Market update: 20 January 2026
The ASX 200 rose 2.1% this week, supported by stronger household spending, rising commodity prices, and gains in financial stocks. Household spending accelerated in November, offering a brighter signal for retail, although consumer confidence remains low. With inflation showing signs of easing slightly, markets continue to expect the RBA to hold interest rates steady in the near term. The overall tone reflects cautious optimism as investors look ahead to the next round of economic data.
US markets pulled back, with the Dow, S&P 500 and Nasdaq down slightly for the week. Inflation data was steady, with December CPI in line with expectations (with headline inflation at 2.7% and core at 2.6%), reinforcing views that the Fed will keep rates unchanged at its upcoming meeting. Bank earnings helped support the market, but proposed caps on credit card interest rates raised concerns for lending margins.
European shares edged higher as solid economic data and improving investor sentiment supported gains. Germany exited recession with a small GDP lift, while the UK economy grew 0.3% in November after two months of contraction. Eurozone industrial production rose for a third straight month, and a new EU–Mercosur trade deal marked a major step toward strengthening global trade ties.
Markets in Greater China were mixed. Hong Kong’s Hang Seng Index rose 2.3%, while the Shanghai Composite slipped 0.4% after regulators tightened rules around margin lending.
Japan’s Nikkei surged 3.8%, driven by political momentum ahead of a potential snap election. Prime Minister Sanae Takaichi is expected to call a vote in early February. which investors see as paving the way for additional fiscal stimulus. Investors believe a potential victory could pave the way for fiscal stimulus, with particular interest in AI, defence, and nuclear energy sectors that may benefit from future policy support.
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