Market Summary - January 7, 2026
Overview
The global stock market rally experienced a stall in Asia, particularly with Japan's Nikkei index dropping approximately 1%. This decline was attributed to profit-taking after a strong start to the year and rising geopolitical tensions between China and Japan, particularly following China's ban on the export of dual-use materials to Japan.
Key Market Movements
Asian Markets
Major manufacturers in Japan, including Toyota and Honda, saw their shares fall over 2%, while chip-maker Advantest dropped 4.4%. Conversely, Toyo Engineering surged nearly 20% due to the ban on rare earth exports, and Hisamitsu Pharmaceutical jumped about 19% after announcing a significant privatization plan.
Euro Area Inflation
Inflation in the Euro area cooled to 2.0% in December 2025, aligning with the European Central Bank's target. This decrease was primarily driven by falling energy costs and slower price increases in services and manufactured goods. However, food and tobacco prices saw a slight uptick. Core inflation also improved to a four-month low of 2.3%, surpassing analyst expectations.
German Retail Sales
German retail sales unexpectedly fell by 0.6% in November 2025, marking the first decline since August. This drop was largely due to a 1.9% decrease in food sales, overshadowing a minor increase in non-food sales and a solid rise in online shopping. Year-over-year growth in retail sales slowed to 1.1% from 1.6% in October, although early estimates suggest a 2.4% overall growth for 2025.
European Market Performance
European stock markets took a breather, with the main index rising only slightly. German stocks added about 0.4%, while markets in Spain and Italy remained flat after reaching all-time highs. Oil companies like Shell and BP saw declines following President Trump's announcement of a deal to import Venezuelan crude oil, which is expected to increase global oil supply.
Currency and Commodity Updates
The US dollar remained steady as traders awaited key economic reports. The dollar slightly rose to 98.63, while the Euro fell to $1.1676. Gold prices dropped 0.8% to approximately $4,461 per ounce, influenced by a stronger dollar and changing perceptions regarding Venezuela. Other precious metals also faced losses, with silver down 2.3% and palladium down 4.5%.
Looking Ahead
As the European session progresses, attention will shift back to economic data, particularly the ADP private employment figures and the JOLTS report on job openings. Given the recent cooling in the job market, there is a strong possibility that these reports may be negative, potentially impacting the US dollar's value.
Technical Analysis
The FTSE 100 index has breached the psychological 10,000 mark but is currently experiencing volatility. Immediate support levels are identified at 9973 and 9943, with a break below the 10,000 mark potentially leading to a deeper correction.