Global Markets Weekly Update

U.S.

The S&P 500 Index advanced, topping 7,000 but ultimately retreating from its new intraday high. Large-cap value stocks gained and outperformed their growth counterparts. Small- and mid-cap stocks lagged and finished the week lower. Within the S&P 500, the communication services and energy sectors led the way. Health care stocks pulled back the most.

Consumer confidence slides; weekly jobless claims little changed 

After ticking up modestly in December, the Conference Board’s gauge of consumer confidence in January hit its lowest level since May 2014, tumbling more than expected to 84.5 from the previous month’s reading of 94.2. The survey results showed that U.S. consumers’ views on the economy and the labor market weakened.

Initial U.S. jobless claims came in at 209,000 for the week ended January 24—above the consensus estimate but a slight step down from the 210,000 applications for unemployment benefits received in the previous week. Continuing claims, meanwhile, fell to about 1.83 million in the week ended January 17, the lowest level since September 2024.

Durable goods orders rebound; producer prices rise 

A Commerce Department report that was delayed by the U.S. government shutdown late last year showed that orders for durable goods increased by 5.3% sequentially in November, after declining by 2.1% in October. The value of core capital goods orders, a measure that excludes big-ticket items such as aircraft and military hardware, rose 0.7% over the same period.

Producer prices increased 0.5% month over month in December, exceeding expectations for a 0.2% uptick. Service prices, which rose 0.7% during the period, drove this upside. Roughly two-thirds of the increase in service prices stemmed from a 1.7% jump in margins received by wholesalers and retailers.

Fed holds rates steady; former Fed governor Warsh nominated to chair central bank

After three consecutive rate cuts, the Federal Reserve left the benchmark fed funds rate unchanged in the 3.50% to 3.75% range, in line with market expectations. A 10–2 vote underpinned the decision, with the two dissenting policymakers favoring a 25-basis-point reduction. (One basis point is 0.01 percentage point.)

The central bank’s accompanying policy statement sounded a more positive note on the economy, commenting that activity “has been expanding at a solid pace.” It also described inflation as “somewhat elevated” and noted that while job growth has remained low, the unemployment rate has shown signs of stabilizing. In the subsequent press conference, Fed Chair Jerome Powell asserted that, with the economy’s strength, rates did not appear to be “significantly restrictive.” Powell indicated that the Fed would make its interest rate decisions on a meeting-by-meeting basis.

On Friday, President Donald Trump announced that he had nominated Kevin Warsh, a former Fed governor, to head the U.S. central bank. If confirmed by the Senate, Warsh would succeed Chair Powell when the latter’s term expires in May.

Europe

In local currency terms, the pan-European STOXX Europe 600 Index ended 0.44% higher, as earnings optimism overcame worries about trade and geopolitics. Major stock indexes were mixed. Germany’s DAX fell 1.45%, while France’s CAC 40 Index slipped 0.20%. Italy’s FTSE MIB rose 1.55%, and the UK’s FTSE 100 Index added 0.79%.

Eurozone economy continues modest recovery, confidence strengthens

The eurozone economy grew 1.5% in 2025, compared with 0.9% in 2024, and surpassed the European Commission’s (EC) forecast for 1.3%. Stronger investment, household consumption, and exports boosted output, overcoming significant economic and political uncertainty. In the fourth quarter, gross domestic product (GDP) expanded 0.3% sequentially—slightly better than expected and matching the prior period’s pace of growth. Accelerating growth in Germany, Spain, and Italy helped to offset slow growth in France.

The mood among consumers and businesses was more upbeat at the start of 2026, with the EC’s sentiment indicator rising to 98.2 in January, which is just below the long-term average. Confidence improved across all sectors, apart from construction, where it held steady. Sentiment in France strengthened markedly, likely due to subsiding political tension after the 2026 budget was adopted.

Germany trims growth forecast

The UK labor market weakened in the three months through November, and pay growth slowed further. The International Labour Office unemployment rate stayed at a five-year high of 5.1%, with retail and hospitality bearing the brunt of job cuts, official numbers showed. Annual wage growth excluding bonuses declined to 4.5% from 4.6% in the prior period. Year-over-year growth in private-sector pay, a measure monitored by the Bank of England (BoE), slowed to 3.6%—the lowest level since November 2020.

Retail sales volumes rose 0.4% sequentially in December, after falling in the previous two months. The increase came against a backdrop of an unexpected acceleration of inflation to 3.4% from 3.2% in November due to higher airfare and tobacco costs. However, the BoE has called for annual consumer price inflation to recede to its 2% target in April or May.

Sweden central bank holds rates steady

The Riksbank kept its policy interest rate unchanged at 1.75%, as widely expected, and reiterated that policy would stay at this level “for some time to come”—through at least 2026. 

