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Market Outlook: 27–31 January 2026

Overview

The week of 27–31 January is dominated by the year’s first Fed decision, a Bank of Canada meeting, a heavy run of U.S. and Eurozone data, and important China releases into month‑end. Volatility risk is elevated as investors test the “soft landing, mild disinflation” narrative against still‑tight policy, tariff effects, and mixed global growth.

Key Themes and Drivers

1. Fed and Bank of Canada decisions

  • The Fed heads into its late‑January FOMC meeting having delivered three 25 bp cuts in 2025, bringing the policy rate to 3.5–3.75%, and signalling that “risk‑management” cuts are largely done.​
  • Markets watch whether the Fed:
    • Leaves rates on hold but keeps optionality for 1–2 cuts later in 2026, or
    • Signals an earlier cut path if labour data weaken further.
  • The Bank of Canada meets the same week, with its decision and press conference closely watched for guidance on timing and depth of further easing.

2. U.S. data: durable goods, productivity, trade

  • Early in the week, U.S. durable and core capital goods orders are key for capex momentum; a weak print would reinforce slower global goods demand.
  • Later in the week, productivity, trade balance and any updated labour or inflation indicators will inform growth and margin expectations heading into Q1.

3. Europe and UK: growth and inflation signals

  • Eurozone and German indicators (confidence, prices, and activity) help confirm whether disinflation continues alongside sluggish but positive growth, as suggested by late‑2025 PMI trends.
  • UK data around retail, housing and sentiment will shape expectations for BoE cuts, against a backdrop of cooling inflation and weaker labour markets.

4. China and Asia: profits, liquidity and PMIs

  • China’s week‑ahead calendar includes:
    • Industrial profits and other December data that highlight margin pressure and weak year‑end demand.​
    • MLF and liquidity operations as the PBoC balances large OMO maturities against pre–Lunar New Year cash demand; systemic tightening is unlikely, but funding could be choppy.​
  • China’s official PMIs due right at the turn of the month (and CFLP manufacturing/services on 31 Jan GMT) give an early read on January growth.
  • Japan and other Asian economies release trade and activity figures that feed into the global manufacturing and tech cycle.

Key Events Calendar

Date*Event / dataMarket focus
Mon 26–Tue 27 JanU.S. durable & capital goods orders; no other major releasesU.S. capex, goods demand​
Wed 28 JanBank of Canada decision & press conferenceCAD, North American rate path
Wed 28–Thu 29 JanFOMC rate decision, projections, Powell press conferenceFed stance, cuts vs hold in 2026
Late weekEurozone & German data (prices, confidence, activity)Growth/disinflation mix in Europe
Late weekChina industrial profits, liquidity operations; China/HK trade statsChina margins, liquidity, regional risk
Sat 31 Jan (GMT)China CFLP manufacturing & services PMIsFirst broad growth snapshot for 2026​

*Some dates quoted in GMT; Asia will see data in the following local session.

Market Sentiment and Risks

  • Equities:
    • Global stocks start 2026 near highs, supported by strong 2025 gains and AI‑linked earnings, but valuations are rich and breadth narrow.
    • Any hawkish surprise from the Fed/BoC or weak China data could trigger profit‑taking, especially in cyclicals and rate‑sensitive growth.
  • Bonds:
    • Yields remain highly sensitive to Fed language; confirmation of a “pause with optionality” supports range‑bound trading, while a more dovish tone could steepen curves.
  • FX:
    • USD reacts to FOMC; CAD to BoC tone; AUD/NZD and Asian FX to China data and liquidity.
  • Commodities:
    • Oil and industrial metals hinge on China’s profit and PMI signals plus global demand indicators; gold remains supported as a hedge against policy and growth surprises.

Bottom line:
27–31 January is a central‑bank‑and‑data heavy week where Fed/BoC decisions, U.S. capex data, and China’s profits/PMIs can all move markets. With valuations elevated and positioning optimistic, staying diversified and nimble around the mid‑week FOMC/BoC cluster and China’s late‑week releases is prudent.


US stocks had a choppy, holiday‑shortened week, with indexes hovering near record levels as investors reacted to Trump’s shifting Europe/Greenland stance and positioned ahead of heavy economic data and earnings next week.

1. Tariff Threats, Greenland Deal Talk, and Rebound

  • President Trump’s threat to impose tariffs on parts of Europe over the Greenland dispute initially hit equities, bonds, and the dollar simultaneously, prompting a rare risk‑off move early in the week.
  • Markets later recovered after Trump withdrew fresh EU tariff threats and signaled progress toward a “Greenland framework” agreement, helping the Nasdaq 100, Dow, and S&P 500 rebound around 0.6–0.7% in one session.

2. Record Levels but Weekly Softness

  • The S&P 500 and Dow are trading close to record territory after recent highs driven by strong US bank results and resilient big‑tech performance earlier in January.
  • For this week, the Dow and S&P 500 were roughly flat to slightly negative as investors digested Trump’s comments on policy and the Fed, with sector rotation keeping overall index moves contained.

3. Outflows from US Stocks and Focus on Data

  • US equity funds saw nearly 17 billion dollars of outflows during the week, with money rotating into Europe and Japan as geopolitical noise around tariffs and Greenland raised near‑term uncertainty.​
  • Traders are now focused on a compressed batch of US data next week—housing, inflation, income, and GDP—plus big earnings, which could quickly shift expectations for Fed policy and drive larger moves in equities and the dollar.

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Final Key Takeaway
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