Saxo Market Compass
12 January 2026 (recap week of 5 to 9 January 2026)

Where markets have been — and where they’re heading.

Headlines & introduction

Markets opened the year with record highs, low headline volatility, and growing sensitivity to policy risk.

The first full trading week of 2026 delivered fresh equity records in the US and Europe, supported by softer labour metrics, resilient earnings expectations, and easing inflation pressures outside energy. Beneath the surface, geopolitics, energy supply risks, and political pressure on central banks kept investors alert. By week’s end, attention shifted decisively toward inflation prints, labour market data, and the formal start of US earnings season.
Market pulse: confidence is high, but conviction remains conditional.

Equities

Equities advanced across regions, but rotation and regional divergence became more pronounced.

United States:

US equities pushed to new record levels by Friday (January 9), with the S&P 500 and Nasdaq closing the week at all-time highs as December labour data showed slower but still positive job growth. Early-week gains were led by energy and financials on Venezuela-related headlines (January 6), while mid-week trading saw a rotation back into technology and selective AI-linked names (January 7–8). By late week, a pause in mega-cap tech momentum prompted renewed interest in cyclicals and defence (January 9). Overall, the trend remained constructive, but market leadership narrowed as investors positioned for critical inflation data and the first tranche of earnings.

Market pulse: US equities are rising, but the market is no longer moving as a single trade.

Europe and Asia:

European equities broadly tracked the US higher early in the week, buoyed by softer German and French inflation data and continued strength in defence, industrials, and selected technology names (January 6–7). UK equities outperformed mid-week on defence exposure before cooling alongside broader European markets as indices hovered near record levels (January 9). Mining stocks gained attention late in the week on renewed merger speculation, adding sector-specific volatility. In Asia, sentiment improved on Beijing policy support signals and easing deflation pressures, lifting mainland indices and stabilising Hong Kong earlier in the week. However, gains faded into Friday as investors turned cautious ahead of inflation data and amid renewed geopolitical uncertainty. Japan underperformed as persistently high bond yields and domestic political uncertainty weighed on risk appetite.

Market pulse: outside the US, equities are advancing on policy support rather than firm growth momentum.

Volatility

Index volatility stayed low, but options markets continued to price event risk selectively.

The VIX remained subdued throughout the week, hovering in the mid-teens despite equities pushing to new highs (January 6–9). Short-dated implied volatility climbed around key US labour data, signalling targeted hedging rather than broad fear. Single-stock volatility was most pronounced in energy and defence names, reflecting geopolitical sensitivity rather than macro stress. Downside skew stayed modestly bid, suggesting investors continued to pay for protection even as index conditions appeared calm.

Market pulse: volatility looks dormant, not absent.

Market sentiment based on options flow data

Options markets signalled confidence, but with risk controls firmly engaged.

Options activity over the past week suggests institutional investors remained invested while actively managing downside risk. Broad positioning continued to reflect confidence in the medium-term equity outlook, yet downside protection was consistently added to guard against short-term volatility rather than systemic stress. This pattern points to expectations of temporary pullbacks, not a change in trend. Most noticeably, hedging clustered around mid-January expiries in large US technology names, coinciding with key macro data releases and the early stages of earnings season. Longer-dated upside positioning remained in place, indicating that investors are hedging uncertainty rather than reducing growth exposure.

Market pulse: disciplined participation, with safeguards switched on.

Digital assets

Digital assets traded in line with broader risk sentiment, with ETFs amplifying macro sensitivity.

Bitcoin and ethereum moved within relatively tight ranges through the week, softening mid-week ahead of US payrolls before stabilising into Friday (January 8–9). ETF flows highlighted a more cautious tone, with intermittent outflows from bitcoin products and steadier demand for ethereum-linked vehicles earlier in the week (January 7). Crypto-linked equities largely mirrored broader equity moves, reinforcing the view that digital assets continue to trade as macro-sensitive instruments rather than idiosyncratic growth plays.

Market pulse: resilience holds, but conviction remains macro-driven.

Fixed income

Bond markets stayed range-bound, with Japan the main source of tension.

