10 min readRecent weeks recap:
US Global stocks recap
After reaching a record high, the S&P 500 and the Dow Jones had small declines across the week as stocks failed to maintain the previous week’s upward move. The S&P 500 traded in a narrow range as the earnings season opened and geopolitical tensions lingered. Small caps and value stocks outpaced large caps and growth stocks.
Major US data /themes
Banks kicked off earnings season with a mixed performance. JP Morgan and Citi fell post-earnings, while Morgan Stanley and Goldman Sachs impressed. Taiwan Semiconductor Manufacturing jumped after Q4 earnings, boosting sentiment around AI.
A slew of political and trade-related headlines drew attention last week. These included Trump proposing a 10% interest rate limit on credit card purchases and a 25% tariff on countries doing business with Iran. Separately, the DoJ said it was investigating Fed Chair Powell, raising concerns over Fed independence.
US Core CPI was slightly weaker than expected at 2.6%. U.S. data this week has been strong, with retail sales and jobless claims coming in stronger than expected. The market has reined in expectations of a Fed rate cut, with the probability now at 67% that the Fed will leave rates unchanged in April.
Gold / Silver moves
Gold and Silver both extended their impressive rallies, rising to fresh record highs of 4640 and 93.5 per ounce, respectively, last week, before easing lower. Gold rose 2% across the week, and Silver booked gains of 12%, putting gains this year at 26%. The precious metals were boosted by safe-haven demand amid geopolitical risks in Iran and amid concerns over Fed independence. Both of these concerns eased slightly by the end of the week.
Strong US data also prompted investors to lower expectations for a Fed rate cut. At the start of the new week, geopolitical tensions over Greenland are in focus, keeping safe-haven demand strong. Over the weekend, Trump threatened 10% tariffs on Europe and 25% tariffs on specific European countries if they don’t agree to give the US Greenland. The EU threatened to impose €93 billion in tariffs in retaliation, fueling trade-war worries and lifting precious metals to fresh record highs. US GDP, PCE, and PMI data could also provide more clues on the outlook for US interest rates.
Oil moves
Oil rallied across the first part of last week, rising to an almost 3-month high, before falling nearly 5% on Thursday and ending the week almost flat. The price rallied in the first half of the week on fears of supply disruption in Iran, before falling back after President Trump calmed fears of imminent military strike on OPEC’s fourth largest producer, after he was told that the execution of protestors in Iran had stopped. As a result, the risk premium eased. Geopolitical tensions will remain under the spotlight.
As long as there is no supply disruption in Iran, oil could trade in a familiar range. Attention could return to oversupply concerns after Trump announced that Venezuela would deliver up to 50 million barrels of oil to an already oversupplied market. On the demand side, Chinese and US data will be a key focus. Strong data points to an improved demand outlook.
Indian markets
Indian markets ended the volatile week essentially unchanged. The Nifty 50 ended at 25,694 while the Sensex ended the week at 83,570. Trading was choppy, driven by US tariff threats, mixed Q3 earnings, and ongoing Foreign Institutional Investor (FII) selling. Banks and Metal sectors drove the upside, with Pharma and Realty under pressure.
Foreign Institutional Investors (FIIs) remained firmly defensive last week, with FIIs selling shares worth R21,000 crore.
Meanwhile, domestic investors remained net buyers, supporting the markets by purchasing shares worth R34,000 crore.
India and the EU are now close to finalising a free trade deal, expected to conclude this month. The deal would be the largest trade deal for India amid a stalled US-India trade deal.
India’s inflation edged higher to 1.33% YoY in December, driven by higher food prices, marking the fastest pace in three months. However, this is still below the RBI’s target range, keeping rate cuts on the table.
Key Indian market drivers this week include the ongoing Q3 Indian earnings season and PMIs on Friday. Attention will be firmly on Trump, the US, and geopolitical developments. The US President will be speaking at the World Economic Forum in Davos. US data and earnings are also under the spotlight.
USD/INR rose 0.52% across the week, the fourth straight week of gains, and ended on Friday at 90.70. The Rupee continues to underperform across the board amid continuous outflow of foreign funds from the Indian stock market. The RBI is expected to continue reducing interest rates in the near term.
