and funding: Elevated private credit size (~$3tn) confronts sector-specific default risk as software firms adjust to AI economics; private lenders may face higher loss rates if revenue disruption accelerates [14]. Meanwhile, larger corporates are flexing balance sheets and capital markets access (e.g., debt issuance for AI investment) that could widen the gap between well-capitalized tech leaders and smaller-scale firms [7][18].

- Macro spillovers: A deeper China housing slump would weigh on regional growth, commodity exporters, and banks with property exposure, increasing downside tail risks for global GDP and corporate earnings [8]. Semiconductor relocation frictions could raise capex and inventory costs across the industry, supporting near-term investment but lowering manufacturing efficiency [3].

Market Outlook

Near term, markets will be driven by US labor/inflation data and central-bank signaling that recalibrates rate expectations and term premium — important for equity multiples and private credit stress [24][29]. AI narratives and large private financings should continue to underpin selective outperformance within tech and semiconductor-related names, but investors must price in increased capex, regulatory risks, and potential earnings dispersion [2][7][18]. Regionally, watch for knock-on effects from China’s property contraction and Japan’s policy-driven FX volatility; both present asymmetric risks to growth and earnings forecasts [5][8][13]. Finally, private-credit and mid-market lenders deserve close monitoring as sector-specific AI disruption and higher rates could reveal hidden asset-quality deterioration [14][22][30]. Overall, positioning should emphasize liquidity, selective exposure to durable AI winners, and hedges for China/FX-driven downside scenarios.