US Treasury yields moved sideways for most of the week, easing early before rebounding modestly ahead of Friday’s jobs report (January 9). The curve flattened as short-dated yields edged higher while long-end rates remained anchored. In contrast, Japanese government bonds remained under pressure, with long-dated yields pushing to fresh multi-decade highs before stabilising mid-week. This divergence kept global rate expectations in focus and fed through into currency markets.

Market pulse: fixed income is calm in the US, but far from settled globally.

Commodities

Geopolitics dominated price action across energy and metals.

Oil prices swung on developments linked to Venezuela and broader geopolitical risk throughout the week (January 6–9), with supply concerns preventing a sustained sell-off despite elevated inventories. Precious metals outperformed as political uncertainty, central-bank credibility questions, and a classic safe-haven backdrop supported bullion; gold approached fresh record highs. Industrial metals also advanced on China policy optimism and tight supply narratives, while agricultural markets were more mixed.

Market pulse: commodities are responding more to politics than demand fundamentals.

Currencies

Foreign exchange reflected yield divergence and rising political noise.

The US dollar traded mixed, firming into Friday before weakening again as political pressure on the Federal Reserve came into sharper focus (January 9–12). The Japanese yen remained structurally weak, as elevated bond yields failed to translate into sustained currency support. Commodity-linked currencies outperformed earlier in the week, while the euro and sterling tracked relative rate expectations rather than domestic data surprises.

Market pulse: currencies are being driven by policy credibility as much as data.

Key takeaways

• US and European equities started 2026 at record highs, but leadership rotated.
• Volatility stayed low, yet downside protection remained in demand.
• Options flow showed confidence paired with active risk management.
• Japan stood out as the main source of bond-market tension.
• Commodities gained on geopolitics rather than demand fundamentals.
• FX markets reflected policy divergence and central-bank credibility concerns.

Looking ahead

• Earnings and inflation are scheduled catalysts, but political and geopolitical risks are increasingly market-relevant.
  This week’s calendar brings the formal start of US earnings season, with major banks due to report early, potentially offering insight into credit conditions, net interest income, and guidance for 2026. The release of US December CPI is the key macro event that could reframe rate expectations if the data deviates meaningfully from consensus, followed by retail sales and producer price data that will deepen the economic narrative. Semiconductor earnings, notably TSMC, will act as a barometer for AI-cycle strength beyond the US tech complex.
   
• Political pressure on monetary policy and headline risk to credibility are now palpable.
  Federal Reserve Chair Jerome Powell disclosed that the US Department of Justice has served the central bank with grand jury subpoenas threatening a criminal indictment — a rare and unprecedented escalation in the long-running conflict between the Trump administration and the Fed. Powell characterised the action as an attempt to exert political influence over monetary policy and rejected it as a pretext, while markets reacted with safe-haven bid dynamics in gold and risk-off moves in equities and FX. Concerns about central-bank independence may continue to shape yields, risk sentiment, and dollar strength this week.
   
• Geopolitical developments are likely to persist in the headlines.
  Nationwide protests in Iran have continued amid government efforts to suppress unrest, contributing to energy and safe-haven demand dynamics, with substantial reported casualties and continued uncertainty over the regime’s stability. While the direct short-term economic impact is unclear, persistent tensions in the Middle East may keep energy markets sensitive to disruption risk.
   
• Rhetoric around Greenland and US foreign policy adds a geopolitical overlay.
  Ongoing commentary on the US administration’s position regarding Greenland, including rhetoric about territorial ambitions, remains in public discourse and has elicited strong diplomatic pushback from Nordic allies, underscoring geopolitical risk sentiment that can influence defence and resource markets if conversations escalate further.

Market pulse: the calendar is busy, but headlines may set the tempo.

Conclusion

Markets enter mid-January with strong momentum but heightened sensitivity to policy risk, headline politics, and earnings reality. While equities remain well supported, the coming week will test whether optimism can be justified by inflation data and corporate guidance amid politicised monetary policy risk. Staying diversified and attentive to volatility and options signals remains essential as 2026’s first major catalysts unfold.