Australian shares are set for a softer start to the week as strong domestic economic data reinforces expectations of an interest rate rise from the Reserve Bank of Australia (RBA), which meets tomorrow.
SPI futures point to the S&P/ASX 200 opening around 60 points, or 0.7%, lower on Monday, extending last week’s pullback. Despite the near-term weakness, the benchmark index rose 1.8% over January, marking its strongest monthly performance since August.
Markets are increasingly confident the RBA will lift the cash rate by 25 basis points to 3.85% at its meeting on Tuesday, following stronger-than-expected inflation and employment data. Interest rate markets are pricing a 74% probability of a hike, which would be the first increase in more than two years and a sharp shift from expectations just two months ago, when easing remained the base case.
US: Fed succession fears and inflation pressure Wall Street
US sharemarkets closed lower on Friday as investors reacted to inflation data, corporate earnings and growing uncertainty around US monetary policy leadership.
Sentiment weakened after US President Donald Trump nominated former Federal Reserve Governor Kevin Warsh as a potential successor to Fed Chair Jerome Powell, a move seen as hawkish given Warsh’s preference for a smaller central bank balance sheet.
The Dow Jones Industrial Average fell 179 points, or 0.4%, the S&P 500 lost 30 points, or 0.4%, and the Nasdaq dropped 223 points, or 0.9%. Materials stocks led declines, with the S&P 500 materials index down 1.9%.
Newmont slumped 11.5%—its worst session since October 2024—as gold prices plunged. Defensive consumer staples gained 1.4%, with Colgate-Palmolive jumping 5.9% after forecasting stronger-than-expected annual sales. Apple added 0.5% following its quarterly results.
Despite Friday’s losses, January delivered solid gains, with the Dow rising 1.7% to record its ninth consecutive monthly advance, the longest streak since 2018. The S&P 500 gained 1.4%, while the Nasdaq rose 0.9%.
Europe: Banks drive strong start to 2026
European sharemarkets finished higher on Friday, extending a strong run for regional equities.
The FTSEurofirst 300 index rose 0.8% on the day and climbed 3.2% in January, marking its seventh straight monthly gain. Banking stocks led the advance, rising 1.7%.
Caixabank surged 6.7% after the Spanish lender forecast higher lending income and profits this year and next. In London, the FTSE 100 added 0.5% on Friday and rose 2.9% across January, its longest monthly winning streak in 12 years.
Currencies: US dollar strength pressures majors
The US dollar strengthened in European and US trade, weighing on major currencies.
- The euro slid from US$1.1969 to near US$1.1850 by the US close.
- The Australian dollar fell from US70.31 cents to US69.41 cents, last trading near US69.60 cents.
- The Japanese yen weakened from JPY153.71 to around JPY154.75 per US dollar.
Commodities: Gold and silver slammed as yields rise
Commodity markets were mixed to weaker, with precious metals hit hardest as bond yields firmed and the US dollar strengthened.
Gold futures plunged US$609.70, or 11.4%, to US$4,745.10 an ounce—its steepest daily fall since 1983—following the announcement of Kevin Warsh as Trump’s preferred Fed nominee.
- Spot gold was near US$4,864 at the US close, with bullion down 4.7% for the week.
- Silver futures collapsed 31.4% to US$78.53, marking their worst session since March 1980.
Base metals also retreated.
- Copper futures fell 4.5% and aluminium dropped 3.3%, both pressured by a stronger US dollar. For the week, copper eased 0.2% and aluminium declined 2%.
Oil prices edged lower after President Trump reiterated openness to negotiations with Iran.
- Brent crude slipped US2 cents to US$70.69 a barrel.
- US Nymex crude fell US21 cents to US$65.21 a barrel. Despite the pullback, Brent surged 16.2% in January, its strongest monthly gain since 2022.
- Iron ore futures eased US15 cents, or 0.1%, to US$105.62 a tonne, weighed by rising Chinese port inventories ahead of the Lunar New Year. The steelmaking ingredient fell 0.7% over the week.
Looking ahead: RBA, inflation and global earnings in focus
In Australia, markets will focus on home price data, job ads, inflation and manufacturing figures, alongside the RBA’s two-day monetary policy meeting. Austal is due to release earnings.
China will publish factory activity data, while in the US, the ISM manufacturing index is due alongside earnings from Walt Disney and Palantir.