– Asian stocks kicked off the week on a strong note, with Hong Kong leading gains amid optimism over AI adoption. Analysts have raised their growth outlook for China, predicting AI could significantly boost corporate earnings and attract substantial investment inflows.

– European markets continued their steady climb, extending recent gains. Meanwhile, Japan’s Nikkei remained subdued as a stronger yen offset positive economic data showing better-than-expected GDP growth of 2.8%.

– In the U.S., softer retail sales data led traders to increase bets on two Federal Reserve rate cuts this year, with the first move expected by June.

– On the geopolitical front, attention is on potential Russia-Ukraine peace talks in Saudi Arabia, though details remain unclear. Additionally, France is set to host an emergency European summit following reports that the U.S. and Russia will take the lead in negotiations.

Coffee Prices Surge: Impact of Climate Crisis and Import Issues

 – The Consumer Price Index report from Wednesday showed that prices for roasted coffee rose 2.5% in January compared to the previous year, while instant coffee jumped 7.1%. Andrea Illy, chairman of illy caffè, stated that while they haven’t raised prices yet, they may have to in the medium term due to the “perfect price storm” in the coffee market. This surge in prices is linked to climate issues in major coffee-producing countries, like Brazil and Vietnam, where extreme weather and forest fires have impacted harvests. The U.S., the second-largest coffee importer after the EU, relies heavily on Brazil, Colombia, and Vietnam for supply. Illy noted that the price surge’s duration remains uncertain.

European Bonds Slip as Defense Stocks Rally, Raising Debt Concerns Amid Shifting Security Landscape

• European bonds declined and defense shares surged as investors braced for increased military spending in response to new US pressure on European nations for enhanced security guarantees for Ukraine.
• German, French, and Italian bonds slipped, with 10-year bund yields hitting their highest level in over two weeks.
• Meanwhile, European defense stocks reached record highs—German firm Rheinmetall AG jumped 11%—reflecting expectations that European countries will need to ramp up defense budgets, potentially costing an extra $3.1 trillion over the next decade.
• Some EU leaders are even considering joint bond issuances to fund this expansion.
• On the positive side, European stocks gained momentum from a favorable meeting between China’s President Xi Jinping and key business figures, hinting at an easing crackdown on the private sector.
• In currency markets, the yen strengthened amid robust Japanese economic growth and expectations of further BOJ hikes, while the dollar remained steady after recent losses, and the euro weakened against the greenback.