Weekly Market Review - 12-01-2026

Eloise Bell
7 days ago
4 min read

Global markets opened 2026 on a firmer footing, with equities advancing across major regions amid a cautiously improving risk backdrop. UK and US indices moved higher over the week, supported by strength in defensive sectors and resilient large-cap stocks, even as technology and growth shares lagged. Beneath the surface, investors remained selective, balancing easing headline inflation against persistent underlying cost pressures, ongoing geopolitical risks and a still-restrictive global monetary policy environment. This cautious optimism set the tone for markets as attention turns to key inflation and activity data in the week ahead.

Market Recap.

In the UK, the FTSE 100 ETF advanced 1.17%, supported by resilience in large-cap defensive stocks. US markets also moved higher overall, with the Dow Jones Industrial Average ETF gaining 1.50% and the S&P 500 ETF rising 1.20%. However, performance was more mixed beneath the surface, as technology and growth stocks faced renewed pressure, leaving the Nasdaq 100 ETF with a more modest gain of 1.36%.

News.

The UK housing market returned to focus this week as competition among mortgage lenders intensified. Data from Moneyfacts showed the number of available mortgage products has risen to its highest level in 18 years, while more than eight in ten mortgage holders remain on fixed-rate deals. Mortgage rates have declined over the past year, with the average two-year fixed rate falling below 5% for the first time since September 2022 in August, although analysts noted that wider economic uncertainty continues to pose risks, particularly for borrowers approaching the end of existing fixed-rate agreements.

Inflation.

UK inflation expectations remained elevated at the start of 2026, according to the latest British Chambers of Commerce Quarterly Economic Survey (QES). The survey found that a large share of firms continue to expect higher prices over the coming year, with respondents citing labour costs and wage pressures as the primary drivers, rather than energy or imported input costs.

While the pace of input-price growth has eased compared with previous quarters, the QES indicates that cost pressures remain embedded across the domestic economy. Many businesses reported limited capacity to absorb higher costs internally, highlighting the continued presence of underlying inflation pressures even as headline measures have moderated. The findings underline the importance of monitoring services inflation and wage dynamics as key components of the UK inflation backdrop.

Central Banks.

Inflation dynamics in Europe also remained under scrutiny this week, with European Central Bank officials reiterating a cautious approach to monetary policy. ECB Governing Council member Olli Rehn Müller said he would pursue a “conservative rate policy” if elected Vice President, underscoring the institution’s continued focus on ensuring inflation returns to target on a sustainable basis.

The remarks highlight the ECB’s emphasis on prudence as inflation pressures ease unevenly across the euro area, with policymakers remaining attentive to underlying price dynamics rather than short-term movements in headline inflation. The comments reflect the ECB’s broader data-dependent stance as it assesses inflation trends and economic conditions at the start of 2026.

Commodities.

Commodities recorded a mixed performance between 5 and 12 January, with precious metals strengthening amid heightened geopolitical risk and a more defensive market backdrop. Gold rose over the week, trading around US$4,480/oz, as safe-haven demand increased, while silver also advanced, moving up to approximately US$53/oz, supported by broader risk-off sentiment and investor positioning in defensive assets.

In contrast, energy markets remained under pressure. Oil prices edged lower over the period as concerns over ample global supply outweighed near-term geopolitical risks. Brent crude slipped to around US$59.80/barrel, while WTI declined to near US$56.90/barrel. Overall, precious metals outperformed on rising uncertainty, while crude prices stayed constrained by supply dynamics and demand uncertainty.

ESG.

ESG considerations were back in focus this week after the United States formally withdrew from the UN Framework Convention on Climate Change (UNFCCC) and participation in more than 65 international climate and environmental bodies, according to ESG Dive. The move reduces US involvement in multilateral climate coordination and data-sharing initiatives, highlighting a widening divergence in climate policy approaches between major economies, particularly between the US and Europe, where sustainability regulation continues to tighten.

Geopolitics.

Norway announced an emergency aid package of €340 million to support Ukraine’s energy sector and help maintain critical services, including the electricity grid, in response to intensified Russian attacks on infrastructure during winter. The funding forms part of a wider 85 billion-kroner ($8.45 billion) aid programme approved by the Norwegian parliament for 2026, with civilian assistance earmarked for energy security, budget support and reconstruction alongside military support

Week Ahead.

United States: In the United States, the week begins with a key inflation update. Tuesday, 13 January, sees the release of December consumer price inflation (CPI), a critical data point for assessing whether disinflationary progress is continuing into the new year. Attention then turns to consumer activity on Thursday, 15 January, when December retail sales are published, offering insight into post-holiday spending momentum. The week concludes on Friday, 16 January, with industrial production and capacity utilisation, providing an update on manufacturing activity and underlying economic momentum as markets refine expectations for the Federal Reserve’s early-2026 policy path.

Eurozone: In the UK, the official data calendar remains relatively light, but Thursday, 15 January, brings the release of November monthly GDP, alongside industrial production and manufacturing output figures. These data will be monitored for signs of whether the UK economy carried any momentum into the end of 2025 amid still-restrictive financial conditions. In the absence of major inflation or labour-market releases, markets are also likely to focus on policy commentary and private-sector surveys for early signals on economic conditions at the start of the year.

United Kingdom: Across the Eurozone, the data flow is limited but still relevant for sentiment. Industrial production data for November, due mid-week, will provide an update on activity levels across the bloc, while markets will continue to monitor European Central Bank communication for guidance on the inflation outlook and the timing of any further policy easing. With few headline releases scheduled, broader global developments are expected to remain a key driver of market sentiment.