Week ahead: Geopolitics, US, India CPI, earnings, US retail sales, China and India trade data

Recent weeks recap:

US Global stocks recap

US stocks rallied across the first week of 2026 as investors largely looked past mounting geopolitical tensions following the US intervention in Venezuela. Major indices, the Dow Jones and the S&P 500, reached record highs. The U.S. dollar is on track to get around 0.7% in the first week of January, marking its strongest weekly performance since mid-November.

There were several sector-specific developments, with energy stocks seeing volatility as Trump opened the door to Venezuelan oil. Meanwhile, defence stocks also jumped on the prospect of higher military spending.

Major US data/themes

On the data front, there was a heavy dose of economic data, including several label market reports, but generally, the surprise was outside. The key release was the US nonfarm payrolls report, which showed 50,000 jobs added in December, although November and October’s readings were revised lower by 76,000.

However, the unemployment rate ticked lower to 4.6%. ISM data showed that economic activity in the US manufacturing sector contracted for the 10th consecutive month; however, service activity expanded for the 10th consecutive month, reaching a 14-month high.

Gold / Silver moves

Gold and Silver started 2026 in positive territory. Gold surged 4.4% last week, while silver jumped 10% despite a stronger U.S. dollar. Precious metals were in demand as geopolitical uncertainty continued with unrest in Iran, continued fighting in Russia and Ukraine, and after the US capture of Venezuela, President Maduro. The weaker-than-forecast headline US non-farm payrolls figure indicates the market continues to expect two rate cuts this year, supporting precious metals. Retail demand for Gold in India remained subdued due to the elevated prices.

Looking ahead, US CPI inflation data, combined with the Supreme Court decision delayed from last week, and ongoing geopolitical tensions, could impact prices this week. The deepening feud between Trump and Powell also raises concerns about Fed independence and the potential lifting of Gold. Gold trades at a record high at the start of the new week.

Oil moves

Last week was a week of two halves. Oil prices fell sharply in the first half of the week after Trump announced a deal had been reached between the US and Venezuela under which Venezuela would turn over 50 million barrels of oil to the US. The prospect of a higher oil supply pulled oil prices 4% lower in just two days.

However, protests in Iran, a key oil-producing country, lifted oil prices sharply at the end of the week. Protests gathered momentum over the weekend, and Trump said Iran wants to negotiate with Washington after he made renewed threats to intervene.

Attention will remain on geopolitical tensions across the coming week. Should the situation in Iran escalate, oil prices could rise further on supply concerns.

Indian markets

Indian markets ended a two-week winning streak with the steepest weekly decline in over three months. The Nifty 50 and the Sensex fell 2.4% to 2.5%, closing at 25,683 and 83,576, respectively. The sell-off accelerated midweek amid steep FII outflows, driven by fears of higher US tariffs and following disappointing Q3 earnings from heavyweights HDFC Bank and Trent.

Foreign Institutional Investors (FIIs) started 2026 on a cautious note, selling equities worth ₹8,017 crore in January so far, extending the selloff seen in 2025.

President Trump signed a bill into law that authorizes Washington to impose tariffs of up to 500% on countries trading with Russia. Any developments here could weigh on sentiment this week.

Key Indian market drivers this week will include broad risk sentiment amid geopolitical risks, the Q3 earnings season in India, and the Q4 US earnings, led by major IT firms, banks, and Reliance Industries. Inflation data in both the US and India could also drive moves.

USD/INR rose 0.26% across last week, settling on Friday at 90.24 and marking the third straight week of gains. Not only did the USD appreciate against its major peers, but the Rupee also declined amid FII outflows and renewed trade tensions with the US.

Pakistan markets

The Pakistan Stock Exchange (PSX) started the new year on a buoyant note, pushing to fresh record highs, boosted by liquidity and optimism of further monetary policy easing as consumer inflation continues to decelerate. The KSE 100 soared past 187,000 in the early part of the week, with profit taking in the second half of the week, settling 3% higher.

Despite substantial gains in 2025, the PSX has failed to attract foreign investors. Data from the State Bank of Pakistan showed net foreign outflows of $393 million from the equity market, offset by $142 million in inflows. However, local investors continue to buy in.