UK mortgage approvals fall

British lenders approved 61,013 loans for house purchases in December, down from 64,072 in November and the smallest number in 18 months, Bank of England data showed. Economists polled by Reuters had expected a small rise.

Japan

Japan’s stock markets ended the week lower, with the Nikkei 225 Index declining 0.97% and the broader TOPIX down 1.75%. The technology segment was weighed down by concerns about the sustainability of massive artificial intelligence spending, while yen strength dampened the earnings prospects of Japan’s export-oriented companies. Investors looked ahead to Japan’s lower house election on February 8, with several major media outlets converging around the message that Prime Minister Sanae Takaichi’s Liberal Democratic Party could be on track to win a majority of seats without a coalition partner.

The yen has fluctuated sharply amid political uncertainty on the heels of Takaichi’s snap election announcement and talk of unfunded tax cuts. Speculation about government intervention in the foreign exchange markets led the yen to surge against the greenback. Although no direct intervention was confirmed, there was verbal intervention by Japanese authorities, with Takaichi stating that the government would take all necessary measures to address speculative and highly abnormal movements. Top currency diplomat Atsushi Mimura said that Japan’s government would maintain close coordination with the U.S. on foreign exchange.

The yield on the 10-year Japanese government bond fell to 2.23% from 2.26% at the end of the previous week. A weaker-than-expected consumer inflation print prompted some investors to temper their expectations about when the Bank of Japan, which raised short-term interest rates in the latter part of December, might raise rates again. The Tokyo-area core consumer price index rose 2.0% year over year in January, short of the consensus forecast of 2.2% and slowing from 2.3% in December. The slowdown was attributed primarily to easing price pressure on food and the effects of gasoline subsidies.

China

Mainland Chinese stock markets ended the week little changed. The CSI 300 Index, the main onshore benchmark, edged up 0.08%, according to FactSet. The Shanghai Composite Index shed 0.44%. In Hong Kong, the benchmark Hang Seng Index gained 2.38%.

Thirteen out of 20 Chinese provinces that have publicly released their 2026 economic targets set out lower GDP growth goals from last year, Bloomberg reported, citing local government work reports. Most of the provinces reduced their GDP targets by half a percentage point or shifted to a range with a lower end, Bloomberg said. Provinces that made the change include the economically vital coastal provinces Guangdong and Zhejiang, home of technology bellwether Alibaba and other leading companies.

Other key markets

Hungary

Policymakers keep rates unchanged as inflation risks appear to be “balanced”

On Tuesday, the National Bank of Hungary (NBH) held its regularly scheduled policy meeting. As was generally expected, central bank officials kept the base rate at 6.50%. The NBH also held the overnight collateralized lending rate—the upper limit of an interest rate “corridor” for the base rate—at 7.50%. In addition, the central bank kept the overnight deposit rate, which is the lower limit of that corridor, at 5.50%.

According to the post-meeting statement, policymakers continued to perceive a “duality” in the Hungarian economy. Retail sales have continued growing, but industrial and construction production decreased in November. The unemployment rate remains low, but labor market tightness “has eased gradually in recent quarters.” In addition, policymakers expect growth to pick up due in part to rising real wages and government measures to increase consumers’ income. However, they believe that “higher budgetary expenditure” will make it harder to reduce public debt.

Regarding inflation, policymakers noted that headline inflation fell to 3.3% and core inflation declined to 3.8% in December. They attribute the disinflationary trend to lower fuel and processed food prices, and they believe that inflation may briefly fall below their 3.0% inflation target in early 2026 before rising toward the upper limit of their tolerance band. At present, they consider the risks to inflation to be “balanced,” though they acknowledge that some uncertainty around how “repricings” at the start of the year could affect the inflation outlook. Ultimately, central bank officials decided to leave interest rates at current levels, deeming that maintaining tight monetary conditions is “warranted” in the current environment.

Brazil

Selic rate unchanged, but improving inflation could allow “interest rate calibration” to begin at next policy meeting

On Thursday, Türkiye's central bank held its scheduled monetary policy meeting, and policymakers decided to reduce the one-week repo auction rate by 100 basis points (one percentage point), from 38.0% to 37.0%. At the same time, policymakers lowered the overnight lending rate from 41.0% to 40.0% and the overnight borrowing rate from 36.5% to 35.5%. While a rate reduction was generally expected, some investors were disappointed that the central bank did not make larger rate cuts.

According to the very short post-meeting statement, policymakers noted that the “underlying trend of inflation declined in December.” Indeed, the government recently reported that the annual rate of inflation in December was 30.89% versus 31.07% in November. As for January, policymakers believe that consumer inflation “has firmed” due to increased food prices, though they consider the rise in inflation to be “limited.”

While they acknowledged “signs of improvement,” they believe that “inflation expectations and pricing behavior continue to pose risks to the disinflation process.” With a commitment to maintain the “tight monetary stance…until price stability is achieved,” policymakers opted to proceed with a relatively small rate cut.