The Monday Report – 16 February 2026

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This story features CONTACT ENERGY LIMITED, and other companies.
For more info SHARE ANALYSIS: CEN

US markets were generally flat on Friday ahead of the long weekend with US financial markets closed on Monday 16th (today) for President's Day.

After a positive week, and after a steep sell off on Friday, ASX200 futures are pointing to a positive start as earnings season rolls on.

Good Morning,

The Australian market fell -126 points or -1.4% on Friday to 8,918 with nine sectors losing ground.

The ASX200 finished the week 208 points or 2.40% higher with extremely volatile trading across sectors. 

The best performing were Utilities up 9.38%, Financials up 5.41%, Materials up 5.10% and Real Estate up 2.30%.

The Healthcare sector fell -12.61%, IT went down -5.37%, Consumer Discretionary was off -0.97% and Telcos went down -0.65%.

These sectors were the only four to finish the week in the red.

The February results season is generating some solid results, even though volatility remains well above historical patterns, with all of a2 Milk ((A2M)), Ansell ((ANN)), GPT Group ((GPT)) and BlueScope Steel ((BSL)) at least matching consensus forecasts.

What happened overnight, NAB Markets Today extract

In the US, headline January CPI grew 0.2% m/m, one-tenth below expectations. The core print, however, was in line with consensus at 0.3% m/m and 2.5% y/y, and was the lowest January print since 2020. That is a notable comparison given the prevalence of 1 January price increases, seen this year in subscription services and tobacco in particular. Shelter inflation is slowing too.

While the broad market reaction was consistent with the benign nature of the overall numbers, some of the underlying signals are not entirely comforting. Almost half the CPI basket is now running at 3% y/y or faster.

A New York Fed paper published on Friday found that 95% of tariffs are being borne domestically and the Congressional Budget Office had noted a few days earlier that tariffs were inducing substantial margin compression for US investors.

Are those margin compressions settled and a one-off adjustment from tariffs has now been seen, or will squeezed margins begin to leak into final prices? Time will tell.

For the Fed-watched core PCE deflator, analysts are still somewhat divided, with estimates currently landing around 2.6–2.9% y/y for the January print, which is out next month. (December core PCE, due this Friday, is picked to be unchanged from November at 2.8% y/y.)

Chicago Fed President Goolsbee said in an interview there were “good and less good things” in the CPI, noting while goods inflation had improved, “we’re still seeing pretty high services inflation, which tends to be persistent”. He added interest rates “can still keep going down a fair bit more” – if inflation were at 2%”.

There was comparatively little other news or data. Speaking at a security conference in Munich over the weekend, ECB President Lagarde said Europe must build resilience even when it is “temporarily more expensive” to do so.

She alluded to the increasing likelihood of financial market stress amid assertive industrial policies and rising geopolitical tensions, and announced that EUR repo lines would become a permanent part of the ECB toolkit from 3Q2026.

The US Supreme Court has scheduled 20, 24 and 25 February as days on which opinions are expected to be released. These dates are being closely watched for a potential ruling on President Trump’s use of national emergency powers to impose tariffs.

However, the Court does not pre-schedule individual opinions, so any tariff-related decision could be issued on any of these days, or on none of them.

In England, BoE Chief Economist Huw Pill put himself firmly on the narrow majority of BoE monetary policy committee members that voted for a hold on 5 February. He said rates are “a little bit too low” but “holding at this level” was appropriate.

The market prices -18bbp of a cut in March and nearly -49bp by year-end. This week UK CPI is expected to show some sharp declines from administered prices, although if core CPI does slow to 3.0% as expected, that will be the lowest since late 2021.

In rates markets, bond yields globally fell on Friday night, largely around the US CPI release. The 2Y yield is at 3.4%, the lowest since the early stages of the tightening cycle in 2022. Around 22bp of a Fed rate cut is priced for June, only marginally higher than the prior session, with the strong payrolls print from Wednesday night still tempering rate-cut expectations somewhat.

The 15bp fall in 10Y UST yields last week was the largest among developed economy bond markets and has taken the 10Y ACGB-UST yield spread above 65bp, a level not sustained in over a decade.

However, with Australia pricing another 35bp of hikes in this year (on top of the one delivered) whilst the US is priced for more than -60bp of cuts this year, the long yield divergence is not yet looking unreasonable.

The JPY only moved modestly on Friday but is up nearly 3% for the week, while the AUD is up 0.9% over the same period.

Equities did show a little enthusiasm for the soft CPI but ultimately closed little changed in the US. The S&P500’s 0.05% gain came from decent gains in utilities outweighing another weak session for IT and communication stocks. The equal-weight S&P500 and the Russell2000 were both up 1.2% on the day.

For the week, European and UK bourses were standouts, with gains of around 0.5–0.75% across the CAC40, DAX and FTSE100. The S&P500 was down -1.4% on the week, the equal-weight off by -0.5%.

Equity investors may soon have another angle to trade the ‘AI-disrupted’ theme: Anthropic, the developer of software-developing model Claude, is mooting an IPO.

In credit, the US IG primary market had a very quiet Friday, as the narrow window between the CPI report and today’s Presidents’ Day holiday proved unappealing to potential borrowers. 

Japan 2026 Outlook, Franklin Templeton Investments, Hsung Khoo

Templeton Global Investments is constructive on Japanese equities, as the country goes through its most significant economic and corporate transformation in a generation. The normalization of the Japanese economy after three decades of deflation is creating tailwinds for earnings growth.

The pro-growth policies of the Takaichi administration should also provide a boost for Japan’s long-term growth potential. The broadening out of corporate reforms is transforming the metabolism of corporate Japan and driving what we view as a structural return-on-equity (ROE) improvement story.