USD/PKR slipped -0.02% last week to settle on Friday at 283.23, marking the third straight weekly decline.

Week ahead (focus US & Asia)

India CPI December (Monday)

Expectations are for India’s CPI inflation to rise in December as favourable base effects ease and as the impact of elevated Gold and Silver prices becomes more apparent. That said, price pressures appear contained, and headline inflation is expected to rise to 1.4% YoY, up from 0.71% previously.

On a monthly basis, CPI is expected to rise 0.2% against 0.3% previously. The data would strengthen the RBI’s case for maintaining its accommodative stance and considering further rate cuts.

December trade data (Thursday) is also expected to reflect a continued, albeit modest improvement in the trade deficit. Lower crude oil prices (WTI fell 18% in 2025). However, this benefit could be offset by higher gold imports.

State Bank of Pakistan rate decision (Monday)

The central bank will announce its first rate decision for the year on Monday. The decision comes after a surprise 50 bps rate cut in December to 10.5%, the lowest level in three years, following the International Monetary Fund loan payout.

The move came after four consecutive meetings in which rates were kept unchanged. Expectations are that the SBP will keep rates unchanged at this meeting, following the IMF’s advice to keep rates tight. A surprise cut by the central bank could send stocks sharply higher.

US Q4 earnings season

According to FactSet, the Q4 earnings season is expected to show slowing growth. S&P 500 earnings are forecast to rise 8.3% year on year, marking a tenth consecutive quarter of expansion, and revenue is expected to grow 7.6% year on year, the strongest growth since 2022. Estimates have been revised higher throughout the quarter amid firmer demand and more positive corporate guidance.

Technology is expected to drive earnings and revenue growth, led by semiconductors and software, and materials are also among the strong performers. In contrast, consumer discretionary is expected to deliver the weakest earnings performers amid declines in automakers and household durables.

Energy revenues are also expected to fall due to lower oil prices. Financials will be a key focus this week, with earnings growth expected to have improved modestly. Upbeat results could boost stocks and the S&P 500.

US CPI (Tuesday)

Data collection issues following the longest government shutdown led to a surprisingly cool November CPI report. Given that the sampling took place in the second half of November, this likely amplified the slowdown in price growth or, in some cases, price decline, which typically occurs around the start of the holiday season and Black Friday sales. Most of these distortions are expected to be unwound in the December report, which could result in the December CPI ticking slightly higher relative to November’s cooler reading.

However, while a rebound is in store, the broad trend is expected to be lower. Recent PMIs have also been showing a tempering in prices paid and received since the middle of the year. Overall expectations are for headline CPI at 2.7% year-on-year and core CPI at 2.7%, up from 2.6%. The data comes as federal policymakers remain divided on the outlook for rates as they assess the risks of sticky inflation and a weakening labour market. Higher-than-forecast data could lift USD/JPY.

Chinese trade balance (Wednesday)

China’s December trade data are expected to cap a particularly strong year, with the trade surplus surpassing $1 trillion by November, supported by resilient exports and softer imports. Expectations are for export growth to slow modestly to 3% year on year in December, down from 5.9% in November, reflecting earlier front-loading.

Meanwhile, imports are expected to rise 1.6% annually, down from 1.9% in November. The December surplus of around $118.9 billion would bring the full-year 2025 surplus to nearly $1.2 trillion. Strong data could help boost sentiment and stock indices such as the Hang Seng. Chinese industrial production, retail sales, and Q4 GDP are due on Thursday and Friday.

US retail sales (Wednesday)

November retail sales data will be released on Wednesday. Retail sales are expected to rise 0.4% MoM, up from 0% in October. This would indicate a significant increase in sales during the holiday period. Using Bank of America’s monthly consumer data, seasonally adjusted holiday spending was strong in October and November.

Still, it slowed around Black Friday and Cyber Monday, showing that consumers were shopping early for deals. Broadly speaking, consumer finances appear healthy, although there are significant gaps between higher- and lower-income households and in spending.

The market will be watching these figures closely to see whether any softening in the labour market shows through in consumer spending. Solid data could boost the USD, pulling EUR/USD lower.

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