Monday, January 7, 2026 – Today’s financial markets have been moving with mixed sentiment as investors weighed a range of macroeconomic indicators, central bank rhetoric, and geopolitical developments. From my perspective, the key story continues to revolve around shifting expectations for central bank policy globally — especially from the U.S. Federal Reserve, the European Central Bank, and the People’s Bank of China.
This morning, equity markets in the U.S. opened slightly lower after last week’s rally, which was largely driven by cooling labor market data. The December Non-Farm Payroll report released last Friday came in below expectations, showing signs of softness in the labor market with just 115,000 jobs added. Average hourly earnings growth also decelerated to 3.8% year-over-year, suggesting disinflationary pressures are building. For investors like myself closely watching Fed policy, this reinforces the narrative that the Fed could begin cutting rates as early as March 2026. However, a few Fed officials pushed back over the weekend, warning that inflation is not yet fully defeated.
Investors are now pricing in a nearly 65% probability of a March cut, according to the CME FedWatch tool updated today. The bond market reacted accordingly, with the U.S. 10-year Treasury yield pulling back to around 3.79% in morning trading. This marks a significant retreat from the 4.2% levels we saw in late Q3 of 2025. This re-pricing is critical — it changes the discount rate calculus for risk assets, and I believe it’s one of the key reasons why tech and growth stocks continue to outperform.
In Europe, the latest CPI numbers from Germany and Eurozone-wide retail sales data released today were weaker than expected. Eurozone inflation cooled to 2.2% annually in December, moving closer to the ECB’s 2% target. This supports the recent dovish tilt from Christine Lagarde, who acknowledged that while rate cuts are premature now, discussions could begin by the middle of the year. European equities responded positively, with the DAX and CAC40 gaining modest ground. Meanwhile, the euro softened slightly against the dollar, now trading near 1.0920.
In Asia, China’s market remains under pressure despite Beijing’s ongoing stimulus efforts. The Caixin Services PMI dropped to 51.0 in December, indicating slower expansion. Additionally, property debt woes continue to dominate headlines after reports surfaced this morning that several smaller developers defaulted on offshore bonds. While the PBOC continued its liquidity injections via reverse repo operations today, it’s becoming increasingly clear that monetary tools alone aren’t enough to restore investor confidence. Foreign investment flows remain weak, and I remain cautious on Chinese equities in the near term.
Commodities showed a mixed picture. Brent crude stayed range-bound around $78 per barrel despite ongoing tensions in the Red Sea, which have impacted shipping routes. Demand concerns seem to be outweighing supply disruptions for now. Gold continued its steady upward move, now trading above $2,080/oz. In my view, gold is benefiting from falling yields, a weaker dollar, and increased demand for safe-haven assets as geopolitical risk re-escalates.
Cryptocurrencies saw modest declines after last week’s rally. Bitcoin dropped back below $45,000 as profit-taking set in, though market sentiment remains relatively bullish given the upcoming Bitcoin halving event in April 2026. Additionally, speculation continues over the SEC’s decision on several pending spot Bitcoin ETF applications, with expectations rising that a green-light could come this quarter. This has the potential to unlock major institutional inflows into crypto markets.
Overall, today’s market activity echoes a broader theme: investors are trying to position themselves ahead of central banks’ pivot toward easing policies later in 2026. The decelerating economic data across major economies is pushing the narrative forward. However, uncertainties remain — particularly around inflation stickiness, fiscal policy stances in election-heavy 2026, and global geopolitical tensions. As always, I believe staying nimble and data-focused will be essential in navigating this evolving environment.