Global DM 2026 W7 Recap

Macro Overview

Global markets experienced a mixed week, influenced by strong U.S. job gains in January, which dampened expectations for imminent Federal Reserve rate cuts. Concerns over AI's disruptive potential weighed on technology stocks, leading to a broader market decline in the U.S. Meanwhile, the Eurozone showed continued economic expansion and employment growth in Q4 2025, though Germany saw rising wholesale prices. Japan's markets surged following a clear election victory for the LDP, promising aggressive fiscal policies. China continued to grapple with persistent deflationary pressures, despite some stabilization signs in the property market. Overall, a complex macroeconomic landscape with shifting central bank expectations, technological impacts, and regional variations.

Policy Insights

Monetary policy discussions were dominated by the U.S. Federal Reserve, where stronger-than-expected January job data significantly reduced the probability of near-term rate cuts, with market expectations shifting towards rates remaining unchanged through June. The European Central Bank continued its cautious stance, with the Eurozone showing steady growth. In Japan, Prime Minister Takaichi's Liberal Democratic Party secured a supermajority, setting the stage for aggressive fiscal spending, targeted tax cuts, and potentially increased defense spending. The Bank of Japan is closely watched for potential monetary tightening, though JGB yields remained stable. China's central bank (PBOC) reaffirmed a "moderately loose" monetary policy for 2026, signaling room for further reserve requirement ratio and interest rate cuts to boost domestic demand.