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16 Feb 2026 | 3 minutes to read
US equity indices were the outlier amongst major global share markets last week. US stocks fell further on concerns over potential artificial intelligence (AI) disruption, with the selling pressure spreading beyond the technology sector. While tech stocks were most pressured, last week provided further evidence that weakness was increasingly spilling into other sectors viewed as vulnerable to AI disruption, including the legal profession, financial services, insurance and even real estate and logistics. The technology-heavy Nasdaq fell -2.1%, while the broad S&P 500 suffered its fourth negative week out of the past five. Mega-cap technology stocks led the pullback, with the ‘Magnificent Seven’ down c.-2% over the week, taking their year-to-date to drop-off to c.-7%. While European equities were volatile as well, they ended the week in positive territory, with the UK market up c.+0.8%, extending the strong start to 2026 which has seen it rise more than +5%. Asian and emerging markets have also enjoyed a very strong start to the year, with some commentators suggesting a broader market rotation is underway.
Seemingly unperturbed by any AI-related market jitters, Alphabet - the parent of Google and YouTube - completed a massive $31.5bn global bond issuance last week. Tapping dollar, sterling and Swiss franc markets, the US behemoth is seeking to further fund its expanding AI infrastructure and data-centre investment. The deal featured maturities ranging from 3 to 40 years, alongside a rare 100-year sterling ‘century bond’. The century bond raised £1bn with a 6.125% coupon, marking the first 100-year bond issued by a technology company since 1997. Hitherto, so-called ‘hyperscalers’ have been primarily funding their AI-related capital expenditure from the large cash piles built up through the free cash flow generated by their core businesses.
The UK economy grew by a slender 0.1% in the fourth quarter of 2025 according to the latest preliminary figures from the Office for National Statistics (ONS) last week. This was slightly slower than consensus expectations amongst economists. The figures suggest a lacklustre end to the year; month-on-month the economy expanded 0.1% in December, down from a downwardly revised 0.2% in November. For the year as a whole the figures make slightly more encouraging reading for the Treasury, with the UK economy estimated to have grown 1.3%, following the 1.1% growth recorded in 2024. The ONS figures indicate a rather mixed picture in the fourth quarter, with the all-important services sector recording no growth, meaning the overall growth was driven instead by manufacturing. The construction sector, however, suffered a 2.1% fall. Uncertainty around the Autumn Budget may explain some of the lacklustre performance over the closing months of 2025, with Chancellor Rachel Reeves stating that 2026 would be the year the economy starts to benefit from the government’s economic plan. As noted last week, the Bank of England (BoE) voted to hold interest rates at 3.75% at its most recent meeting. But with the Bank trimming its own 2026 growth forecast, and inflationary pressures expected to ease, a rate cut seems increasingly likely in the coming months.
Last week’s slightly delayed non-farm payroll data pointed to greater-than-expected resilience in the US labour market. Non-farm payrolls - which measure the number of workers in the economy excluding farm workers, private household staff, and non-profit workers - increased by 130,000 in January, well above forecasts of +70,000. The gains were driven by the healthcare and construction sectors, while federal government roles were shed. The latest US Labor Department report also showed unemployment nudging lower, falling to 4.3% from 4.4% at the last print, and a peak of 4.5% in November. Last year saw a marked slowdown in the US jobs market as tariff-related uncertainty and a crackdown on immigration gave employers pause for thought. However, the strength of January’s figures may well dampen expectations of a Federal Reserve (Fed) interest rate cut in March. Nevertheless, the latest data remains subject to revision. And with the job gains concentrated in just a few sectors, it is possible that the headline figures appear more robust than the underlying reality.
Stronger-than-expected payrolls were followed by a softer-than-expected inflation print later in the week, suggesting the Fed’s holding pattern through much of 2025 could be vindicated. Headline consumer prices in the US rose by 2.4% year-on-year in January, easing from 2.7% at the last print, and below expectations of 2.5%. Energy prices fell 0.1% after a 2.3% rise in December, while food inflation eased slightly to 2.9% from 3.1% previously. Lower inflation prints could support the argument of those calling for looser monetary policy, although some commentators are still concerned that the full inflationary impact of trade tariffs is yet to be felt, while a lower supply of labour might eventually exert upward pressure on wage growth and services inflation.
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