MarketWatch for January 2026

January saw global markets start the year on firmer ground. Equity markets rose across most regions, helped by optimism surrounding artificial intelligence and expectations that major central banks could continue easing policy later in 2026. A weaker US dollar also supported risk assets. However, the month was not without turbulence: geopolitical tensions, shifting expectations for monetary policy and renewed trade uncertainty caused bouts of volatility.

US equities finished January higher, with the S&P 500 gaining 1.5%. Momentum strengthened toward the end of the month, as the index climbed above 7,000 for the first time, even if only briefly. However, gains were narrowly concentrated, and volatility rose at several points, most notably during a sharp one-day sell-off sparked by renewed tariff threats. Political developments also added to market chatter after the Trump Administration selected former Federal Reserve Governor Kevin Warsh to succeed Jerome Powell as Chair of the Federal Reserve.

Eurozone equities delivered positive returns, supported by robust performance in information technology, energy and utilities. Economic data added to positive sentiment: Eurostat reported that eurozone GDP grew 0.3% in Q4 2025, slightly ahead of expectations. While some structural challenges remain, particularly in manufacturing, investors generally welcomed signs of steady economic momentum.

UK equities performed well in January, led by strength in the basic materials sector. A supportive global backdrop and improving risk appetite helped offset softer results in some domestically focused areas.

Japanese equities extended their gains from the end of 2025. Continued optimism around generative AI demand lifted technology names, while rising government bond yields supported financial stocks. The backdrop remained constructive, even as political developments, including the announcement of a snap election, introduced some uncertainty in government bond markets.

Emerging markets outperformed their developed-market peers. A weaker US dollar, broad-based improvement in risk appetite and strong performance in technology-heavy markets such as Korea and Taiwan contributed to the rally.

Asia ex Japan equities rose sharply overall, though performance varied. China posted more modest gains, while India and Indonesia fell as weak earnings, foreign outflows and, in Indonesia’s case, concerns about governance and falling commodity prices weighed on sentiment.

Fixed income markets were mixed. US Treasury yields rose and prices fell through the month, and the Federal Open Market Committee kept rates unchanged at 3.5%–3.75%.

Eurozone government bonds outperformed US Treasuries, while Japanese government bond yields increased significantly following the snap election announcement.

Credit markets fared better than government bonds, with investment grade credit generating solid total and excess returns.

Commodity markets were strong overall, driven largely by geopolitical developments. The removal of Venezuelan president Nicolás Maduro and heightened tensions between the US and Iran pushed energy prices higher.

Precious metals were volatile: gold and silver rallied early in the month before a sharp correction at month-end. On 30 January, gold recorded its largest one-day fall in more than 40 years but ended the month up 8.8%.

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