Global markets kick of 2026 on a strong note

General market commentary

Global equity markets started the year on a positive footing, led by strength across Asia and renewed optimism around artificial intelligence. Equities in Hong Kong, South Korea, Taiwan and Singapore all reached fresh highs, supported by enthusiasm for more efficient AI development in China and reports of an upcoming IPO of Baidu’s AI chip business. In the U.S., small- and mid-cap shares showed pro-cyclical leadership, though gains in semiconductor equities were not enough to lift major indexes across the board. On Friday, the S&P 500 edged slightly higher, the Dow Jones Industrial Average posted modest gains, while the Nasdaq ended the day in negative territory, reflecting a mixed session amid a lack of major economic data or corporate headlines. Overall sentiment remained constructive as investors welcomed the start of 2026.

The broader backdrop remains supportive following a strong, if volatile, year for global equities. In 2025, the S&P 500 recorded 39 new all-time highs and returned 18% including dividends, while most other equity markets posted gains of around 30%. Looking ahead, expectations for continued economic growth, further monetary easing and rising corporate earnings underpin a positive outlook, albeit with more moderate returns as valuations have risen. Artificial intelligence is likely to remain a key driver, but leadership is expected to broaden across sectors and regions, reinforcing the case for a diversified approach to equity markets.

Latest market and economic update

Asian markets began the year on a strong footing, driven by a rally in technology and semiconductor shares. Japan’s Nikkei and TOPIX surged, with chipmakers Advantest and Tokyo Electron jumping sharply. South Korea’s KOSPI hit a record, driven by gains in Samsung Electronics and SK Hynix. China advanced, while Hong Kong and other regional markets were mixed.

U.S. equity futures were mostly flat as investors assessed heightened geopolitical risks after the U.S. military detained Venezuela’s President Maduro. S&P 500 and Nasdaq futures edged higher, Dow futures dipped slightly. Markets await Friday’s December jobs report, with traders cautious amid potential Fed policy shifts and uncertainty over U.S. involvement in Venezuela’s oil sector.

European shares opened 2026 strongly, with the STOXX 600 rising 0.7% to near record highs. Gains were led by technology, driven by ASML (+7%), and defence shares (+3.3%), while basic resources (+0.6%) and energy (+1.4%) also advanced. Media (-1.2%) and real estate (-0.7%) lagged, amid eurozone factory activity retreating further into contraction.

The dollar strengthened, with the dollar index reaching a two-week high above 98.5 amid U.S. geopolitical concerns in Venezuela and anticipation of key economic data. The euro traded at 1.1683, reflecting dollar resilience. Markets focus on Friday’s jobs report, other employment and PMI data, and potential Fed rate cuts, amid uncertainty over the next Fed chair.

Oil prices edged higher, with Brent at $60.92 and WTI at $57.43, as markets weighed U.S. action in Venezuela and geopolitical risks. Maduro’s capture caused no immediate disruption to PDVSA output. Analysts see modest short-term price risks, while OPEC+ maintained production and attention turns to Iran amid ongoing protests and rising tensions.

President Donald Trump said the US may take action against Colombia and Iran after a strike on Venezuela that led to the capture of President Nicolas Maduro. He warned of further military action if the interim government does not cooperate, criticised Colombia over drug trafficking, cited unrest in Iran, and said Washington would oversee Venezuela’s transition until elections are held.

China’s services sector grew at its slowest pace in six months in December, with new business and exports weakening. Employment declined for a fifth month, while input costs rose but selling prices fell due to competition. Despite this, business sentiment strengthened, and the economy remains on track for around 5% growth in 2026.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Baidu shares rose 15% on Friday after the company announced plans to spin off its AI chip unit, Kunlunxin, and seek a Hong Kong listing. The move aims to highlight Kunlunxin’s standalone value, attract semiconductor-focused investors, and broaden financing, while the unit continues operating as a Baidu subsidiary amid the company’s push for AI self-sufficiency.

