Our weekly podcast by Kevin Lings:

• The S&P 500 index ended the week down 0.4%, after a gain of 1.6% the previous week. Year-to-date the US equity market is up 1.4%. The US earnings season kicked off during the week, when several big banks reported their fourth-quarter results. Market reactions were mixed. However, the market responded positively to comments by President Trump indicating that military action against Iran is not imminent.

• In contrast, the STOXX Europe 600 index ended up 0.8%. It was supported by resilient economic data, although the market responded negatively to Trump's proposal to levy new tariffs on countries opposing US control of Greenland. The Nikkei 225 Index gained 3.8% and the broader TOPIX Index rose 4.1%, boosted by news that Japan’s Prime Minister Sanae Takaichi is preparing to call a snap general election in early February 2025. Investors anticipate that a Takaichi victory would provide greater certainty about political direction and clear the way for more aggressive fiscal stimulus. This revived what investors have dubbed the “Takaichi trade,” which has boosted areas of the market centred on artificial intelligence, nuclear energy, and defence. SA’s All-Share index gained a further 1.7% and has risen by a robust 3.7% year-to-date.

• In China, the CSI 300 Index, the main onshore benchmark, fell by 0.6% while the Shanghai Composite Index declined by 0.5%. Chinese stock markets weakened after regulators tightened the rules on margin financing for domestic stock investors. Year-to-date the Shanghai Composite Index is still up a respectable 3.4%.

• The US 10-year bond yield ended slightly higher at 4.24%, up from 4.18% at the end of the previous week. Despite the recent upward drift in yields, the 10-year bond yield has remained largely range-bound between 4.05% and 4.25% in each of the past six weeks. It is pricing in the     Federal Reserve (Fed) keeping interest rates on hold at the next Federal Open Market Committee meeting on 28 January. This follows three consecutive rate cuts towards the end of 2025. Since the rate of inflation remains above target, and the unemployment rate eased back to 4.4% in     December, we expect the Fed will keep interest rates unchanged for at least a few months before considering additional cuts. A further softening of the US labour market and a gradual further slowdown in inflation should allow the Fed to cut rates twice more this year – although the impact of a new Fed chairman in May 2026 remains unknown.

• The US dollar has gained 1.1% against the euro this year as expectations of Fed interest rates cuts in early 2025 have been pushed back. Unsurprisingly, most emerging market currencies have weakened against the stronger dollar. The rand is one of the better performing emerging market currencies (gaining 0.8% year-to-date against the dollar) primarily due to the ongoing rally in gold and PGM prices.

• In December 2025, US consumer inflation rose by 0.3% m/m, which was in line with market expectations. This kept the annual rate of inflation unchanged at 2.7% y/y. Encouragingly, core consumer inflation increased by a more modest 0.2% m/m in December, which was below expectations for an increase of 0.3%, resulting in the annual rate of core inflation remaining unchanged at 2.6% y/y. While core inflation has slowed from 3.3% at the start of 2025 it is, obviously, not yet in sight of the Fed’s inflation target and is likely to remain elevated in the coming months. Importantly, US inflation is not expected to re-accelerate meaningfully, allowing the Fed to focus on the performance of the labour market and the current upward drift in the unemployment rate.

• In December 2025, US shelter inflation rose by 0.4% m/m, a relatively large monthly increase given the recent softening of the US housing market. However, we are confident that the official measure of US shelter inflation will continue to drift lower in 2026, given the sustained low rate of rental inflation reflected in private sector data. The monthly rate of change in the prices of a range of goods categories that have a high import content slowed appreciably or declined in December, signalling slightly less tariff-related price pressure. These include tools/hardware (0% m/m), toys (-0.5% m/m), televisions (-0.6% m/m), sporting goods (0.1% m/m), photographic equipment (-1.3% m/m), and personal care products (-0.3% m/m). It appears that most companies have simply absorbed a substantial portion of the tariff increase rather than pass the increased cost onto the household sector. At the same time, there has been an impressive increase in labour productivity, probably partly related to the increased adoption of AI, which is helping companies to mitigate various cost pressures.

• US PPI inflation rose by 0.2% m/m in November (from 0.1% m/m in October), which pushed the annual rate of producer inflation from 2.8% to 3%. The increase was primarily driven by rising energy prices. PPI inflation for non-durable core goods continued to decelerate, while services PPI inflation turned negative again.

• Last week, US weekly jobless claims fell to 198 000, below market expectations for 215 000 and well below the 30‑year median of 320 000. Continuing jobless claims also edged lower to 1.88 million but remain well above the lows of around 1.35 million in 2022 and above the pre‑pandemic     average (2018–2019) of around 1.7 million. This may signal that those without work are having a harder time finding employment. Steady economic growth of around 2% in 2026 should contain job lay-offs, with the unemployment rate likely to stabilise at around 4.4%-4.8% in 2026.

