Week in Review: Global Markets Mixed as Resources Rally

US earnings divergence and softer inflation temper equity sentiment:

Global equity markets delivered mixed performances over the last week, with small-cap and value stocks extending their year-to-date outperformance relative to large-cap and growth-oriented shares. The start of the fourth-quarter earnings season in the US set the tone, particularly within the financial sector, where results and market reactions varied.

Several major US banks reported earnings during the last week. JPMorgan Chase and Citigroup shares declined after both institutions posted lower quarterly profits, while Morgan Stanley and Goldman Sachs advanced, supported by results that broadly exceeded market expectations. Technology shares provided some support to broader markets, led by the semiconductor sector. Taiwan Semiconductor, Nvidia, Micron and peers rallied on strong earnings updates, continued AI-driven optimism, and news of a US–Taiwan trade agreement committing approximately USD 250 billion toward US-based semiconductor manufacturing.

Outside of precious metals, markets were notably calm despite heightened political uncertainty in the United States. Late Sunday, news emerged that Federal Reserve Chair Jerome Powell was under investigation by the US Department of Justice regarding testimony on cost overruns related to the Federal Reserve’s headquarters renovation. Powell pushed back strongly, characterising the investigation as politically motivated amid renewed pressure from President Donald Trump to accelerate interest rate cuts and challenge central bank independence. Market reaction, however, remained muted.

Geopolitical developments also came into focus. Widespread protests in Iran prompted President Trump early in the week to suggest possible US military action, warning that Iran was approaching a “red line.” He simultaneously signalled support for protesters and began withdrawing US troops from select Middle Eastern bases. By midweek, the tone softened as the administration indicated assurances had been received that executions would halt and violence against protesters would subside.

On the macroeconomic front, US inflation data surprised modestly to the downside. Core CPI rose 0.2% month-on-month and 2.6% year-on-year in December, below consensus expectations. Headline CPI increased 0.3% month-on-month and remained steady at 2.7% year-on-year, easing concerns that prior methodological adjustments would lead to a renewed acceleration in inflation.

Last week, US equity indices ended lower, with the S&P 500 down 0.4%, the Dow Jones Industrial Average declining 0.3%, and the Nasdaq Composite falling 0.7%.

European growth surprises support equities despite lingering risks:

In Europe, markets were more constructive. The STOXX Europe 50 Index gained 0.53%, supported by resilient economic data and earnings. Germany recorded its first annual economic growth in three years, with GDP expanding 0.2% in the fourth quarter and for the full year. The Bundesbank forecasts growth of 0.6% in 2026, driven by increased defence and infrastructure spending. In the UK, GDP grew 0.3% month-on-month in November, exceeding expectations, with services, production and manufacturing contributing positively. The FTSE 100 rose 1.09% for the week.

Asia mixed as Japan rallies and China faces policy headwinds:

Asian markets were mixed. Japanese equities rallied sharply, with the Nikkei 225 Index gaining 3.84% and hovering near record highs. Optimism was underpinned by reports that Prime Minister Sanae Takaichi may call a snap general election, potentially strengthening political stability. In contrast, mainland Chinese markets declined after regulators tightened margin financing rules for domestic investors. Economic data showed exports rising 6.6% in December and a record USD 1.2 trillion trade surplus for 2025. The Shanghai Composite fell 0.45%, while Hong Kong’s Hang Seng Index rose 2.25%.

Commodities steady as geopolitical risk premium fades:

Commodity markets reflected ongoing geopolitical uncertainty. Brent crude oil rose 1.6% on the week, settling near USD 64 per barrel after a volatile period marked by concerns over Iranian supply disruptions. Prices eased later in the last week as the likelihood of immediate US military intervention diminished, despite a continued build-up of US forces in the region. Gold prices were volatile, but still recorded a weekly gain of approximately 2%, after reaching a record high midweek. Safe-haven demand moderated as geopolitical tensions eased and expectations for near-term US rate cuts continued to fade.

This week will feature a busy US economic calendar, as agencies catch up following the government shutdown. Key releases include personal income and spending data, PCE inflation measures, and another estimate of third-quarter GDP. Leading indicators such as S&P PMIs and the University of Michigan consumer sentiment survey will also be closely watched. Internationally, PMIs will be released across the Eurozone, the UK, Japan, Australia and India. The UK will publish inflation, labour market and retail sales data, while China’s final GDP print for the year and the Bank of Japan’s monetary policy decision will be key focal points for Asian markets.

South Africa rate-cut expectations lift equities:

The South African rand weakened modestly on Friday, as market participants positioned ahead of this week’s inflation release, which is expected to provide further insight into the health of Africa’s most industrialised economy and the South African Reserve Bank’s (SARB) interest rate trajectory for the year ahead.

Inflation eased for the first time in three months in November, slowing to 3.5% year-on-year and remaining comfortably within the SARB’s 3% target band. At its most recent policy meeting, the central bank cut the repo rate by 25 basis points to 6.75% in a unanimous decision, noting that an improved inflation outlook had created scope for a less restrictive policy stance.

Looking ahead, a further rate cut at the end of January is increasingly likely, supported by subdued inflation dynamics and the continued resilience of the rand amid a weaker US dollar. A further 25 basis point reduction would lower the repo rate to 6.50%, bringing the prime lending rate down to 10%. Such a move would provide additional relief to indebted consumers and enhance the domestic economy’s resilience against ongoing global uncertainty.

Equity markets responded positively over the last week. The FTSE/JSE All Share Index advanced 1.74%, led by strong gains in resource stocks, reflecting firmer commodity prices and renewed investor appetite for mining counters.