Market navigator:
week of 19 January 2026

What happened last week

• Japan announces snap election: Prime Minister Sanae Takaichi confirmed plans to dissolve the Lower House for a snap election in early February, capitalising on approval ratings exceeding 70%. The move aims to secure a stronger parliamentary majority for her ruling coalition with the Japan Innovation Party. USD/JPY climbed to 159.45 before paring gains whilst the Nikkei 225 rallied 3.8%.
• US goldilocks scenario: December's core consumer price index (CPI) rose 0.2% month-on-month (MoM) whilst November's core producer price index (PPI) remained flat, both undershooting consensus. Initial jobless claims declined to 198,000, below forecasts. The benign inflation trajectory combined with robust labour market indicators suggests the US economy maintains its goldilocks equilibrium. Market pricing for two or more Federal Reserve (Fed) rate cuts by year-end 2026 declined to 58%.
• Geopolitical tensions intensify: Escalating civil unrest in Iran propelled WTI crude to a 12-week peak of $62.2 per barrel before retreating as intervention concerns eased. President Trump threatened 10% additional tariffs on eight European nations pending Greenland negotiations. Safe-haven demand elevated precious metals, with silver surging over 12%.
• China's measured stimulus approach: The People's Bank of China (PBOC) reduced minimum down payment requirements for commercial property mortgages whilst cutting relending rates on targeted sectors by 25 basis points. The measures followed 2025 new bank loans declining to RMB 16.27 trillion, the lowest since 2018, sparking optimism for additional stimulus including potential benchmark rate reductions.

Markets in focus

Strong start to the US earnings season

A notable divergence has emerged within US equities as mega-cap stocks retreat from recent peaks whilst smaller companies demonstrate catch-up momentum. This trend becomes evident when comparing the S&P 500 index performance against the S&P 500 equal-weight index—the former declined 0.4% whilst the latter advanced 0.7%. A similar pattern manifested between the Russell 2000 (+2.0%) and Nasdaq 100 (-0.9%).

Major banking institutions delivered robust results overall, buoyed by strong trading revenues, though investor scrutiny of individual report cards has driven performance divergence. Goldman Sachs' shares surged 4.6% following record-setting equity trading revenue—the highest for any Wall Street bank. Conversely, JPMorgan Chase's shares declined 4.2% on disappointing investment banking fees despite meeting overall top and bottom-line expectations.

The technology sector received support from Taiwan Semiconductor Manufacturing Company's (TSMC) results, as the chipmaker delivered 25.5% year-on-year (YoY) revenue growth in Q4 whilst raising long-term gross margin guidance to above 56%. The financial report alleviates concerns regarding the sustainability of artificial intelligence (AI) demand.

The US Tech 100 index encountered resistance level at the upper boundary of a two-month consolidation range near 25,830, a level that has persisted for nearly two months. The relative strength index (RSI) resumed its declining trajectory, indicating weakening momentum and suggesting the probability of establishing a new historical high remains limited in the near term. The index should find support around 24,650 and is likely to trade within a sideways range this week.

Figure 1: US Tech 100 index (daily) price chart

Hang Seng gains tempered by regulatory action

The Hang Seng Index (HSI) advanced 2.3% last week, closing at 26,845 on Friday and capping a volatile period characterised by strong early-week gains that were partially eroded by regulatory concerns and profit-taking.

Healthcare companies continued to lead gains. Alibaba Health surged 17.9% on optimism surrounding artificial intelligence applications in healthcare, buoyed by reports that AI health assistant "Ant Afu" exceeded 30 million monthly active users shortly after launch, validating substantial market demand for AI-powered health services. Parent company Alibaba also gained 13.5% following upgrades to its Qwen AI application.

Regulatory intervention tempered sentiment mid-week as authorities launched an antitrust investigation into Trip.com over alleged abuse of market dominance and monopolistic practices. The online travel platform plummeted 21.8% during the week. Separately, Pop Mart retreated 9.3% following a China Labor Watch report alleging serious labour violations at a key Labubu supplier.

Beijing also implemented tighter margin financing requirements effective 19 January, aiming to curb excessive leverage as mainland turnover reached record levels. Despite this cooling measure, the PBOC's signal that further reserve requirement ratio and policy rate reductions remain under consideration provided market support.

The HSI is currently establishing a foundation near 26,850 for its next advance towards the resistance zone around 27,000–27,300. The trend remains bullish as the 20-day simple moving average (SMA) has formed a golden cross with the 50-day SMA. The next rally phase would likely accelerate following three consecutive closes above 27,000. Any pullbacks should find support around 26,000.

Figure 2: Hang Seng Index (daily) price chart

Potential intervention limits USD/JPY gains

The yen's weakness extended last week as the snap election may provide enhanced authority for the Takaichi administration to deploy larger fiscal expenditure whilst further delaying the Bank of Japan's (BOJ) policy normalisation trajectory. USD/JPY briefly touched 159.4, a level last observed on 12 July 2024 when the Japanese government deployed ¥3.2 trillion in currency support operations.

Finance Minister Katayama's emphatic warnings regarding sharp, unidirectional yen movements strengthens the case for potential currency intervention. However, despite the verbal guidance, no evidence of actual intervention has materialised even as USD/JPY approached the 158 level on multiple occasions since October.

