Global News Summary: 2-9 January 2026
The first full week of 2026 highlighted a clear shift from year-end optimism to early-year realism. The dominant themes were cooling labour momentum in the US, meaningful disinflation progress in Europe, renewed focus on Japan’s rising interest rates, and mixed inflation signals from China. The overall picture was not one of collapsing growth, but of economies slowing just enough to keep central banks cautious. Hiring in the US disappointed, reducing expectations of near-term rate cuts, while Eurozone inflation reached the ECB’s 2% target, easing immediate policy pressure. In Japan, policymakers reinforced a tightening bias, keeping attention firmly on government bond yields and currency volatility as global investors reassessed funding costs.
United States
Economic Growth / Recession
The prevailing assessment was slowdown rather than recession. Despite weaker hiring, equity markets remained supported by the view that the economy is transitioning into a “low hire, low fire” phase, where activity cools without triggering a sharp contraction.
Jobs
US employers added approximately 50,000 jobs in December, well below recent norms, while the unemployment rate edged down to around 4.4%. This capped the weakest year of job creation since the pandemic, with softness concentrated outside essential service sectors.
Wage growth remained relatively firm at around 3.8% year-on-year, suggesting that labour-market cooling has not yet fully translated into wage disinflation.
Inflation
No new CPI release occurred during the week. Market focus instead shifted to whether continued wage resilience could slow the final stage of disinflation.
Debt Securities
The softer jobs data reduced expectations of an imminent policy easing. Market pricing increasingly favoured the view that the Federal Reserve would hold rates steady in the near term, rather than cut aggressively at the start of the year.
AI
Artificial intelligence remained a major investment theme, but the discussion matured noticeably. Attention shifted from enthusiasm to execution, with estimates suggesting that large technology firms may spend over $500 billion on AI-related capital investment in 2026, representing growth of more than 30% year-on-year.
New AI hardware and infrastructure announcements reinforced the scale of the build-out, even as related equities showed more selective performance.
ESG
A practical sustainability dimension emerged through the growing energy demands of AI infrastructure. Long-term power supply arrangements — including nuclear-linked capacity — became a focal point as data centres’ electricity needs intensified.
United Kingdom
Inflation
UK grocery inflation continued to trend lower, with food price growth easing to around 4.3% in December, down from the previous month. This reinforced expectations that headline inflation will continue to decline through 2026.
Jobs
Economists increasingly warned that unemployment could rise during 2026, with many forecasts clustering between 5% and 5.5%, and some cautioning that it could move higher if growth weakens further.
(No major interest rate or government bond decision occurred during this week; the UK narrative centred on inflation trends and labour-market risk rather than policy action.)
Eurozone
Inflation
Eurozone inflation fell to 2.0% in December, reaching the central bank’s target. Core inflation eased to around 2.3%, while services inflation slowed to approximately 3.4%, still elevated but clearly improving.
Economic Growth / Recession
The macro outlook became slightly more constructive. Forecasts pointed to around 1.2% GDP growth, with inflation expected to average just under 2% in 2026, reducing immediate recession concerns while supporting a cautious policy stance.
Debt Securities
Government bond yields in core Europe declined modestly as inflation reached target, reinforcing the view that policy is likely to remain on hold rather than tighten further.
China
Inflation
China’s consumer inflation rose to about 0.8% year-on-year in December, the highest level in several years, largely driven by food prices. Core inflation held steady near 1.2%.
In contrast, producer prices continued to fall, with PPI down around 1.9% year-on-year in December and a full-year decline of roughly 2.6%, extending factory-gate deflation.
Debt Securities / Credit
Credit conditions showed mixed improvement. New bank lending increased compared with November but remained below the level seen a year earlier. Broader financing measures softened, highlighting uneven credit transmission despite policy support.
Economic Growth / Recession
Growth remained broadly aligned with the ~5% target for 2025, but weak domestic demand and ongoing property-sector stress kept expectations of further policy support alive.
Japan
Debt Securities
Japan reinforced its role as a global interest-rate driver. Following December’s rate increase, 10-year government bond yields climbed to around 2.1%, levels not seen in decades, as markets priced in further normalisation.
Inflation
Inflation stayed above the 2% target, keeping real interest rates negative and providing justification for a gradual tightening path.
Economic Growth
Policymakers described the economy as growing moderately, supported by a wage–price cycle that could sustain further policy normalisation if momentum persists.
Australia
Inflation
Australian inflation slowed more than expected, with annual CPI easing to around 3.4% in November, down from 3.8% in October and below forecasts. This reduced fears of an imminent rate hike.
Debt Securities
With inflation cooling, market pricing shifted away from aggressive tightening expectations, and the near-term interest-rate outlook appeared less hawkish than earlier in the quarter.
New Zealand
Jobs
No new labour-market data was released during the week. The most recent reading showed unemployment at approximately 5.3%, with the next update due in early February.
Economic Growth / Recession
The prevailing assessment remained one of soft demand and an easing bias, with no new shock altering the outlook during this period.
Singapore
Inflation
No new inflation data was released. The most recent figures showed core inflation steady at around 1.2%, consistent with a low and stable inflation environment.
Switzerland
Debt Securities / Policy
Central bank guidance indicated that policy rates are likely to remain at 0%, with officials confident that inflation will stay within the price-stability range.
Inflation
Inflation projections remained exceptionally low, at around 0.3% for 2026 and 0.6% for 2027, underscoring Switzerland’s persistent low-inflation regime.
Economic Growth
The outlook improved modestly, supported in part by easing external trade pressures, though overall growth remained subdued.