Edward Hayden-Briffett
Research Analyst, The Officials
UK Unemployment Above Expectations, Chinese Housing Market, Data Today
UK unemployment up, China housing slumps, Europe output weak; yields fall, BoE cut bets rise, data today.
UK unemployment ticks up to 5.2%, above expectations and the highest since February 2021.
Earnings growth slowed too, to 4.2% y/y in Q4, though public sector gains are still vastly outpacing private sector. Markets are now boosting BoE rate cut expectations to 2 cuts this year. The FTSE 100 climbed 0.4%, cable weakened significantly, with GBP down 50 pips against USD and gilt yields fell – by between 3 and 4 bps down the curve.
Japanese yields showed some relief, with the long end down particularly hard following a strong 5-year JGB auction. The 10 year yield has dropped nearly 8 bps and the 40 year by 8.4 bps.
The Chinese housing market isn’t stabilising – it's collapsing and the government has no cards left to play. New home prices fell -0.4% m/m in January – that’s 43 declines in the last 46 months. Of the 70 cities surveyed, 62 saw prices fall (worse than December). Demand hasn’t come back, confidence hasn’t reset, and the inventory glut is still dragging everything down.
S&P expects primary sales to drop another 10–14% this year, while the resale market in top-tier cities continues to slide (down 7.6% y/y). Too much supply, too much debt, and too little willingness to catch the falling knife. Meanwhile, fixed asset investment in real estate has been contracting for 4 years and shows no signs of coming back to normality. China’s former growth engine sector has become a multi-year deleveraging story, leading to a long grind, not a V-shaped rebound.
Europe’s on a long grind too, as the Eurozone industrial complex stumbled past the 2025 finish line. December output was down 1.4% m/m in the euro area as capital goods contracted, signalling cooling investment momentum. On a y/y basis production remained moderately up at +1.2% y/y and averaged +1.5% across 2025. Germany and Spain posted sharp monthly declines. Europe now enters 2026 with a fragile industrial backdrop and little sign of a meaningful demand rebound.
Data today: ZEW Economic Sentiment, Canada inflation, New York Empire State Manufacturing, ADP Employment
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