LONDON, Feb 6 (Reuters) - Japan's snap election, a heavy dose of key U.S. data, earnings season, plus a slide in (some) tech shares suggest there won't be much down time for traders in the coming week.
Here's all you need to know about what's coming up in financial markets by Rae Wee in Singapore, Lewis Krauskopf in New York and Karin Strohecker, Tommy Wilkes and Lucy Raitano in London.
1/ A FREE HAND?
Japan heads to the polls on Sunday and Prime Minister Sanae Takaichi wants the nation of over 120
million people to hand her a stronger mandate to deliver on her promises of more spending.
The closely-watched lower house election is shaping up to be one of the most unpredictable in years, though polls point to Takaichi's Liberal Democratic Party gaining a majority.
A strong showing by the LDP would allow Takaichi to expand stimulus, which could heighten concerns about Japan's finances and push up government bond yields further in a selloff that could ripple out overseas.
Investors have also sold the yen. Its recent slide prompted suspected rate checks from Japan and the U.S. to stem its decline - which, if confirmed, would mark a rare, coordinated move.
2/ AI SPLITS INTO WINNERS AND LOSERS
Cisco Systems and Germany's Siemens Energy report earnings on Wednesday.
They've benefited from the AI boom in different ways, but now Barclays says that trade is "seeing extreme dispersion".
In other words, the market is sifting between the winners and losers with more conviction. The sensitivity to which companies are benefiting or suffering from AI disruption is evident in sliding software and data analytics stocks. They have plunged as traders honed in on the existential threat posed by increasingly powerful AI models.
AI enablers, companies contributing to the global AI data centre build-out, meanwhile, have fared better. But with the spectre of a bubble popping and markets near record highs, it would be wise to hold onto your hats.
3/ DELAYED DATA DUMP
A double dose of major U.S. economic reports should give investors a critical view of the economy, after the releases were delayed a little by the recently ended three-day government shutdown.
The January non-farm payrolls report, now due on Wednesday, is expected to show an increase of 70,000 jobs, according to a Reuters poll. The Federal Reserve pointed to signs of stabilisation in the labour market as it held rates steady last month, pausing its easing cycle.
Two days later, the January consumer price index, one of the most closely watched measures for assessing inflation trends, is set to be published.
The data comes as investors gauge the impact of newly nominated Fed chair Kevin Warsh, who could take charge in time for the Fed's June meeting. Markets currently price that meeting as the likely next time for a rate cut.
4/FROM MUNICH, WITH LOVE
The Munich Security Conference gets underway on Thursday. Now in its seventh decade, the annual gathering saw possibly its most consequential - and contentious — meeting in 2025 when a series of U.S. statements set the stage for a tectonic shift in the international order still underway today.
There is no shortage of hot geopolitical issues - from Iran to Ukraine and Greenland - while questions over the future role of NATO are looming large.
But the meeting looks to stretch beyond its usual scope: The European Central Bank is working on opening up access to euro liquidity to more countries - part of efforts to bolster the single currency's international role, sources told Reuters.
The announcement will likely come from ECB chief Christine Lagarde, who will open a roundtable on trade dependencies at the conference.
5/ EUROPEAN BANKS' TIME IN THE SUN OVER?
European banks have been among the best performing stocks in the past 12 months with a more than 60% gain, aided by rising profitability, low loan defaults and a showering of shareholders with cash.
Britain's Barclays and NatWest and Italy's UniCredit report 2025 earnings in coming days, following generally strong numbers already from Deutsche Bank and BNP Paribas. The French lender and Lloyds also lifted their key profitability targets.
But analysts warn the good times cannot last, especially if European economies slow. Spain's BBVA saw a 7% drop in its shares on Thursday after it set aside 19% more in cash for loan losses in the fourth quarter than a year earlier.
As well as financial prospects, investors are looking for signs that bosses have an appetite to spend more of their excess capital on deals - such as Santander's recently announced $12.2 billion acquisition of U.S. lender Webster Financial.
(Graphics by Sumanta Sen. Compiled by Dhara Ranasinghe. Editing by Mark Potter)
