Lunar New Year Lull Masks Deeper Jitters Over AI Valuations And Geopolitics

Global investors headed into 17 February 2026 in a strangely bifurcated mood: headlines spoke of “sleepy uber‑bulls” and record‑high world indices, yet beneath the surface, AI valuation worries and geopolitical risk were already tugging at Asian markets.

In New York, Reuters reported that Wall Street stocks “eked out nominal gains” on Tuesday as investors wrestled with the pros and cons of the AI boom. Strong earnings from big‑tech names and relentless inflows into AI‑themed ETFs kept benchmark indices near record territory, but the tone was hesitant rather than euphoric. ANZ analysts told Reuters the market remained uneasy because of looming US–Iran and Ukraine discussions, warning that any setback could quickly re‑inflate the risk premium embedded in oil and other assets.

Against that backdrop, Asian markets were unusually quiet. Most of North and Southeast Asia—including Hong Kong, Singapore, Taiwan and South Korea—was shut for Lunar New Year holidays, leaving Tokyo to bear the burden of price discovery in the region. Japan’s Nikkei slipped about 0.4% in thin trade, reflecting a mix of profit‑taking after a strong run and disappointment over weaker‑than‑expected fourth‑quarter GDP data.

The GDP report showed Japan’s economy expanding at an annualised pace of just 0.4%, far below consensus forecasts for 1.6% growth. Reuters noted that government spending had been a drag, fueling speculation that Prime Minister Sanae Takaichi might unveil additional fiscal measures and possibly a cut to the reduced food sales tax to shore up consumption. NAB analysts suggested in a research note that markets were already pricing such stimulus in, even as they fretted about long‑term fiscal sustainability.​

Currency markets added a twist. The yen strengthened modestly, with the dollar dipping about 0.3% to around 153 yen, as traders reassessed the trajectory of Bank of Japan policy in light of the weaker data. The broader dollar index edged up 0.1% against a basket of currencies, reflecting lingering safe‑haven demand and expectations that the Federal Reserve would remain cautious on rate cuts as long as inflation remained sticky.

Gold, meanwhile, pulled back. With signs of progress in US–Iran talks dimming fears of an immediate escalation in the Middle East, bullion lost some of its safe‑haven shine; Reuters said spot prices fell more than 2%, with silver down nearly 3% on the day. That reversal highlighted how sensitive cross‑asset risk sentiment had become to small shifts in the geopolitical narrative.

For investors focused on Asia and the Gulf, the quiet tape on 17 February masked deeper cross‑currents. Chinese banks were already stepping up lending to Gulf borrowers at a record pace, tightening financial links that would later become central to the region’s risk story. ASEAN fintech and digital‑payment platforms were moving into a more mature phase of embedded finance and cross‑border interoperability, setting up new channels through which shocks could propagate—or be dampened—across economies.

Looking back, 17 February may be remembered less for its modest index moves than for the uneasy coexistence of AI‑driven optimism and geopolitical caution. The “sleepy uber‑bulls” that Reuters described were not complacent so much as suspended—waiting for clearer signals on whether AI’s promise and diplomatic progress could outweigh the accumulating risks in energy, trade and global politics.