Market navigator:
week of 5 January 2026

What happened last week

• Fed's rate trajectory: December's Federal Open Market Committee (FOMC) minutes revealed most members intend to reduce rates further if inflation declines as anticipated, though consensus on timing remains elusive. Several participants favour maintaining current rates for a while to assess lagged effects from three consecutive cuts in 2025. Declining initial and continuing jobless claims elevated the probability of steady rates at January's meeting to 85%.
• China's economic activity revives: Manufacturing activity returned to expansion territory in December following eight consecutive months of contraction, according to official purchasing managers' index (PMI) data. The private RatingDog survey corroborated this positive trend. Nevertheless, the persistent challenge of deflation remains unresolved. Output prices continue contracting despite rising input costs, reflecting the margin compression manufacturers face amid intensifying price competition.
• Onshore yuan appreciates beyond 7.0: The government announced RMB 62.5 billion in trade-in subsidies for electric vehicles and appliances to bolster economic activity. Markets broadly anticipate a moderation in stimulus scale as China appears positioned to achieve its 5% growth target. Policy support is expected to become more targeted in 2026, focusing on strategic priorities including technological innovation and domestic consumption expansion. USD/CNY declined below 7.0 for the first time since 2023, supported by an improved economic outlook.
• Middle East conflicts: Geopolitical tensions escalated as the UAE-backed Southern Transitional Council seized Yemen's oil-rich Hadramawt province, prompting Saudi airstrikes. The confrontation heightened supply disruption concerns, propelling WTI crude oil above $58 per barrel before stabilising.

Markets in focus

Broadening technology leadership supports US equity outlook

US equity markets delivered impressive gains throughout 2025 despite periodic volatility, with the S&P 500 advancing 16%, the Nasdaq 100 climbing 20%, and the Dow Jones rising 13%. The S&P 500 established 39 new all-time highs during the year, demonstrating remarkable resilience despite intermittent concerns regarding tariffs and labour market softening.

Markets concluded 2025 on a subdued note amid diminished holiday-season liquidity but commenced 2026 with renewed optimism as Asian markets surged to fresh highs. Enhanced enthusiasm surrounding artificial intelligence (AI) developments in China, particularly following DeepSeek's publication of more efficient AI training methodologies and Baidu's reported plans for an AI chip unit initial public offering (IPO), fuelled risk appetite across global markets.

Looking ahead, sustained positive returns are anticipated in 2026, supported by robust earnings growth and Federal Reserve (Fed) monetary easing. Technology sector leadership continues to broaden beyond mega-cap names as AI infrastructure expenditure remains substantial. However, investors should prepare for elevated volatility following an unusually calm eight-month period, with the fundamental backdrop favouring tactical buying during market pullbacks rather than sustained declines.

The US Tech 100 index is still struggling to break out from its weak momentum demonstrated by the lower peaks in the relative strength index (RSI). Until a decisive breakthrough above 25,830 materialises, the index is likely to remain range-bound between 24,600 and 25,830. A breakout above this zone could propel the index towards the historical high at 26,253, while a breach below would prompt testing of the next support zone near 24,000.

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

Artificial intelligence optimism propels HSI above 26,000

The Hang Seng Index (HSI) ranked among the best-performing major equity indices in 2025, delivering 28% returns and marking its strongest annual performance since 2017. As year-end approached, trading volumes declined significantly as investors reduced positions ahead of the new year. After consistently settling between 25,000 and 26,000 since 8 December, the HSI decisively crossed the 26,000 threshold on the first trading day of 2026, advancing 2.8% on Friday.

However, it may be premature to declare the consolidation over, as daily turnover volume remains below recent averages. Daily turnover registered merely HK$141 billion last Friday, 45% below the HK$256 billion average recorded across the first eleven months of 2025. Turnover is expected to increase as mainland investors return following the New Year holiday on 5 January.

The IPO market represents a principal catalyst for optimism. Biren Technology – the first graphics processing unit (GPU) company listed on the Hong Kong stock exchange – surged 76% on its trading debut after attracting retail over-subscription exceeding 2,300 times. Additionally, ten companies await listing on the Hong Kong exchange over the next two weeks, targeting aggregate proceeds exceeding HK$26 billion. AI-related entities including AI model companies Zhipu AI and MiniMax have garnered the greatest interest.

The daily chart indicates improving price momentum as the HSI attempts to breach the range established since 18 November. Friday's sharp advance also penetrated resistance from the 20-day and 50-day moving averages (MA). Given reduced holiday liquidity, additional evidence of the index sustaining above 26,264 is required before confirming the consolidation has concluded. A successful hold above this level would provide impetus for testing the next resistance level around 27,200–27,300.

