USA
Trading was thin and choppy around year-end, with macro signals mixed: weekly initial jobless claims fell to 199k (week ended Dec 27; released early due to the New Year holiday), reinforcing the “still-tight labor market” narrative even as other soft spots persisted. On the activity side, manufacturing remained in contraction in December—ISM Manufacturing PMI at 47.9—highlighting continued pressure from weaker orders and elevated costs. In markets, the holiday-interrupted week (Dec 29–Jan 2) was essentially a de-risking from late-December highs: Nasdaq −1.5%, S&P 500 −1.0%, Dow −0.7%, with Friday (Jan 2) delivering only a modest stabilization rather than a full rebound. The takeaway: investors used the low-liquidity window to lock in gains after a strong 2025, while the combination of resilient labor data and contracting manufacturing kept the rates/inflation debate alive and capped risk appetite into the first full week of 2026.
Europe
The key macro headline was still “soft growth, sticky costs” in manufacturing. Final December surveys showed the Eurozone Manufacturing PMI slipping to 48.8 (deeper in contraction), with Germany notably weaker (Germany PMI 47.0)—consistent with fragile demand and persistent export weakness.
Inflation didn’t deliver a fresh catalyst during this window: Eurostat’s schedule indicated the December flash inflation estimate would arrive later (Jan 7, 2026), so markets traded more off positioning, rates expectations, and risk sentiment than new CPI data. Despite weak PMIs, equities pushed higher into year-end/early-year, helped by easing-policy hopes and sector leadership (notably tech/consumer names in the post-holiday reopen), with the STOXX Europe 600 rising ~+1.2%. Major indices echoed that bid: FTSE 100 ~+0.9%, DAX ~+0.8%, CAC 40 ~+1.0%, and IBEX 35 ~+1.7% over the same span. Net: even with manufacturing still contracting, the market treated Europe as a “rate-cut beneficiary” into 2026, keeping the equity tone constructive.
Japan
The data backdrop improved at the margin but remained borderline: Japan’s manufacturing PMI narrative was “back toward stabilization,” with indicators moving up around the 50 threshold by December. Equity performance during this specific week was dominated by the calendar: Japan traded only a limited set of sessions into year-end, and by the Jan 2 window many local markets were still holiday-affected (global feeds explicitly flagged Nikkei closed on Jan 2). In price terms, the Nikkei 225 slipped into the year’s end (Dec 29: 50,526.92 → Dec 30: 50,339.48, about −0.4%) amid profit-taking after a strong 2025 run. Meanwhile, the broader TOPIX finished 2025 at a record year-end close of 3,408.97, underscoring how leadership was broader than just mega-cap tech even as positioning turned cautious into holidays. The market message: Japan entered 2026 with constructive fundamentals and strong momentum, but near-term index moves in this week were more about year-end rebalancing and thin liquidity than fresh macro repricing.
China
China delivered the most market-moving macro surprise of the week: official December data showed factory activity returning to expansion, with the NBS Manufacturing PMI rising to 50.1 (from 49.2) and non-manufacturing PMI at 50.2, widely read as a fiscal/stockpiling-supported rebound rather than a clean demand-led re-acceleration. Risk assets reacted differently across venues due to holiday schedules: Mainland trading was limited around New Year, and the Shanghai Composite was nearly flat across the last sessions, signaling “better PMI, but still cautious on follow-through.” Hong Kong, with more continuous price discovery, leaned into the improvement and global risk tone: the Hang Seng jumped ~+2.8% on Jan 2 and ended up roughly +2.7%. Bottom line: the PMI beat helped sentiment, but markets still treated the rebound as potentially temporary given weak external demand/headwinds—so the biggest equity impulse showed up in Hong Kong beta rather than in a sustained Mainland breakout.