These regime changes underpin multiyear earnings-per-share (EPS) growth that can drive returns for Japanese equities. This is likely to be accompanied by further upside from price-earnings (P/E) multiple re-rating, as global investors embrace the revitalization of Japan’s economy and businesses.

The return of sustainable inflation has set Japan’s economy on a normalization path after three decades of deflation and stagnation. The ability to raise prices provides a long-absent tailwind for earnings growth.  We believe this is restoring animal spirits in corporate Japan.

Companies are now pursuing growth investments and strategic initiatives to become more competitive after years of under-investing. They are also raising wages, and trickle-down effects for households are taking shape. The flywheel for a sustained normalization of the Japanese economy is in motion, and we believe this is supporting a multiyear earnings growth story for corporate Japan.

Meanwhile, the pro-growth policies of the Takaichi administration, which include targeted strategic investments, are likely to accelerate the ongoing normalization of the Japanese economy in our view, as well as raise the long-term growth potential for Japan.

Policy support through public-private partnerships will take place in 17 strategic areas, such as semiconductors, artificial intelligence (AI), energy and defense. 

Corporate reforms are broadening out, and we think they are revitalizing corporate Japan. In the past, corporations showed a lack of attention to shareholder interests in Japan, but this is changing fast. The corporate reform movement has accelerated in recent years, and there is a growing focus on shareholder interests.

Corporate Japan is increasingly prioritizing the improvement of ROE, a measure on which many Japanese firms lagged their peers in the United States and Europe.

While the initial focus was on improving capital efficiency by increasing dividend payouts and pursuing share buybacks, the focus is now broadening out to other forms of capital allocation discipline, such as selling non-core, underperforming businesses and redeploying the capital toward the core businesses.

Corporate Japan is also now pursuing profit margin improvement through business portfolio restructuring and strategic initiatives to improve operational effectiveness. This goes beyond productivity improvement initiatives and includes a greater focus on product portfolio as well as pricing optimization.

The bottom line is that corporate reforms are driving a structural ROE improvement story in Japan.

Japanese equities have traded at a significant discount to global peers for the better part of the past three decades. The relatively flat long-term growth outlook and sub-par ROE due to a lack of focus on shareholder interests contributed to causing this long-term discount.

The regime changes of economic normalization and corporate reforms in Japan are challenging this long- held understanding of the valuations of Japanese equities. As Japan’s nominal GDP growth and corporate ROE trend toward the levels of its global peers, a sustainable P/E multiple re-rating for Japanese equities is warranted, in our view.  

In 2026, EPS growth is likely to be the key driver for Japanese equity market returns. We see a favorable set-up for further upside from valuation multiple re-rating as global investors gain confidence in the regime changes in Japan.

From our research, global investors remain underweight in their exposure to Japanese equities.

At TGI, our fundamental research is leading us to favor domestic-facing businesses. We believe this group of companies may be better positioned to benefit from Japan’s regime shifts.

Banks and industrial companies are among the standouts. Japanese banks are likely beneficiaries of stronger loan demand and capital market activities, as the Japanese economy normalizes after 30 years of stagnation. The multiyear investment cycle among businesses also bodes well for industrial companies. 

We take a highly selective approach to foreign income earners, given the global economic and geopolitical uncertainties. We prefer companies with exposure to structurally growing end markets, such as semiconductors, electricity infrastructure and aerospace.

Across both domestic and foreign-facing companies, progress in corporate reforms and commitment to shareholder interests will be key considerations. 

Corporate news in Australia

-Contact Energy ((CEN)) is looking to raise NZ$525m to fund its renewable energy program

-Santana Minerals ((SMI)) is set to launch a $120m equity raising 

-Affinity Equity Partners is upsizing the debt facilities for Luma Imaging by $150m

-Macquarie Asset Management ((MQG)) is reported as having completed the exclusive due diligence period on Qube Holdings ((QUB)) 

-Botanix Pharmaceuticals ((BOT)) launched a capital raising for $30m at a -45.5% discount to the last traded share price

-Trek Metals ((TKM)) launched a $12m placement at 15c per share, a discount of -9.1% to the last close

-The US Administration is pushing AVZ Minerals to sell its Congo lithium stake to a US firm

-A contract worker has died post an incident at Rio Tinto’s ((RIO))

On the calendar today:

-A2 MILK COMPANY LIMITED ((A2M)) 1H26 Earnings

-AUSTRALIAN CLINICAL LABS LIMITED ((ACL)) 1H26 Earnings

-AUDINATE GROUP LIMITED ((AD8)) H1 earnings report

-ANSELL LIMITED ((ANN)) 1H26 Earnings

-AURIZON HOLDINGS LIMITED ((AZJ)) 1H26 Earnings

-BENDIGO & ADELAIDE BANK LIMITED ((BEN)) 1H26 Earnings

-BLUESCOPE STEEL LIMITED ((BSL)) 1H26 Earnings

-CONTACT ENERGY LIMITED ((CEN)) 1H26 Earnings

-FREIGHTWAYS GROUP LIMITED ((FRW)) 1H26 Earnings

-GPT GROUP ((GPT)) FY25 Earnings

-JB HI-FI LIMITED ((JBH)) 1H26 Earnings

-NEW HOPE CORPORATION LIMITED ((NHC)) Jan Qtr Activity

-OOH!MEDIA LIMITED ((OML)) FY25 Earnings

-STOCKLAND ((SGP)) 1H26 Earnings

-TREASURY WINE ESTATES LIMITED ((TWE)) 1H26 Earnings

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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