Pakistan markets
The Pakistan Stock Exchange (PSX) experienced a volatile week. Still, it closed on a positive note, buoyed by a sharp rally on Friday as geopolitical tension eased and large-scale manufacturing data revived investor confidence. The index rose 0.37% last week, adding to 3% gains the week before.
Looking out across this week’s ongoing corporate earnings season could remain supportive, particularly if earnings surprises are positive. The approaching monetary policy meeting and hopes of further rate cuts are also keeping stocks buoyant. However, geopolitical risks remain.
USD/PKR slipped -0.02% last week to settle on Friday at 280.00, marking the third straight weekly decline.
Week ahead (US and Asia)
Geopolitical tensions and the World Economic Forum
Monday is a public holiday in the US. US markets will be closed, and liquidity could be thin, potentially driving outsized moves as markets react to geopolitical tensions. Rising concerns over the US- EU position and Greenland could weigh on sentiment.
The World Economic Forum is taking place in Davos this week, with at least 60 heads of state in attendance, including President Trump. This event isn’t usually market-moving. However, attention will be on Trump’s speech on Wednesday, whose comments on trade policy, tariffs, and global growth could influence market sentiment and the USD.
China GDP (Monday)
China’s GDP grew 5% in 2025 despite Trump’s tariff wars, as booming exports offset slow domestic growth. The data highlights the challenges for Beijing’s policymakers as the economy becomes increasingly reliant on exports to maintain growth amid greater uncertainty over global trade created by Trump’s policies. Other data on Monday highlighted the 2-speed economy, with industrial production beating forecasts while domestic indicators, from property to retail sales, were lower than expected.
US earnings season
Big banks opened earnings season with mixed results. Analysts predicted financial sector earnings of 6.6% in Q4, slightly below the 8.2% average gain forecast across all 11 sectors of the S&P 500. Technology is expected to post the strongest earnings growth, while consumer discretionary is expected to deliver the weakest results. This week’s earnings season moves into full swing with investors’ attention to updates from companies including 3M, Netflix, J&J, Visa, GE, and P&G, among others.
US PCE and Q3 GDP (Thursday)
US PCE data for October and November will be released on Thursday. The government shutdown delayed the Fed’s preferred inflation gauge due to missing data, and it will be approximated using CPI averages. This means that the cooler-than-expected November CPI could disproportionately influence the data. The data comes after December CPI data showed headline inflation also 2.7% and core inflation at 2.6%; however, the underlying components point to upside risk for PCE as food prices rose 0.7% month over month, marking the most significant increase since 22 October, which widens the gap between CPI and PCE.
The latest trends are unlikely to alter the Fed’s wait-and-see stance, as policymakers wait for further evidence of either a weakening jobs market or fading price pressures in the coming months before considering another rate cut. Q3 GP data will also be released. However, this is the final reading and is considered less timely than the PMI data. Weaker data could boost rate-cut optimism and lift stocks such as the Nasdaq.
BoJ rate decision (Friday)
At the last meeting in December, the central bank raised its interest rate by 25 basis points to 0.75%, marking the highest level since 1995. The move was anticipated by markets and was sealed by a unanimous vote, marking a shift from the more divided votes in previous meetings. This also marked the first rate increase since January 2025 and points to a move towards normalisation after decades of ultra-loose monetary policy.
In this meeting, the BoJ is widely expected to leave interest rates unchanged at 0.75%, with no rate change expected until June, depending on wage inflation developments and movements in the yen. Yen weakness is under the spotlight amid expectations of an aggressively expansionary fiscal policy from PM Takachi, who is expected to call a snap election imminently. A hawkish BoJ could pull USD/JPY.
India PMIs (Friday)
India’s business activity data is due on Friday. Expectations are for manufacturing to ease slightly to 55.4, down from 55 in December, a 2-year low on easing new orders. Services activity is also expected to grow at a slower pace of 57.7, down from 58, an 11-month low, as new business growth eased and hiring stalled.
This puts the composite PMI, a good gauge of business activity, at 57.5, down slightly from 57.8 in December. The market will be watching to see if these trends continue. Weak data could weigh on sentiment, pulling stocks such as the Sensex lower.
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