US market recap and global influences

United States (US) equity markets endured another volatile week, characterised by a rotation out of tech and growth stocks into more cyclical sectors. This followed a stronger-than-expected manufacturing purchasing managers' index (PMI) reading early in the week, which indicated expansion for the first time in a year. However, as the week progressed, concerns over artificial intelligence (AI) capital expenditure (capex) burdens, fears of disruption, and forced unwinds in leveraged positions across multiple asset classes triggered a risk-off cascade.

Locally, the Australia 200 (ASX 200) is set to finish the week lower, pressured by global risk aversion, falling commodity prices, and heavy selling in materials and tech sectors. Adding to the pressure, the Reserve Bank of Australia (RBA) delivered its first interest rate hike in two years, lifting the cash rate by 25 basis points (bp) to 3.85% amidst a darkening inflation outlook.

The week that was: highlights

• In the US, the Institute for Supply Management (ISM) manufacturing PMI unexpectedly rose to 52.6 in January, up from 47.9
• The ISM services PMI remained steady at 53.8 in January, exceeding expectations of 53.5
• Job openings and labor turnover survey (JOLTS) job openings fell by 368,000 to 6,542,000 in December, the lowest since September 2020, and below market expectations of 7,200,000
• Initial jobless claims increased to 231,000 for the week ending 31 January, well above expectations of 212,000 and up sharply from the prior week's 209,000
• The European Central Bank (ECB) maintained its key interest rates, as expected
• The Bank of England (BoE) kept its key interest rate on hold, as expected, at 3.75%
• In China (CN), the RatingDog manufacturing PMI rose to 50.3 in January from 50.1
• The RBA raised rates by 25 bp to 3.85%, as widely expected
• In New Zealand (NZ), the unemployment rate rose to 5.4% in the fourth quarter (Q4) of 2025, up from 5.3% in the third quarter (Q3)
• Crude oil fell 3.50% to US$62.93 and is poised to snap its six-week winning streak
• Gold fell 3.64% this week to US$4720.
• Bitcoin fell 21% this week to US$60,745, marking its heaviest fall since November 2022
• Wall Street's 'fear gauge,' the volatility index (VIX), surged to 21.78 from 17.43 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU household spending: Monday, 9 February at 11.30am AEDT
• Westpac consumer confidence: Tuesday, 10 February at 10.30am AEDT
• National Australia Bank (NAB) business confidence: Tuesday, 10 February at 11.30pm AEDT
• RBA Hauser speech: Wednesday, 11 February at 12.30am AEDT
• RBA Hunter speech: Thursday, 12 February at 3.45pm AEDT

China & Japan

• CN consumer price index (CPI): Wednesday, 11 February at 12.30pm AEDT
• CN producer price index (PPI): Wednesday, 11 February at 12.30pm AEDT
• CN house price index: Friday, 13 February at 12.30pm AEDT

United States

• Retail sales: Wednesday, 11 February at 12.30am AEDT
• Non-farm payrolls (rescheduled): Thursday, 12 February at 12.30am AEDT
• Existing home sales: Friday, 13 February at 12.30am AEDT
• CPI: Saturday, 14 February at 12.30am AEDT

Europe & United Kingdom

• UK gross domestic product (GDP): Thursday, 12 February at 6.00pm AEDT

Key events for the week ahead

AU: Westpac consumer confidence

Date: Tuesday, 10 February at 10.30am AEDT

For January, Australian consumer confidence dipped 1.7% to 92.9, sliding to a three‑month low from December’s 94.5. This extended the sharp 9% drop seen the previous month, pushing sentiment deeper into pessimistic territory as households grappled with renewed RBA rate‑hike concerns.

The decline was driven by worsening near‑term outlooks, with expectations for family finances over the next year falling 4.5% and near‑term economic expectations down 6.5%.

A key factor was rising mortgage rate expectations due to hawkish RBA signals and inflation concerns. Offsetting this slightly were modest gains in assessments of family finances compared with a year ago (+2.3%) and longer‑term economic views (+0.9%). House price expectations remained bullish but colled slightly.

Looking ahead to February’s reading, the RBA’s 25 bp rate hike this week - combined with its darkening inflation outlook and expectations of additional rate hikes - suggestssentiment should soften further towards the 90 mark.

 Australian consumer confidence chart

CN: CPI

Date: Wednesday, 11 February at 12.30pm AEDT

For December, China's CPI inflation edged higher to 0.8% year-on-year (YoY), up from 0.7% in November, marking the strongest reading since February 2023. The figure met or slightly exceeded forecasts, with the monthly CPI rising 0.2% (above expectations of 0.1%).

Food prices were the key driver, increasing 1.1% - the biggest monthly gain in 14 months - led by fresh vegetables and fruit. Core CPI (excluding food and energy) remained at 1.2%, its highest in 20 months.

For the full year 2025, CPI ended flat at 0%, well below the approximately 2% target.

For January 2026, expectations are for headline CPI to remain in the 0.7 - 0.8% range, with core CPI stable near 1.2%. Seasonal factors and policy support may offer some lift, but producer deflation and subdued consumption will pressure policymakers for further easing.

China inflation rate chart

US: non-farm payrolls (rescheduled)

Date: Thursday, 12 February at 12.30am AEDT

For December, the US economy added just 50,000 jobs, falling short of expectations for a gain of around 60,000 and below November's downwardly revised figure of 56,000.

Despite the weak headline number, the unemployment rate edged lower to 4.4%, down from a revised 4.5% in November. This decline reflected a drop in the participation rate to 62.4% from 62.5%, a decrease in the number of unemployed persons to 7.5 million, and improvements in broader underemployment measures like the U-6 rate (down to 8.4% from 8.7%).

Markets largely looked past the softer job creation figures, focusing on the lower unemployment rate as evidence of stabilisation.

In January's Federal Open Market Committee (FOMC) press conference, Federal Reserve (Fed) Chair Jerome Powell highlighted these mixed signals, noting: 'Job gains have remained low, and the unemployment rate has shown some signs of stabilisation.'

The upcoming January non-farm payrolls report, covering the first full post-holiday month, is expected to show 70,000 jobs added, with the unemployment rate expected to remain at 4.4%.

US unemployment rate chart

US: Q4 2025 earnings season

The Q4 earnings season rolls on with reports set to drop next week from companies including Spotify, Robinhood, Lyft, McDonald's, Cisco, Airbnb, Rivian, Twilio, and Coinbase.