Key Points

• U.S. Futures Under Pressure: AI disruption fears extend market volatility as the Nasdaq logs its fifth consecutive weekly loss.
• China Accelerates AI Push: Alibaba’s Qwen3.5 reinforces the shift toward agent-based AI systems.
• Europe Opens Lower: Earnings and inflation data drive cautious positioning across regional indices.
• Consumer Staple Risk Emerges: A French probe into infant formula recalls elevates reputational and earnings uncertainty.

February Economic Calendar

• Feb 18 — U.S. Retail Sales (Monthly): Measures consumer spending strength, a primary driver of U.S. GDP and a key indicator for Federal Reserve policy calibration.
• Feb 18 — Eurozone CPI (Final): Confirms the inflation trajectory and shapes European Central Bank rate expectations.
• Feb 19 — U.S. Initial Jobless Claims: High-frequency labor market data offering insight into employment stability and wage pressure trends.
• Feb 19 — U.S. Industrial Production: Tracks manufacturing output and capacity utilization, signaling business investment momentum.
• Feb 20 — Japan CPI: A critical inflation reading that may influence Bank of Japan policy normalization discussions.
• Feb 20 — UK Retail Sales: A key gauge of UK consumer resilience and implications for Bank of England policy.
• Feb 21 — China Loan Prime Rate Decision: Impacts credit conditions, property sector activity, and the broader Chinese growth outlook.
• Feb 21 — U.S. Fed Speakers (Various Officials): Commentary may influence rate expectations and near-term equity and bond market volatility.

U.S. Futures Slide as AI Disruption Weighs on Sentiment

U.S. equity futures traded lower following two consecutive losing weeks, with S&P 500 futures down 0.42%, Nasdaq 100 futures off 0.75%, and Dow futures declining 133 points. Markets remain under pressure as concerns about artificial intelligence disruption ripple across industries including financial services, trucking, and real estate.

The S&P 500 and Dow both fell more than 1% last week, while the Nasdaq posted its fifth straight weekly decline, marking its longest losing streak since 2022. Investors are now focused on upcoming Federal Reserve meeting minutes and Friday’s PCE inflation report for clearer direction on monetary policy.

Alibaba Launches Qwen3.5 as China’s AI Race Shifts to Agents

Alibaba unveiled Qwen3.5, its latest large language model, offering both open-weight and hosted API versions with enhanced cost efficiency and performance. The model supports agentic capabilities and multimodal inputs, aligning with the accelerating global shift toward AI agents capable of executing multi-step tasks autonomously.

Alibaba claims benchmark performance comparable to leading Western models, though results are self-reported. The release underscores intensifying competition among Chinese AI firms as ByteDance and others roll out upgraded systems, highlighting China’s push to narrow the gap with U.S. AI leaders.

European Markets Set to Open Lower Amid Earnings Watch

European equities were poised to open lower, with the FTSE seen down 0.2% and Germany’s DAX, France’s CAC 40, and Italy’s FTSE MIB projected to fall 0.4%. Investors remain focused on earnings from major miners including Antofagasta and BHP, alongside InterContinental Hotels Group and EssilorLuxottica.

Data releases on German inflation, economic sentiment, and U.K. unemployment are also in focus. The cautious tone follows modest gains earlier in the week and subdued trading in Asia due to Lunar New Year holidays.

France Investigates Nestlé and Danone Over Baby Formula Recalls

French prosecutors have opened investigations into five baby formula manufacturers, including Nestlé and Danone, following global recalls linked to potential cereulide contamination. Recalls have affected more than 60 countries and involve major brands such as Aptamil, Cow & Gate, and SMA.

While no causal link has been established in reported infant deaths, the probe raises reputational and financial concerns. Infant formula accounts for approximately 5% of Nestlé’s revenue and an estimated 21% of Danone’s revenue, heightening investor sensitivity ahead of upcoming earnings.

Conclusion

Markets remain in a consolidation phase as artificial intelligence disruption concerns weigh on U.S. equities and earnings season drives selective positioning in Europe. At the same time, China’s accelerating push into AI agents signals intensifying global competition in advanced technologies.

Regulatory and reputational risks are also resurfacing within defensive sectors, as demonstrated by the expanding baby formula investigation in France. With inflation data and central bank communications ahead, investors face a backdrop defined by technological transformation, policy uncertainty, and earnings sensitivity across global markets.

Investment Insights

• AI Volatility Expands Beyond Tech: Disruption concerns are spreading across industries; prioritize companies with durable pricing power and clear competitive moats.
• China’s AI Escalation: Alibaba’s agentic pivot reinforces long-term structural growth in AI infrastructure and cloud ecosystems.
• European Earnings Selectivity: With markets opening lower, stock-specific fundamentals and margin resilience remain key differentiators.
• Consumer Brand Risk Monitoring: Reputational events in defensive sectors can introduce unexpected earnings volatility; balance exposure within staples.