ETO Markets Buzz | US Markets Hit Record Highs as Investors Weigh Cooling Jobs Data and Persistent I

US equity markets moved to fresh record highs as investors assessed the latest labour market data and its implications for monetary policy. December employment figures showed job creation slowing modestly, reinforcing expectations that the US economy is transitioning toward a more balanced growth phase rather than a sharp downturn. At the same time, persistent inflation expectations and renewed geopolitical risks continue to influence sentiment across asset classes.

US Equities Extend Gains on Soft-Landing Hopes

US equities advanced strongly, with the S&P 500 and the Dow Jones Industrial Average both closing at record levels. Markets responded positively to signs that employment growth is cooling without triggering a material deterioration in labour conditions. The unemployment rate edged lower to 4.4 percent, suggesting the labour market remains steady and gradually expanding, albeit at a more measured pace.

Inflation Expectations Complicate the Policy Outlook

Investor focus has now shifted toward the Federal Reserve, as policymakers weigh softer employment momentum against inflation risks that remain elevated. While near-term growth indicators have eased, inflation expectations continue to complicate the outlook for interest rate cuts, reinforcing expectations that policy will remain restrictive for longer.

Consumer Confidence Stabilises but Remains Subdued

Consumer confidence in the United States showed modest improvement in early 2026, with sentiment rising for a second consecutive month. However, confidence levels remain significantly below those seen a year ago, reflecting ongoing cost-of-living pressures and the lingering impact of higher interest rates. While easing tariff concerns have provided some marginal relief, household inflation expectations remain a key constraint on broader confidence recovery.

Longer-term inflation expectations have moved higher compared to a year earlier, highlighting concerns that inflation persistence may continue to challenge the Federal Reserves path toward easing. This divergence between moderating growth and firm inflation expectations suggests policymakers are likely to maintain a cautious and patient stance.

Oil Strengthens as Geopolitical Risks Re-Enter Focus

Oil prices strengthened as geopolitical risk re-emerged as a central theme in energy markets. Rising internal instability in Iran, which accounts for roughly three million barrels per day of global oil supply, has increased fears of potential supply disruptions. While no immediate shock has materialised, the heightened risk premium underscores how sensitive energy markets remain to developments in key producing regions. Any sustained disruption would likely tighten global supply conditions and add further inflationary pressure.

As markets fully re-engage following the holiday period, attention is turning to a heavy slate of economic releases and the start of earnings season for major US financial institutions. In the United States, upcoming inflation data, retail sales, and producer price figures will be closely monitored for confirmation that price pressures are easing. In Europe, GDP updates and industrial data will provide insight into regional growth trends, while Chinas trade and credit data will be watched for signs of stabilisation amid global protectionist pressures.

Iron Ore Outlook: Fundamentals Turning More Supportive

Iron ore fundamentals are showing early signs of improvement as economic conditions in China begin to stabilise. Targeted stimulus measures, improving credit availability, and gradual recovery in infrastructure spending are supporting steel demand expectations. On the supply side, disciplined production growth and operational constraints among major exporters are limiting downside risk. Combined with Chinas preference for higher-grade ore to meet environmental targets, the balance of risks for iron ore prices appears increasingly skewed to the upside.

Overall, early 2026 is shaping up as an environment defined by cooling but resilient growth, persistent inflation concerns, and heightened geopolitical risk. For investors, this backdrop favours selectivity, diversification, and disciplined risk management as markets navigate a more complex and policy-sensitive phase.

Disclaimer

This article is provided for general informational purposes only and does not constitute investment advice. Market conditions are subject to change without notice. Investors should carefully consider their financial situation and seek independent professional advice before making any investment decisions.