• According to the US Census Bureau, retail sales rose by a robust 0.6% m/m in November, above market expectations for an increase of 0.4% m/m and a rebound from a slight decline in October. However, growth in the control group of retail sales - which excludes several volatile categories and feeds directly into the GDP estimate - decelerated from 0.6% m/m in October to 0.4% m/m in November. Despite the slowdown in the control group, the growth rate remains resilient, which is indicative of steady growth in consumer spending despite some softening of the US labour market.

• On Tuesday, the US Census Bureau reported that sales of new single-family homes for October was recorded at a seasonally-adjusted annual rate of 737 000. This was a slight decrease from the prior month but ahead of market estimates for sales of around 725 000. US mortgage rates continued their recent downward trend, with the average 30-year fixed rate approaching 6% towards the end of the week.

• The US National Association of Realtors (NAR) reported that existing home sales rose by 5.1% m/m in December to an annualised 4.35 million units. This was above market expectations for sales of around 4.18 million. According to the NAR Chief Economist, Lawrence Yun, home sales increased in all regions, as “conditions began improving, with lower mortgage rates and slower home price growth”. Bloomberg’s economic surprise index for housing and real estate data recently hit a 13-year high.

• The US NFIB Small Business Confidence Index edged up to 99.3 index points in December 2025 from 98.7 in November. While the actual sales index improved, the expected sales component, hiring intentions and capex intentions all softened, with job openings stable. Importantly, only 8.6% of companies responded to the survey, which is obviously extremely low and problematic for the accuracy and relevance of the survey.

• Early in the week, the US House of Representatives passed the proposed AGOA act with a vote of 340 to 54. The bill will now proceed to the Senate for consideration and approval before it is sent to Trump for his approval. It extends AGOA for three years to 2028. The proposed AGOA legislation contains no changes from the previous legislation, other than the extension of the expiry date. The legislation still allows the president power over which countries can participate in AGOA. The AGOA agreement does not supersede Trump’s vast array of tariff changes that he has announced since the start of his second term.

• According to Germany’s Federal Statistical Office, the economy grew for the first time in three years in 2025 as household and government spending increased. Official data showed that GDP expanded by 0.2% in the fourth quarter of 2025 and by 0.2% for the full year. In contrast, exports fell by 0.3% in 2025 due to higher US tariffs, a stronger euro, and Chinese competition. Imports, on the other hand, rose by an inflation-adjusted 3.6%, after declining in each of the prior two years. Consequently, Germany’s trade surplus fell to €110 billion in 2025 from €241 billion in 2024.

• After 25 years of talks, the EU provisionally endorsed a free trade agreement with South America’s Mercosur bloc, which comprises Argentina, Bolivia, Brazil, Paraguay, and Uruguay. The deal, which is the largest ever for the EU in terms of tariff reductions, will result in the gradual elimination of tariffs on more than 90% of bilateral trade. The EU’s trade with Mercosur was worth over €111 billion in 2024.

• China’s trade balance recorded an improved surplus of $114.14 billion in December, slightly below market expectations for a surplus of $114.35 billion (Bloomberg). The recent increase in China’s trade balance occurred despite imports rising at a faster rate than exports, although both had strong monthly performances. Chinese exports increased by 6.6% y/y in December from a 5.9% y/y rise in November and were higher than market expectations for growth to decelerate to 3.1% y/y (Bloomberg). The latest trade data showed that the combined increase in exports to Southeast Asia and Europe outweighed a tariff-driven slump in exports to the US. (Shipments to the US recorded their ninth consecutive double-digit drop in December, decreasing by -30.2% y/y, following a decline of 28.5%y/y in November. This occurred despite a de-escalation of trade tensions between the US and China, suggesting that the 31% tariff on Chinese goods is still high and well above those of its competitors.) For 2025 as a whole, exports to the US fell by 20%, with the US share of China’s total exports falling to a historic low of 11.1% from a peak of 19.3% in 2018. While the data highlighted China’s manufacturing prowess and ability to withstand US tariffs, it also risks inflaming tensions with the country’s trade partners, as its exports flood into Africa, Latin America, and other markets.

• While most analysts expect the Bank of Japan (BoJ) will increase interest rates again in July 2026, the historic and sustained weakness of the yen prompted some speculation that the BoJ could consider bringing forward the timing of its next interest rate hike, possibly to as early as April. When the BoJ last raised rates at its December 2025 meeting, Governor Kazuo Ueda offered limited insights into the pace of further monetary policy normalisation. However, he reiterated that the central bank will raise interest rates when its forecasts for the economy and prices are realised and emphasised the importance of seeing sustained wage growth. In the past four months, only Japan has increased interest rates among the 80 central banks we monitor.