Markets Daily: Risk Cools, Earnings & US Holiday

19 January 2026 - Daily Market Updates

Markets Daily: Risk appetite cools as trade tensions resurface; earnings and central banks in focus

At a glance

Equities: European benchmarks slipped and US equity futures tracked lower; Asia finished mixed with Japan softer.
Rates and FX: Short-dated core yields eased; haven currencies outperformed while the dollar was little changed on balance.
Commodities: Precious metals advanced to new highs; energy prices were range-bound.

Global overview

A cautious tone gripped markets to start the week as investors weighed renewed trade rhetoric between the US and Europe alongside uneven global growth signals. With US cash equities closed for the Martin Luther King Jr. holiday, price action was led by Europe and Asia. Cyclical pockets most exposed to transatlantic trade—autos, luxury and select industrials—lagged, while defensives and commodity-linked names found support. The bid for safety was evident in firmer precious metals, modest strength in the Swiss franc, and a small rally in front-end European government bonds. Credit risk gauges ticked wider, reflecting a tentative pullback in risk appetite rather than broad stress.

Regional highlights

Europe: Stocks declined broadly, led by export-heavy sectors. A handful of company-specific downgrades and cautious outlooks added to pressure in consumer discretionary. Semicap equipment outperformed after strong order indications from one supplier, bucking the tech-sector drift.
US: Futures pointed lower with volumes thinner into the holiday. Earnings season accelerates this week, and guidance tone will be key given elevated valuation starting points.
Asia: Japan underperformed on political headlines and higher-rate concerns ahead of the central bank meeting later in the week. China-related assets were mixed after data signaled slower momentum into year-end, reinforcing the picture of uneven domestic demand.

Policy and macro

Trade: European officials signaled they are preparing responses should broad new US import levies materialize. Markets are watching for any move from rhetoric to policy that could ripple through supply chains and margins.
Growth: Recent Chinese figures showed moderation, consistent with a gradual, bumpy post-pandemic normalization amid global protectionism. In Japan, a snap election call injected uncertainty into the policy outlook, with bonds softening on the risk of looser fiscal settings.
Central banks: The Bank of Japan meets Friday with markets parsing any tweaks to guidance. Several smaller central banks in Europe and Asia also decide policy this week.

Earnings lens

The next leg of the rally hinges on delivery. With indices near highs, there’s less room for earnings misses or cautious outlooks. Focus areas:

- Top-line resilience vs. FX headwinds in Europe
- Margin trends in consumer and industrials given input-cost normalization
- AI- and cloud-driven capex durability for semis and software
- Credit quality and deposit dynamics for US regional banks

Week ahead: key markers to watch

Monday: US markets closed (MLK Day); Canada inflation.
Tuesday: Euro-area and Germany surveys; UK labor data; early US bank and travel/streaming results.
Wednesday: UK inflation; US housing and construction indicators; high-profile policy and corporate appearances at the annual business forum in Switzerland.
Thursday: US GDP (advance), personal income and PCE inflation; labor-market claims; multiple EM/DM rate decisions.
Friday: Japan CPI and policy decision; preliminary PMIs across major economies; UK and Canada retail updates; US consumer sentiment.

Cross-asset moves

Equities: Pullback concentrated in trade-sensitive sectors; defensives and selected commodity names fared better. Expect positioning to rebalance around earnings beats/misses and guidance.
Rates: Front-end core yields dipped as growth and policy uncertainty nudged duration buyers back in; long-end moves were contained.
FX: Dollar mixed; CHF and JPY found support on haven demand; high-beta FX lagged.
Commodities: Gold and silver extended gains on geopolitical and policy hedging; oil held in a tight band as supply risks met soft demand signals.

What matters from here

Policy path vs. rhetoric: Concrete steps on tariffs would have broader implications for inflation, margins and central bank reaction functions; headlines alone can keep volatility elevated.
Earnings credibility: With lofty multiples, guidance for 2026 profit trajectories may steer leadership more than backward-looking beats.
Liquidity and flows: Recent months have seen strong inflows into US equity funds, cushioning dips; a reversal would amplify any earnings disappointments.
Credit as a canary: Monitoring spread moves in sub-investment grade as a real-time gauge of risk tolerance.

The market is treating trade salvos as a tail risk rather than a base case, but pricing in a higher risk premium across trade-exposed equities and credit. Near term, earnings and central bank messaging are likely to dominate. Expect choppy trading around guidance, with quality balance sheets and visible cash flows better positioned if volatility persists.

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