After a risk-off finish last week, global markets opened the week with caution as investors parsed fresh inflation cues and central-bank signals. Equities were mixed, safe-haven assets saw renewed interest, and currencies remained sensitive to shifting policy expectations.
United States: Quiet Session Ahead of Key Data
US markets are closed this Monday for President’s Day creating lighter liquidity and a muted tone across global markets.
Friday’s session had seen mixed but weaker outcomes in the US with the S&P 500 barely up, rising 0.05% the Dow Jones up 0.1% and the Nasdaq slightly higher 0.2% capping a down week for growth-oriented sectors. Small-caps in the US outperformed mega-caps with the Russell 2000 rising 1.2%.
Investors are now positioned ahead of this week’s U.S. inflation and jobs data, which are expected to heavily influence Fed rate-cut expectations. January CPI recently slowed to 2.4% YoY from 2.7%, the lowest since May 2025, while the economy added 130,000 jobs with unemployment at 4.3% down from 4.4%, the lowest since June 2025. This mix that suggests inflation is easing but the labour market remains resilient. Markets are increasingly pricing rate cuts later in 2026, though policymakers are likely to remain cautious until disinflation proves sustained. Rates are still expected to be on hold for Q1.
Europe: STOXX 600 Edges Higher as ECB Backstop Expands
European equities were slightly laggish, with the STOXX 600 down 0.13%, due to weaker financials, earnings and technology and materials lagged, with some caution around tech and AI volatility. The FTSE 100 added roughly 0.4%.
On the policy front, the ECB expanded its euro liquidity backstop facility, allowing a broader range of global central banks access to euro funding lines. The ECB is aiming to strengthen the euro’s role internationally and reinforce financial stability during periods of stress.
In the UK, markets were relatively steady. The pound traded near US$1.36, holding recent gains as investors weighed BoE policy expectations against softer growth data. Sterling strength continues to cap upside for export-heavy FTSE names, even as domestically focused stocks show more resilience.
The euro held near recent highs around US$1.19, keeping pressure on export-heavy sectors but supporting broader financial conditions. Overall, European markets remain stable but sensitive to global rate expectations and currency moves.
Strong Election Headwind Japan and ASX Set for Rebound
Asian markets traded mixed Monday, reflecting a balance between lingering risk aversion and selective strength in local equities as investors awaited major U.S. inflation and jobs data later this week.
There was varied price action: Japan’s Nikkei 225 was saw modest growth, up around 3.6% since the first trading day after the LDP’s landslide win. China’s Shanghai Composite dipped ~1.3% and the CSI 300 slipped similarly as activity still remain subdued amid Lunar New Year flows and lighter liquidity. Hong Kong’s Hang Seng fell about 1.7%, pressured by tech and property sectors.
The ASX looked poised to open higher Monday, with ASX 200 futures up ~0.5% in early trade. Local optimism was driven by strong earnings from banks, miners and cyclicals potentially offsetting broader global caution. Key reporting season headlines remained in focus with several major companies including JB Hi-Fi, BlueScope and Bendigo Bank slated to deliver results this week, offering fresh catalysts for ASX prices.
The Australian dollar traded near 71 US cents, tracking cross-asset flows and risk sentiment rather than firm domestic drivers on the holiday Monday.
What to Watch Next
- Fed Expectations Post-Data: With January CPI and payrolls now in the market, attention turns to how bond yields and Fed speakers respond. If yields push higher again, equity valuations particularly tech could face renewed pressure. Rates are still expected to be on hold ahead of the March Fed meeting.
- Japan’s Policy Direction and Yen Intervention: Following Takaichi’s election win, markets will look for concrete fiscal and structural policy signals. Bond yields and yen price action will be key indicators of investor confidence particularly in response to increased deficits from tax cuts and stimulus spending.
- ASX Reporting Season: Corporate guidance is now more important than headline earnings beats. Margin outlooks and consumer demand commentary will shape sector leadership locally.