Ahead Today
G3: Eurozone industrial production
Asia: Thailand GDP, India Trade, Philippines Remittances
Market Highlights
US 10-year Treasury yields fell sharply by more than 15bps to 4.04%, as January US CPI inflation came in lower than expected, but with a more mixed impact on the Dollar given the hit to risk sentiment. Markets are increasingly focused on the disruptive impact of GenAI across a range of sectors, and a possible release of DeepSeek’s v4 model later this week may also bring about more volatility. Nonetheless, we note that this time is somewhat different from DeepSeek’s first release with a clear inflection globally on the power of agentic AI since Dec 2025.
In particular, US headline CPI rose 0.17% in January (vs 0.3% for December), and well below the consensus expectation of 0.3%, with year-on-year growth moderating to 2.4% from 2.7% previously. Core inflation was somewhat sticker at 0.3% mom, but this was also smaller than typically seen in January given evidence of residual seasonality. Within core goods, there were some items such as recreational goods in video and autos, sporting goods, toys and consumer electronics which saw strong price gains, but this was more than offset by sharp declines in other prices such as used cars.
Despite lower US yields from the CPI numbers, risk sentiment generally took some hit as concerns around the potential disruptive impact of GenAI rose, coupled with concerns around the size of capex and investment needs of the US tech giants.
What may compound the volatility further this week is a potential announcement and release by DeepSeek on its V4 model, which is rumoured to have strong coding capabilities matching up to or even better than global frontier models such as Claude and OpenAI at code generation tasks, while again with tokens at a fraction of the price.
Nonetheless, our overall sense is that the AI moment for markets has shifted somewhat from what we saw in February 2025 during the 1st release of Deepseek, when the focus was very much on whether China’s AI models can truly disrupt the Western-led hyperscaler business model.
The dominant theme in 2026 is very much the clear acceleration in the capabilities of Agentic AI, and the Nov 2025 release of Claude’s Opus 4.5 has been a key and significant event for not just software developers but also the likes of researchers including those in the economics and social sciences fields. For instance, more than 4.5% of Github Commits are now written by Claude Code, up from just 1.5% towards the end of last year. In addition, many developers in key software companies are reporting they are no longer writing code per se, but have shifted their focus towards review and as such also higher value-added activities such as product development. Meanwhile, academic economists and social scientists alike have been creating and replicating academic research in hours in what would have taken them at least months to do in years past.
If what we are seeing holds, we are likely just barely scratching the surface of what may well be the inflection of an exponential trend of the Agentic AI Economy. The release of DeepSeek v4 could potentially raise the discourse further on this front, in the shift from automation to augmentation, and from digitalization towards disruption.