Highlights
U.S. stock markets delivered mixed results over the week. The S&P 500 briefly climbed above the 7,000-mark, setting a new intraday high before pulling back. Large-cap value stocks outperformed growth shares, while small- and mid-sized companies lagged, ending the week in negative territory. Within the S&P 500, communication services and energy stocks posted the strongest gains, whereas health care stocks were the weakest performers. Following three consecutive rate cuts, the Federal Reserve kept its benchmark interest rate unchanged in the 3.50%–3.75% range, in line with market expectations. The decision was approved by a 10–2 vote, with two policymakers favouring an additional 25-basis-point reduction. In its policy statement, the Fed adopted a more optimistic tone on economic conditions, noting that growth remains solid. Inflation was described as still somewhat elevated, while the labour market showed signs of stabilization. During his press conference, Chair Jerome Powell stated that interest rates did not appear overly restrictive given the strength of the economy and emphasized that future decisions would depend on incoming data. Data released by the Commerce Department—delayed by last year’s government shutdown—showed a rebound in durable goods orders in November, which increased 5.3% following a decline in October. Orders for core capital goods, which exclude defence and aircraft, rose 0.7%, signalling steady business investment. Producer prices rose more than anticipated in December, increasing 0.5% month over month. The increase was driven primarily by higher service prices, which climbed 0.7%. Much of this gain reflected wider margins for wholesalers and retailers. Later in the week, President Donald Trump announced his nomination of former Federal Reserve governor Kevin Warsh to succeed Powell as central bank chair when Powell’s term ends in May, pending Senate confirmation. European equities finished the week slightly higher overall, supported by optimism about corporate earnings that outweighed concerns over trade and geopolitical risks. Performance across major markets was uneven, with gains in Italy and the UK offset by losses in Germany and France. For the week, the pan-European Euro STOXX 600 closed 0.25% higher. The Eurozone economy continued its gradual recovery, growing 1.5% in 2025—faster than the previous year and above European Commission expectations. Economic confidence improved at the start of 2026, with sentiment rising across most sectors. In Asia, Japanese equity markets ended the week lower – with the Nikkei 225 shedding 0.97% – pressured by concerns over heavy spending on artificial intelligence and the strengthening yen, which weighed on exporters’ earnings outlooks. Investors also remained cautious ahead of Japan’s lower house election scheduled for February 8. The yen experienced sharp swings amid speculation over possible government intervention following discussions of unfunded tax cuts. Officials issued warnings against excessive currency movements, helping fuel volatility. Finally, Mainland Chinese stock markets were little changed over the week, with modest movements in major indexes.
Data Highlights
The USD Fed Interest Rate Decision stayed still at 3.75%, in line with expectations. CAD BoC Interest Rate Decision stayed still at 2.25%, in line with expectations. The EUR Unemployment Rate (Dec) was expected to stay still at 6.3%, but actually fell against expectations by 0.1%, to 6.2%. Germany Unemployment Rate (Jan) stayed still at 6.3%, in line with expectations. The Germany Inflation Rate YoY (Jan) was expected to rise 0.2% from 1.8%, to 2%; it actually rose beyond the mark by 0.1%, reaching 2.1%. JPY Unemployment Rate (Dec) stayed stagnant at 2.6%, in line with expectations. AUD Inflation Rate YoY (Dec) rose to 3.8% from 3.4%, the market excited only a rise to 3.6%, beating expectations by 0.2%.
Week Ahead
USD ISM Manufacturing Employment (Jan), ISM Manufacturing PMI (Jan) – Monday | AUD RBA Interest Rate Decision – Tuesday | NZD Unemployment Rate (Q4), EUR Inflation Rate YoY (Jan), EUR CPI (Jan), USD ISM Services PMI (Jan) – Wednesday | GBP BoE Interest Rate Decision, EUR ECB Interest Rate Decision, USD Initial Jobless Claims (Jan), USD Continuing Jobless Claims (Jan) – Thursday | CHF Unemployment Rate (Jan), USD Unemployment Rate (Jan), USD Non-Farm Payrolls (Jan), CAD Unemployment Rate (Jan) – Friday
