Global News Summary: 28 Dec 2025 – 2 Jan 2026

The final days of 2025 and the opening of 2026 were shaped by holiday-thinned liquidity, portfolio positioning, and forward-looking reassessment, rather than fresh economic shocks. Markets broadly held their gains, but attention shifted from year-end performance to how interest rates, fiscal policy and inflation dynamics will shape early-2026 conditions. The key developments were concentrated in US asset allocation flows, Japan’s fiscal and debt outlook, China’s 2026 policy stance, and persistently low inflation in parts of Asia and Europe.

United States

US markets closed the year on a strong footing. The S&P 500 finished just below 7,000, ending 2025 up roughly 18%, while the Nasdaq gained more than 20%, reflecting optimism around earnings resilience and a soft-landing narrative.

Inflation continued to ease but remained above central bank comfort. Headline CPI for November stayed in the high-2% range, reinforcing confidence that inflation is moderating, but not yet low enough to allow policy complacency.

Investor behaviour was telling. Large inflows into money market funds contrasted with modest outflows from bond funds, signalling that investors were simultaneously willing to hold risk assets while keeping liquidity readily available ahead of January data releases and policy meetings.

United Kingdom

UK equities ended 2025 on a high, with the FTSE 100 briefly crossing 10,000, marking one of its strongest annual performances in over a decade. However, underlying consumer signals were less robust.

Boxing Day retail activity weakened, particularly in high streets and city centres, while retail parks performed better. Total Boxing Day spending was estimated around £3.6 billion, noticeably lower than the previous year, highlighting continued cost-of-living sensitivity.

Inflation remained above target, and Bank Rate stayed at 3.75%, keeping expectations centred on gradual easing rather than rapid relief.

Eurozone

The euro area entered the new year in a slow but stabilising position. Inflation hovered close to target, with headline CPI around 2.1%–2.2%, helping to anchor expectations and limit policy uncertainty.

Bond markets were largely driven by global yield movements rather than domestic policy action, and there was no renewed recession scare during this quiet week.

China

Chinese authorities signalled that fiscal policy in 2026 will be more proactive, with a focus on supporting domestic demand, investment, and longer-term growth drivers. At the same time, policymakers continued to acknowledge that the property sector remains a drag on confidence.

Benchmark lending rates were left unchanged, reinforcing a preference for stability over aggressive easing. Local governments increasingly relied on structured financing and asset-backed issuance to bridge funding gaps, easing near-term liquidity pressures but raising longer-term balance-sheet questions.

Japan

Japan remained a focal point for global markets. The government approved a record FY2026 budget of approximately ¥122 trillion, underscoring continued fiscal support even as interest rates rise.

Despite the scale of spending, authorities emphasised fiscal discipline. New government bond issuance was capped, while debt servicing costs were projected to increase, highlighting Japan’s growing sensitivity to higher yields.

The yen weakened toward the mid-150s per US dollar in thin trading, keeping markets alert to potential intervention should currency moves accelerate.

Australia

Australia’s outlook was dominated by fiscal and inflation considerations rather than near-term growth surprises. Inflation expectations edged higher, with projections pointing to around 3.7% by mid-2026, complicating the case for early rate cuts.

The government projected an underlying cash deficit of roughly A$37 billion for 2025–26, shaping expectations in the bond market more than issuance volumes.

New Zealand

New Zealand continued to lag peers in growth momentum. 2025 GDP growth was expected to remain below 1%, keeping the economy sensitive to external conditions.

Inflation stayed near 3%, with policymakers expecting it to drift back towards target over the course of 2026. The policy rate remained 2.25%, reflecting an already accommodative stance.

Singapore

Singapore entered 2026 with one of the strongest outlooks among developed economies. 2025 growth expectations remained around 4%, supported by resilient domestic demand.

Inflation remained benign. Core and headline inflation both stood at approximately 1.2%, reinforcing confidence in price stability and policy continuity.

Switzerland

Switzerland remained in a low-inflation, low-growth regime. Inflation expectations were exceptionally subdued, with forecasts near 0.3% for 2026, rising only gradually thereafter.

The policy rate stayed at 0%, with authorities continuing to favour currency management tools over a return to negative rates.

What Actually Mattered This Week

• Rates and fiscal policy, not growth surprises, drove market thinking

• Japan’s debt dynamics continued to act as a global “cost of capital” signal

• Consumer pressure was visible in parts of the UK despite strong equity markets

• China stabilised rather than reflated, supporting growth without igniting a global acceleration

• Low inflation in Asia and Switzerland stood out as a contrast to the US and UK