Such interventions cannot be deployed arbitrarily given limited foreign exchange reserves and require coordination with fiscal and monetary policy to prove effective. Japan expended approximately $100 billion across four intervention operations in 2024 when USD/JPY approached 160. As of end-December 2025, Japan's foreign currency reserves stood at $1,164 billion. Markets currently price close to two additional BOJ rate increases in 2026, with the first likely occurring in the second half. Traders are growing impatient regarding central bank signalling; if the BOJ continues providing ambiguous guidance on the normalisation path, substantial downward pressure will accumulate on the yen.

An Elliott Wave pattern has emerged on USD/JPY's daily chart, where the advance since October aligns with Wave 5 under the framework. A 100% Fibonacci extension of Wave 3 could potentially drive USD/JPY to 162.8, though speculation regarding government intervention currently caps gains beyond 159. In the absence of intervention, USD/JPY is likely to consolidate between 156–157 before its next upward movement. Should the BOJ transmit clear signals of rate increases, this could trigger a retreat towards 154.5.

Figure 3: USD/JPY (daily) price chart

The week ahead

The upcoming week centres on China's economic performance, critical US inflation data and the BOJ's policy stance, alongside key corporate earnings that may influence sector sentiment.

China releases fourth-quarter gross domestic product (GDP) data on Monday, with markets anticipating growth deceleration to 4.4% YoY from the prior quarter's 4.8%. Despite the expected moderation, full-year growth remains on trajectory to meet Beijing's 5% target. Accompanying industrial production and retail sales figures will provide insights into whether additional stimulus measures are required to support the economy. Stronger-than-expected retail sales growth would signal improving domestic consumption dynamics, whilst industrial production figures will reveal whether the manufacturing sector's performance aligns with December's robust export growth, potentially confirming resilient external demand.

US monetary policy expectations will be shaped by Thursday's core personal consumption expenditure (PCE) index—the Fed's preferred inflation gauge. Following last week's benign CPI and PPI readings, markets will scrutinise the PCE data for confirmation that inflationary pressures continue moderating ahead of the Fed's January meeting.

The BOJ convenes Friday with interest rates expected to remain at 0.75%. Markets will closely analyse forward guidance for clarity on the policy trajectory. Governor Ueda's communication will prove crucial, as failure to provide conviction regarding future monetary tightening could intensify selling pressure on the yen, which has weakened substantially in recent sessions. Japanese inflation data released earlier that morning will inform the policy discussion.

On the corporate front, investors are keen to assess Netflix's capital allocation strategy following its announcement to acquire Warner Bros' studio operations. Intel's turnaround narrative will also draw considerable attention as the semiconductor manufacturer seeks to expand its foundry market share with its new product portfolio.

Figure 4: China still needs the housing market and domestic consumption to rebound for more sustainable growth

Key macro events this week

Monday 19 January 2026

• 9.30am (HK time) — China House Price Index YoY (December): previous -2.4%
• 10.00am (HK time) — China GDP Growth Rate YoY (Q4): previous 4.8%, consensus 4.4%
• 10.00am (HK time) — China Industrial Production YoY (December): previous 4.8%, consensus 5%
• 10.00am (HK time) — China Retail Sales YoY (December): previous 1.3%, consensus 1.2%

Tuesday 20 January 2026

• 3.00pm (HK time) — UK Unemployment Rate (November): previous 5.1%, consensus 5%

Wednesday 21 January 2026

• 3.00pm (HK time) — UK Inflation Rate YoY (December): previous 3.2%, consensus 3.3%

Thursday 22 January 2026

• 7.50am (HK time) — Japan Balance of Trade (December): previous ¥322.2 billion, consensus ¥357 billion
• 9.30am (HK time) — Australia Unemployment Rate (December): previous 4.3%, consensus 4.4%
• 9.30pm (HK time) — US GDP Growth Rate QoQ Final (Q3): previous 3.8%, consensus 4.3%
• 11.00pm (HK time) — US Core PCE Price Index MoM (October): previous 0.2%
• 11.00pm (HK time) — US Core PCE Price Index MoM (November): consensus 0.2%
• 11.00pm (HK time) — US Personal Income MoM (October): previous 0.4%
• 11.00pm (HK time) — US Personal Income MoM (November): consensus 0.4%
• 11.00pm (HK time) — US Personal Spending MoM (October): previous 0.3%
• 11.00pm (HK time) — US Personal Spending MoM (November): consensus 0.5%

Friday 23 January 2026

• 7.30am (HK time) — Japan Core Inflation Rate YoY (December): previous 3%, consensus 2.4%
• 11.00am (HK time) — Japan BoJ Interest Rate Decision: previous 0.75%, consensus 0.75%
• 3.00pm (HK time) — UK Retail Sales MoM (December): previous -0.1%, consensus -0.1%
• 5.30pm (HK time) — UK S&P Global Manufacturing PMI Flash (January): previous 50.6, consensus 50.7
• 5.30pm (HK time) — UK S&P Global Services PMI Flash (January): previous 51.4, consensus 51.7

Key corporate earnings

(in local exchange time)

Tuesday 20 January 2026

• Netflix

Wednesday 21 January 2026

• Johnson & Johnson
• Charles Schwab

Thursday 22 January 2026

• Procter & Gamble
• GE Aerospace
• Intel

_{Source: Trading Economics, Nasdaq, LSEG (as of 18 January 2026)}