Market insight - global monthly outlook - January 2026

Global Outlook

US equities were flat in December, underperforming globally. Sector performance was mixed, with financials and materials leading. The Fed cut rates by 25bps to 3.5%–3.75%, citing US labour market weakness and easing inflation (2.7% in November). Unemployment rose to 4.6%, while job gains were modest. 

European equities gained over 2% in December, capping a strong year. The European Central Bank kept rates at 2% for the fourth meeting, and projected inflation near its 2% target.

Asia ex-Japan equities delivered mixed performances in December. Most regional markets including Taiwan, Korea, Malaysia and Thailand ended the year on a positive note, while China and India saw modest correction during the month.

United States

• US equities ended December broadly unchanged, underperforming global peers as investors rotated towards cheaper markets.
• Consumer confidence fell further in December to 89.1 from November’s revised 92.9, below expectations of 91.7, reflecting ongoing labour market concerns and tariff-related price pressures.

Europe (including UK)

• In December, European equities returned over 2%. Financials led performance, while energy and staples lagged.
• The Bank of England lowered interest rates by 0.25% to 3.75%. UK CPI fell to 3.2% in November, down from the previous month’s 3.6% outturn.

Asia Pacific (ex Hong Kong ex China ex Japan)

• In overall 2025, the Asia ex Japan region has strong positive return with most markets returned double digit positive return during the year.
• We maintain a constructive outlook on the region due to favourable macro policies, easing inflationary pressure and anticipated rate cuts. We see key opportunities lie in export-driven sectors, policy-supported industries, and long-term structural growth themes. The semiconductor sector and national defence sector with rapidly growing demand are also worth noticing within the region.

Hong Kong and Mainland China (H-shares)

• The Hang Seng Index dropped by 0.9% in December mainly due to technology stock volatility and liquidity concern for real estate developers like Vanke.
• On economic front, the purchasing managers index of China bounced back to expansionary territory in December, reflecting manufacturing activity regained some momentum. Retail sales slowed in November, with year-over-year figure easing to 1.3%. Nevertheless, supported by recent festivities and Singles’ Day promotions which continue recorded a positive growth in November 2025.

Japan

• Japanese equities posted modest gains in December. Finance and insurance were among the best-performing sectors, driven by rising interest rates. 
• The Bank of Japan raised its policy rate by 25 basis points to 0.75%, its highest level in 30 years, in contrast to rate cuts by the US Federal Reserve and Bank of England.

Fixed Income

• US treasuries returned -0.51% in December. Supported by weaker labour conditions and rising unemployment, the US Federal Reserve cut interest rates by 25bps to 3.50%-3.75%. Core inflation declined to 2.6%, its lowest reading since early 2021.
• UK gilts stood out by returning 0.20% over the month. The Bank of England lowered interest rates by 0.25% to 3.75%. UK CPI fell to 3.2% in November, down from the previous month’s 3.6% outturn.

Emerging Markets

• Emerging market equities rose in December, with strong gains in Korea and Taiwan more than offsetting continued softness in China.
• Latin America also delivered positive returns, as Brazil recovered from political uncertainty and Peru benefited from firm commodity prices.

From the perspective of Hong Kong pension investing. All data are sourced from Invesco dated January 19, 2026, unless otherwise stated.