Chinese automaker BYD overtook Tesla as the world’s largest electric vehicle seller in 2025, delivering 2.26 million cars, up 28% year-on-year. Tesla’s deliveries fell 8% to 1.64 million, marking a second consecutive annual decline, with fourth-quarter 2025 shipments down 16%. BYD’s rise contrasts with Elon Musk’s earlier dismissal of the company.

Brazil’s antitrust regulator Cade has launched an investigation into Microsoft over suspected anti-competitive practices in software licensing affecting rival cloud services. The probe targets potential competition issues in the cloud computing market. Following the news on Friday, Microsoft shares fell more than 2%.

Samsung Electronics has regained memory chip leadership with HBM4 and aims to restore memory and foundry strengths while prioritising AI transformation in 2026. It plans to double AI-enabled devices to 800 million using Google’s Gemini, integrate AI across products, and maintain foldable phone dominance despite slow adoption and competition, amid memory chip shortages.

Tokyo Electric Power Co shares surged nearly 9% earlier today after announcing plans to restart a reactor at its Kashiwazaki-Kariwa nuclear plant, the world’s largest. The move, over a decade after Fukushima, aims to boost energy security, cut carbon emissions, reduce fossil fuel reliance, and stabilise costs amid volatile global energy prices.

TSMC shares hit a record high after Goldman Sachs raised its price target to NT$2,330, citing strong AI-driven demand and capacity tightness. The brokerage forecast robust revenue growth of 30% in 2026, continued wafer supply constraints, and $150 billion in capital expenditure through 2028, reinforcing TSMC’s leadership in advanced semiconductor manufacturing.

Bernstein upgraded ASML to Outperform with a €1,300 target, while Aletheia Capital raised its target to around €1,250 and upgraded to Buy, citing strong demand from DRAM expansion, AI-driven 3nm logic growth, and accelerating EUV lithography sales. Analysts expect robust revenue and earnings growth, with ASML trading below historical peer premiums.

Raymond James resumed coverage of Apple with a Market Perform rating, citing a valuation that limits near-term outperformance. Analysts highlighted iPhone 17 sales, growing services, and a 2.4 billion-device installed base, while noting hardware cyclicality, supply chain risks, and tariffs, projecting moderate revenue and earnings growth through fiscal 2027.

Guggenheim upgraded Palo Alto Networks from Sell to Neutral, citing recent underperformance versus major indices, two acquisitions, and strong free cash flow margins through FY28. Analysts expect continued benefits as a leading pure-play security vendor, recent operational improvements, and AI-related demand to support revenue growth, despite prior weak ARR performance.

Maybank upgraded Sea Ltd to Buy, citing the equity’s 36% decline from its 2025 peak as already pricing in near-term risks. Shopee’s VIP programme and fulfilment network should bolster e-commerce in Southeast Asia, while financial arm Monee offers strong monetisation growth. Gaming arm Garena is expected to normalise, with limited impact on overall valuation.

Piper Sandler upgraded Arista Networks to Overweight, raising its price target to $159, citing 2026 as the “Year of Refresh” with AI and hyperscaler demand, strong financial health, and 27.8% revenue growth. Other firms, including William Blair, Evercore, and UBS, maintained positive ratings. Arista also expanded its VESPA and AVA technologies for campus networks.

UBS maintained a Buy rating on Under Armour with an $8 price target, citing a potential 25% five-year EPS growth. The analyst highlighted the brand’s strong recognition, undervaluation versus peers, and prospects for North American revenue growth, signalling significant turnaround potential amid intense competition in the athletic apparel sector.

Barclays upgraded Vertiv Holdings to Overweight from Equal Weight, raising its price target to $200, citing higher 2026–2027 earnings estimates and valuation multiples. The firm highlighted strong revenue exposure to data centres, robust organic growth, expanding margins, and growth in liquid cooling, noting that the stock has underperformed peers despite rising earnings forecasts.

Upcoming data and events

Today’s key U.S. economic releases include ISM Manufacturing data for December, covering New Orders, PMI, Prices, and Employment, alongside 3- and 6-month Treasury bill auctions. Total vehicle sales for December are also scheduled, offering insights into manufacturing activity, pricing pressures, employment trends, and consumer demand as 2026 gets underway.

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