Equity markets ended Friday on a positive note, with risk appetite improving as the week closed. The S&P 500 advanced 0.7%, while smaller-cap stocks continued to outperform, driving the Russell 2000 sharply higher.
US equities were buoyed by renewed optimism following the December jobs report, which, despite softer headline payroll growth, showed no signs of acute labour-market stress.
Outside equities, shorter-dated government bonds sold off as investors trimmed expectations for imminent Federal Reserve easing, while longer-dated bonds rallied. Commodities also moved higher, with oil supported by geopolitical concerns and gold edging to fresh highs.
Weekly market highlights
Here’s how global markets performed during the first full week of 2026:
- S&P 500 gained 1.8%.
- Russell 2000 surged 5.8%, signalling a rotation into smaller-cap shares.
- European equity markets outperformed, hitting successive record highs despite geopolitical tensions.
- Wall Street was more restrained, weighed down by weakness in the technology sector.
- The US dollar strengthened, while volatility remains a key risk ahead of earnings season and US inflation data.
Latest market and economic update
Here’s a snapshot of key developments across global markets:
Asian markets
Asian equities rose modestly on Monday, led by technology shares as AI optimism persisted. Gains were limited by geopolitical and macroeconomic risks, while Japan’s market holiday kept volumes light.
South Korea outperformed, Hong Kong and China advanced slightly, Australia and Singapore edged higher, and Indian futures declined.
US futures
US equity futures fell on Sunday, with S&P 500 down 0.4%, Nasdaq 100 off 0.7%, and Dow futures down 0.4%, amid uncertainty over the Federal Reserve’s independence after Chair Jerome Powell flagged a DOJ probe.
Markets also weighed Iran tensions, upcoming Q4 bank earnings, and December CPI data, which could guide future Fed rate decisions.
European equities
European shares ended at record highs on Friday, led by a 10% surge in Glencore and strong tech gains from ASML, Infineon, and STMicroelectronics, putting the STOXX 600 on its longest weekly winning streak since May.
Mining and technology equities outperformed, while weaker retailers weighed on the market amid mixed earnings and geopolitical concerns.
Currency and commodities
The US dollar eased to around $1.1655 against the euro, and the dollar index slipped to 98.9, ending a four-day rally after a criminal investigation into Fed Chair Jerome Powell raised concerns over central bank independence. Safe-haven demand from Iran unrest supported the dollar, but Powell’s defence of Fed autonomy and expectations of further rate cuts capped gains.
Oil prices held steady in Asian trade as investors weighed supply risks from escalating unrest in Iran against potential additional barrels from Venezuela. Brent and WTI edged up slightly after last week’s gains. Fears of disruptions through the Strait of Hormuz offset optimism over possible US sanctions relief and resumed Venezuelan oil exports.
Political and geopolitical developments
Key political and geopolitical events shaping markets:
- Federal Reserve Chair Jerome Powell said a Justice Department probe into the Fed’s renovation project was politically motivated and threatened central bank independence. He defended his record, while President Trump denied knowledge of the probe and is expected to appoint a successor as Powell’s term ends in May.
- Donald Trump reiterated plans for the US to acquire Greenland, citing strategic concerns over Russia and China. He urged Greenland to propose a deal and has not ruled out military action, despite strong opposition from Denmark and European leaders.
- Trump is expected to be briefed on Tuesday on options to respond to protests in Iran, including military strikes, cyber operations, tougher sanctions, and boosting online opposition, according to the Wall Street Journal.
Equities on the move
The following companies saw notable share price movements driven by analyst ratings, earnings, or strategic developments:
- Meta Platforms signed 20-year deals to buy power from Vistra nuclear plants and support SMR development with Oklo and TerraPower, securing up to 6.6 GW of electricity by 2035.
- DeepSeek, a Chinese AI startup, plans to launch its V4 model in mid-February, aiming to surpass OpenAI and Anthropic with advanced coding capabilities.
- TSMC reported a 20.45% rise in Q4 revenue to T$1.046 trillion ($33.11 billion), beating forecasts on strong AI-related demand.
- Johnson & Johnson agreed to lower US drug prices in exchange for tariff exemptions, launching TrumpRx.gov and investing $55 billion in new facilities.
- GTT secured an LNG carrier order from Samsung Heavy Industries, adding to a strong backlog until mid-2028.
Analyst actions and ratings:
- CrowdStrike upgraded to Buy by Berenberg, citing strong growth potential and recent share pullback.
- Ferrari maintained a buy rating by UBS, with the price target lowered to $555 amid improving sentiment.
- Adobe downgraded to Market Perform by BMO, citing competitive pressures and a lack of near-term catalysts.
- FedEx upgraded to Buy by Bank of America, highlighting cost reductions and freight recovery.
- Chipotle was initiated at Outperform by Telsey Advisory Group, supported by menu innovation and expansion plans.
- Société Générale was downgraded to Reduce by Kepler Cheuvreux, following completed catalysts and pending privatisation.
- On Holding downgraded to Hold by Williams Trading, citing slowing wholesale growth and margin pressures.
- Doximity initiated at Outperform by RBC Capital Markets, with Goldman Sachs upgrading to Neutral.
- Generac upgraded to Outperform by Baird, citing attractive valuation and recovery prospects.
Upcoming data and events
Key events to watch this week:
- US December CPI data – Tuesday
- JPMorgan Chase and Bank of New York earnings – Tuesday
- Germany’s 2025 GDP figures – Thursday
- Luxury sector earnings (Richemont) – Thursday
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