LONDON, Jan 18, 2026, 00:33 GMT
- The U.S. Supreme Court will consider President Donald Trump’s attempt to oust Fed Governor Lisa Cook
- World Economic Forum kicks off in Davos as China unveils GDP figures and Japan moves closer to a potential snap election
- Earnings season is expanding as investors prepare for U.S. inflation figures and global “flash” PMI business surveys
As the week begins, investors are zeroing in on a U.S. Supreme Court case that might reshape the Federal Reserve’s independence. Not far behind on the radar: Davos, China’s growth figures, and a Bank of Japan decision.
Stocks wrapped up Friday with slight weekly declines, while the dollar hovered near a six-week peak as traders speculated on whether Trump would keep economic adviser Kevin Hassett in his current job or reassign him to the Fed. The S&P 500 finished at 6,940.01, and the 10-year Treasury yield climbed 6.7 basis points to 4.227%. Brent crude closed at $64.13 a barrel, with gold last seen at $4,593.28 an ounce. Anthony Saglimbene of Ameriprise described the markets as “flat-lining,” adding, “Most investors will take that as a win.” (Reuters)
On Wednesday, the Supreme Court will weigh whether Trump can remove Cook despite laws protecting Fed governors. Columbia Law School’s Kathryn Judge noted, “This Supreme Court has taken a very expansive approach to executive authority, but it is not unbounded.” Former Justice Department lawyer John Yoo cautioned that weakening central bank independence “will inevitably lead to inflation.” (Reuters)
Davos kicks off Monday, with Trump scheduled to attend the World Economic Forum, where delegates focus on “A Spirit of Dialogue.” Also on Monday, China releases its fourth-quarter and full-year GDP figures. The Bank of Japan will announce its policy later in the week as Japan moves closer to a possible snap election on Feb. 8. On the corporate front, Netflix, Johnson & Johnson, and Intel report earnings, with Netflix facing stiff competition from Paramount Skydance for Warner Bros Discovery. (Reuters)
China kicks off a packed data week with its GDP figures, as S&P Global Market Intelligence predicts 4.5% year-on-year growth for Q4. All eyes then shift to the U.S., where core PCE inflation—the Fed’s favored inflation metric—and Friday’s “flash” PMIs will provide early looks at economic momentum across the U.S., euro zone, Japan, Britain, and others. The Bank of Japan, which raised its policy rate to 0.75% last December, holds a meeting this week; S&P Global notes that the still-low rate continues to weigh on the yen. (S&P Global)
In Tokyo, Prime Minister Sanae Takaichi is considering a campaign promise to suspend the 8% sales tax on food. Japan’s Mainichi newspaper says this move could slash government revenue by roughly 5 trillion yen ($30 billion) annually. According to the paper, the government and the ruling Liberal Democratic Party are weighing the market fallout ahead of a planned parliamentary dissolution on Friday, with elections likely set for Feb. 8. (Reuters)
European shares closed the week largely unchanged, with the STOXX 600 at 614.38, marking its fifth consecutive weekly rise. Michael Field from Morningstar noted that “the margin of safety that investors had previously is gone,” while Richard Flax of Moneyfarm highlighted “a good amount of uncertainty” on the geopolitical front. Luxury stocks took a hit, led by Richemont after Bank of America downgraded the stock. (Reuters)
In the U.S., investors are eyeing potential volatility after monthly options expiration, a time when derivatives contracts expire and traders rebalance hedges. The small-cap Russell 2000 closed Friday at a record high and gained 2.04% for the week, outpacing the S&P 500. Bruce Zaro from Granite Wealth Management noted that “the middle part of January tends to be pretty choppy.” (Reuters)
But a packed week leaves plenty of room for shocks: unexpected data from China, a tougher tone from the BoJ, or a court hint that presidents might more readily dismiss officials at independent agencies—all could rattle bonds and currencies. Oil has climbed on supply concerns and could swing sharply if geopolitical tensions resurface.
Investors are sticking to growth, inflation, and earnings for now. But next week, court battles, election tactics, and Davos politics enter the scene. Traders are already eyeing that mix as the bigger threat.
