Global stocks enjoyed a strong start to 2026 with several markets reaching highs. The Dow Jones Industrial Average closed at above 49,000 for the first time last week, while the S&P 500 also hit a record high. Europe’s Stoxx 600 closed at a new peak as did Japan’s Topix and Nikkei 225 indices. The UK’s FTSE 100 crossed 10,000 points for the first time on its first trading day of the year.
Continued optimism over artificial intelligence (AI) and expectations of lower interest rates helped drive the rally, although concerns over geopolitical tensions slightly tempered momentum.
Around the world
Eurozone inflation eased to 2% year-on-year in December, returning to the ECB’s target for the first time since June 2025 and falling from November’s 2.1%. Core inflation – excluding energy, food, alcohol and tobacco – edged down to 2.3% from 2.4%, according to an official flash estimate.
The ECB predicted in December that headline inflation will average 1.9% in 2026, down from 2.1% in 2025, and increased its forecast for economic growth in the Eurozone to 1.2% this year from the 1% previously estimated.
Elsewhere, Chinese inflation rose by 0.8% on an annual basis, its highest level in almost three years, driven partly by higher food prices.
Figure in focus: 52.7
US business activity grew at a slower pace in December as the services sector expanded at its slowest rate since April 2025. The composite Purchasing Managers’ Index (PMI), which includes both manufacturing and services, fell to 52.7 from 54.2 in November – a reading above 50 indicates expansion.
Meanwhile, Japan’s private sector output expanded at its softest pace in seven months in December as the composite PMI fell to 51.1 from 52.0.
Eurozone business activity also grew at a slower pace, with the composite PMI at 51.5, down from 52.8. However, quarterly growth was the strongest in over two years.
Graph of the week: Venezuela and oil
Investors got a New Year surprise when the US arrested Venezuelan president Nicolás Maduro. The market reaction to the news was largely positive. US oil majors’ share prices rose and Venezuelan government bonds jumped sharply. Oil prices have been volatile, with near-term supply disruption and geopolitical risks battling market expectations for greater supply that could eventually follow from US investment in the sector.
While Venezuela has the world’s largest oil reserves, its production has been relatively limited. Twenty years ago, production peaked at three million barrels per day; today, it is under one million. A return to the previous level, which would not be swift, amounts to just a 2% increase in total global production.
Words of wisdom
Atlantification: The gradual warming of the Arctic Ocean due to warmer water from the Atlantic Ocean flowing in. A study by the US-based National Oceanic and Atmospheric Administration (NOAA) has warned of the ‘Atlantification’ of the northernmost part of the planet as seawater becomes warmer, saltier and increasingly ice-free.
Atlantification is eroding sea ice, “reshaping ecosystems and threatening climate stability,” NOAA said. Surface air temperatures across the Arctic from October 2024 through September 2025 were the warmest recorded since 1900, it said, while the oldest and thickest Arctic sea ice has declined by more than 95% since the 1980s.
What’s coming up?
On Tuesday, the US reports December inflation data; in November, inflation rose less than anticipated to 2.7%.
China updates markets on its trade balance on Wednesday.
On Thursday, the UK reports monthly GDP data for November, while Germany announces its full-year GDP growth rate and Eurozone industrial production data is released.
The US reports industrial production figures on Friday.
