Trading volumes remained light across Asia, with markets in Japan and China closed for New Year holidays. Despite the subdued conditions, MSCI’s broad Asia-Pacific index excluding Japan rose about 1.5 per cent, led by strong gains in Hong Kong, where the Hang Seng Index jumped more than 2 per cent. US stock futures also moved higher, signalling a positive start to the year for Wall Street, while European futures painted a mixed picture.
The early gains followed a strong 2025 for global equities, a year in which markets powered ahead despite tariff wars, geopolitical tensions, the longest US government shutdown on record, and repeated questions over central bank independence. Much of last year’s rally was driven by enthusiasm around artificial intelligence, solid corporate earnings, aggressive share buybacks, and strong retail investor participation.
However, market participants caution that 2026 is likely to be more volatile. With valuations already near long-term averages, further equity gains are expected to depend heavily on earnings growth and the broader macroeconomic environment.
That caution was clearly visible in commodities, where precious metals extended their extraordinary rally from last year.
Spot gold climbed around 1.5 percent to trade near $4,380 an ounce, while silver surged close to 4 per cent. Platinum and palladium also advanced sharply, building on their best annual performances on record.
Gold’s rise in 2025 was its strongest in decades, while silver and platinum delivered historic gains, supported by expectations of US interest rate cuts, persistent geopolitical flashpoints, robust central bank buying, and strong inflows into exchange-traded funds. Analysts say the rally also reflects growing demand for hedges against long-term US dollar weakness.
Investor attention is now firmly focused on the US Federal Reserve and the path of monetary policy. While traders see little chance of an immediate rate cut this month, markets are pricing in at least two reductions later in the year as signs of labour market softening persist.
Concerns over the Fed’s independence have added another layer of uncertainty, with President Donald Trump expected to announce a successor to Chair Jerome Powell later this month. The prospect has kept markets alert to potential shifts in policy direction and governance at the world’s most influential central bank.
In currency markets, the US dollar remained under pressure, extending its sharp decline from 2025, its weakest annual performance in eight years. The yen hovered near levels that have previously prompted intervention by Japanese authorities, keeping traders on edge.
Oil prices edged higher in early trade after suffering their steepest annual loss since 2020, offering some relief to energy markets at the start of the New Year.
As 2026 unfolds, investors appear willing to take selective risks in equities, but the continued surge in precious metals suggests caution remains the dominant undercurrent shaping global markets.
