Daily Commentary

MarketMinder’s View: Here is something for investors to keep an eye on: The EU and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), two of the world’s largest free-trade blocs, are negotiating an economic alliance, “which would create a new trading bloc of 1.5 billion people,” according to Canadian Prime Minister Mark Carney. If agreed, it has the potential to “intertwine the supply chains of members like Canada, Singapore, Mexico, Japan, Vietnam, Malaysia and Australia with Europe. It would bring nearly 40 nations on opposite sides of the globe closer together with the aim of reaching a deal on so-called rules of origin. These rules determine the economic nationality of a product. A deal would allow manufacturers throughout the two blocs to trade goods and their parts more seamlessly in a low-tariff process known as cumulation.” Now, talks have just started, and it may take years before they reach fruition (if they do at all)—likely nothing to drive stocks in the here and now. We highlight this development because it cuts against prevailing doom-and-gloom sentiment regarding global trade, which as this shows, is far from giving up the ghost. While American tariffs are higher than last year, non-US trade barriers are falling—which is far less appreciated than many other headlines we read suggest.

MarketMinder’s View: Japanese exports started 2026 strongly. “The value of overall exports gained 16.8% in January from a year earlier, the sharpest increase since November 2022, the Finance Ministry reported Wednesday. That beat the median analyst forecast of a 13% rise. Overall shipments of semiconductors and other electronic components rose by almost 40%, led by a 51.7% jump in those exports destined for China.” On the more revealing volumes basis, exports rose 8.9% y/y after December’s -1.3%, with positive January results to the US, EU, Asia and China. As we explored yesterday discussing Japanese GDP, sentiment remains skeptical towards growth, even with better-than-expected results as economists here downplay them as frontrunning ahead of this week’s Lunar New Year holiday, unlikely to keep pace and weak-yen driven. This is a fair enough observation, especially considering the year-ago reference point is skewed by the holiday occurring in January last year, creating an artificially low base. January and February data often have this issue, which is why China combines them into one reading. But on the yen, as the article notes, “the yen was largely unchanged from levels a year ago, limiting its impact on the latest data.” So while Japanese exports may or may not keep pace with January’s rates, it looks to us like reality will remain better than ongoing sour sentiment admits, which is all Japan’s bull market needs to keep climbing.

MarketMinder’s View: Heavy industry is only a small slice of the US economy, so industrial production’s 0.6% m/m January jump isn’t some huge economic tailwind. But the sector has struggled here and globally for the past few years, weighing heavily on sentiment. Gloom escalated last year when the Trump administration’s new tariffs didn’t lead immediately to surging factory output. Instead, as the article notes, manufacturers struggled under the pressure of higher costs for imported components, not to mention uncertainty over retaliation from trading partners. But as clarity has arrived, the sector appears to be mounting a recovery. “The increase in factory output last month occurred across the board. Durable goods manufacturing output rose 0.8%, with strong gains in nonmetallic mineral products, machinery, computer and electronic products, miscellaneous durable goods, as well as motor vehicles and parts, which rose for the first time since last August.” Time will tell whether this is a new trend, but given core capital goods orders are now up six straight months through December, per a separate Census Bureau report, that augurs well for future production.