Figure 2: Hang Seng Index (daily) price chart

Pronounced volatility in precious metals

Precious metal prices experienced an outsized decline last Monday after establishing new record highs during the Christmas holiday period. Commodity traders in London and New York returned to unwind gains driven by thin Asian liquidity during Christmas and heightened speculative activity. Gold declined as much as 5% from its peak, while silver witnessed a far steeper plunge approaching 16%, marking one of the largest intraday price movements in history. Despite the sharp drawdown, both metals delivered impressive performances in 2025 – gold prices advanced 65% while silver surged 149%.

In response to recent volatility, CME Group raised margins on gold, silver, platinum and palladium contracts twice within a week. The margin requirement for March 2026 silver contracts increased from $22,000 to $32,500 per contract. The substantial increase in margin requirements may trigger forced liquidation of leveraged positions, exerting near-term pressure on precious metal prices.

From a medium to long-term perspective, however, fundamental factors continue supporting precious metal valuations. Declining real yields as the Fed continues loosening monetary policy provide support for non-yielding assets. Furthermore, structural central bank accumulation remains a key catalyst for gold prices, while silver benefits from the ongoing supply deficit as industrial demand continues outpacing supply.

After overshooting the technical target of $73.6 projected in the 15 December Market Navigator to reach $83.9 on 28 December, silver prices sharply retreated and entered a consolidation phase. The pullback represents a healthy correction following extremely extended conditions, as indicated by technical signals including the RSI. The recent correction should establish a foundation for extending the upward trend. Meanwhile, silver is likely to trade within a range of $71–$75.

Figure 3: Silver (daily) price chart

The week ahead

The upcoming week centres on inflation dynamics across major economies and critical US employment indicators that will shape monetary policy expectations heading into 2026.

Australian inflation readings on Wednesday assume particular significance following October's surprisingly elevated 3.8% year-on-year (YoY) figure. The transition to monthly reporting in October revealed persistent price pressures that have sparked market speculation regarding potential Reserve Bank of Australia (RBA) rate hikes in 2026, despite earlier expectations for cuts. Markets will scrutinise whether this represents a sustained inflationary trend or temporary volatility inherent in the new reporting methodology.

China's inflation data on Friday warrants close attention after consumer prices accelerated to 0.7% in November, building on October's return to positive territory. The critical question remains whether this upturn signals genuine domestic demand recovery or merely reflects base effects and temporary factors. The accompanying producer price index (PPI) will provide additional insight into industrial sector health and pricing power.

US labour market dynamics conclude the week with December's non-farm payrolls report, following November's weak 64,000 addition. Combined with Job Openings and Labour Turnover Survey (JOLTS) data on Wednesday and Institute for Supply Management (ISM) PMIs, these releases will determine whether the Fed maintains its current policy stance or considers adjustments at the January meeting.

Figure 4: US employment data

Key macro events this week

Monday 5 January 2026

• 11.00pm (HK time) – US ISM Manufacturing PMI (December): previous 48.2, consensus 48.3

Wednesday 7 January 2026

• 8.30am (HK time) – Australia Inflation Rate YoY (November): previous 3.8%, consensus 3.7%
• 6.00pm (HK time) – Euro Area Inflation Rate YoY Flash (December): previous 2.1%, consensus 2.1%
• 11.00pm (HK time) – US ISM Services PMI (December): previous 52.6, consensus 52.3
• 11.00pm (HK time) – US JOLTS Job Openings (November): previous 7.67 million, consensus 7.73 million

Thursday 8 January 2026

• 8.30am (HK time) – Australia Trade Balance (November): previous A$4.385 billion, consensus A$5.2 billion
• 1.00pm (HK time) – Japan Consumer Confidence (December): previous 37.5, consensus 37.9
• 9.30pm (HK time) – US Trade Balance (October): previous -$52.8 billion, consensus -$59.4 billion

Friday 9 January 2026

• 9.30am (HK time) – China Inflation Rate YoY (December): previous 0.7%, consensus 0.6%
• 9.30am (HK time) – China PPI YoY (December): previous -2.2%, consensus -2.2%
• 9.30pm (HK time) – US Building Permits (September): previous 1.33 million, consensus 1.34 million
• 9.30pm (HK time) – US Building Permits Preliminary (October)
• 9.30pm (HK time) – US Housing Starts (September): previous 1.307 million, consensus 1.32 million
• 9.30pm (HK time) – US Housing Starts (October)
• 9.30pm (HK time) – US Non-Farm Payrolls (December): previous 64,000, consensus 55,000
• 9.30pm (HK time) – US Unemployment Rate (December): previous 4.6%, consensus 4.5%
• 11.00pm (HK time) – US Michigan Consumer Sentiment Preliminary (January): previous 52.9, consensus 53

_{Source: Trading Economics, Nasdaq, LSEG (as of 3 January 2026)}