Date Issued – 11th February 2026
Courtesy of the Research Department at Balfour Capital Group
Key Points
- AI Disruption Hits Financials: The S&P 500 slipped 0.33% as fears over AI’s impact on brokerage models pressured financial stocks, while the Dow closed at another record high.
- Broker Stocks Reprice on Tech Risk: LPL Financial and Schwab fell sharply as investors factored in potential AI-led erosion of traditional advisory business lines.
- China Inflation Miss Adds Pressure for Stimulus: Subdued CPI and persistent PPI deflation point to lingering demand weakness, prompting speculation over further policy support.
- Hong Kong Pushes Ahead with Stablecoin Regulation: Regulatory clarity in Hong Kong stands in contrast to Beijing’s crypto stance, boosting its standing as a digital finance hub.
February Economic Calendar
| Date | Event | Why It Matters |
|---|---|---|
| Feb 12 | U.S. Retail Sales & ECI | Key metrics for consumer spending and wage growth that feed into inflation outlooks. |
| Feb 13 | U.S. CPI | Core inflation will be a pivotal data point for rate expectations and sectors sensitive to monetary policy. |
| Feb 11–13 | Fed Speeches | Multiple Fed officials will offer guidance on economic conditions and policy direction. |
| Feb 13 | Eurozone Industrial Production | Industrial output data could influence European growth expectations and ECB policy. |
| Feb 12 | UK CPI | A major gauge of inflation in the UK, with implications for Bank of England rate decisions. |
U.S. Market Mixed as AI Concerns Hit Financials
The S&P 500 closed lower after softer‑than‑expected U.S. retail sales data and heightened investor concern that AI‑driven tools could disrupt financial sector earnings, with broker‑dealer names such as LPL Financial, Charles Schwab and Morgan Stanley sliding sharply. While the Dow Jones Industrial Average hit a fresh record above 50,180, defensive sectors like materials and utilities saw rotation inflows, and a broad set of names in the S&P 500 reached 52‑week highs. Investors are now focused on key upcoming labor and inflation reports that could steer monetary policy expectations.
AI Risk Expands from Software to Brokers
Weakness in software equities tied to fears that AI may displace legacy revenue models has bled into financial services, with broker stocks enduring significant losses as investors reassess earnings vulnerability. The sell‑off reflects broader skepticism about near‑term implications of AI adoption and pricing pressure across sectors previously insulated from technology disruption. Market participants are closely watching how technology shifts could alter valuation frameworks for both software and financial firms.
China Inflation Data Underscore Deflation Risks
China’s latest inflation data showed muted consumer price growth, signaling persistent demand weakness and continued producer‑price deflation across manufacturing sectors — a trend that has lingered for months amid structural economic headwinds. The soft pricing environment reinforces expectations that Beijing may deploy further monetary or fiscal stimulus to support domestic consumption and counteract deflationary pressures that cloud near‑term growth prospects.
Hong Kong Presses Ahead with Stablecoin Licensing
Hong Kong is advancing plans to issue its first stablecoin licences as early as March 2026 under a new regulatory regime, positioning the city as an Asia‑Pacific hub for regulated digital assets. This move contrasts sharply with mainland China’s stringent crypto ban and reflects a calibrated approach to integrating digital currency infrastructure while managing risk and compliance requirements for issuers under the supervision of the Hong Kong Monetary Authority.
Conclusion
This week’s cross-market movements reflect the growing influence of artificial intelligence on sector valuations, ongoing macroeconomic fragility in China, and regulatory divergence in digital finance. While the Dow continues to set new highs, sector-level volatility remains pronounced, particularly among tech-adjacent financials. Meanwhile, Hong Kong’s stablecoin licensing initiative signals opportunities in regulated crypto frameworks, just as mainland China reinforces its digital firewall. As investors await pivotal U.S. inflation data, portfolio resilience will depend on navigating a landscape shaped by technology disruption, deflation risk, and regional policy asymmetries.
Investment Insights
- Macro Data as a Market Driver: Upcoming U.S. jobs and CPI releases remain central to shaping Fed expectations and equity valuations.
- AI Impact Across Sectors: Continued AI‑linked volatility suggests careful differentiation between firms with sustainable earnings and those vulnerable to technological disruption.
- Emerging Asia Opportunities: China’s softened price pressure and Hong Kong’s stablecoin framework highlight differentiated growth and policy responses worth monitoring for regional allocation.
- Risk Diversification Critical: With episodic rotation into defensive and non‑cyclical segments, investors may benefit from diversified exposure amid rising dispersion in asset performance.
Disclaimer: This newsletter provides financial insights for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.
