Investors Being Cautious Amid Elevated Economic and Geopolitical Uncertainty
January 8, 2026
Yesterday’s declines in equity prices have been extended. U.S. stock futures are around 0.5% lower prior to the release of U.S. statistics today of jobless insurance claims, the trade balance, consumer price expectations and labor productivity, as well as tomorrow’s most eagerly awaited labor situation figures. Stock markets in Asia closed down 1.6% in Japan, 1.2% in Hong Kong, 0.9% in India and 0.3% in Taiwan. European share prices are marginally lower.
The price of WTI oil is 1.5% higher, as U.S. forces continue to seize tankers carrying Venezuelan oil. The price of gold has fallen 0.8% and continues to be eclipsed by silver price volatility, with a 3.9% slump in the precious metal.
Ten-year sovereign debt yields have reversed their recent direction, jumping six basis points in Germany and by three bps in Spain and Italy but retreating five basis points in Japan. The overnight movements in the 10-year U.S. Treasury (up a basis point), the British Gilt (unchanged) and France’s OAT (up two bps) have been smaller.
Aside from gains of 0.6% and 0.4% against the New Zealand and Australian currencies, overnight changes in the dollar prior to the U.S. data were inconsequential. However, the weighted DXY dollar index is coming off a vulnerable year in which it depreciated just just of 10%, including about half a percent in the last month.
In central banking news, European Central Bank Vice President Luis de Guindos called the ECB’s current monetary stance appropriate, citing huge uncertainties on several counts. Deputy Governor Hauser of the Reserve Bank of Australia welcomed a recent deceleration of inflation but pointed out that such still exceeds the 2-3% target.
December’s release of Euroland economic sentiment and employment expectations revealed a slight softening, with 3-month lows in their latest readings, along with an 8-month high in consumer price expectations and a 9-month high in selling price expectations. The index for consumer confidence in the joint currency bloc got revised 1.5 index points higher to a 3-month high of minus 13.1, which is still deep in negative territory.
Two other Euroland data pieces reported today were
- November producer prices which posted their largest year-on-year drop (-1.7%) in 13 months despite a higher-than-forecast 0.5% month-on-month rise, and
- The rate of unemployment, which in November unexpectedly dipped to a 9-month low of 6.3% from a streak of six straight readings of 6.4%. A 6.3%, joblessness remains very near to the 6.2% low set a year earlier in November 2024.
German industrial orders in November had been expected to fall somewhat after back-to-back increases of 2.1% in September and 1.6% in October but instead leaped another 5.6% in November, sending the 12-month rate of increase to a 46-month high of 10.5%.
France experienced a EUR 12.6 billion current account deficit over the first 11 months of 2025 in contrast to a nearly balanced account a year earlier.
A year-on-year rise of just 0.3% in the British Halifax house price index in December has only half as much as in November and down from a 4.7% on-year increase in November 2024. After monthly declines in three of the past four months, the index is in danger of moving into sub-zero year-on-year territory for the first time in two years.
The index for consumer confidence in Japan last month fell marginally in below November’s 19-month high and, at 37.2, remained quite depressed. Japan also experienced its biggest year-on-year decline in inflation-adjusted cash earnings (-2.8%) in ten months, but this latest observation was not representative of likely results in coming months.
The U.S. October trade deficit and third-quarter productivity/unit labor cost results reported a short while ago missed consensus forecast by a very wide margin.
- The goods and services trade gap of just $29.4 billion was merely half as wide as predicted and down from a deficit in September of $48.1 billion. Among only goods, the deficit of $59.1 billion was sharply reduced from $78.3 billion in September and a monthly average deficit of $112 billion over the first nine months of this year.
- Labor productivity jumped more than 4% in each of the middle two quarters of 2025 with gains of 4.1% in 2Q and 4.9% in 3Q. Analysts had been anticipating only a 3% rise of productivity in the latter quarter. Because of the much bigger-than-anticipated rise, unit labor costs in the third quarter fell by 1.9% instead of rising around 1% as pundits were expecting. The latest 1.2% year-on-year advance of unit labor costs was down from 2.0% in 2Q and 3.0% in the first quarter. The increase had not been as low as 1.2% since the third quarter of 2023.
- This morning’s third U.S. data release, new jobless insurance claims amounting to 208K last week was very close to what analysts were projecting.
Price data released around the world this Thursday included the following results:
- Chilean consumer price inflation ticked up to 3.5% in December from a four and a half year low of 3.4% in the prior two months.
- Consumer price inflation slowed to an 11-month low of 4.1% in Estonia. Such had been as high as 6.1% in August.
- In Cyprus, deflationary CPI readings have been now reported for eight straight months, including on-year readings of -0.5% in both November and December.
- Swiss consumer prices in December were unchanged from November and only 0.1% higher than a year earlier.
- Mexican CPI inflation, which crested at 8.7% in August-September of 2022 was a tad below expectations last month at 3.7%.
- Mongolian CPI inflation dropped to a 14-month low of 7.5% last month from 8.2% in November and 9.2% in October.
- Swedish consumer price inflation remained extremely low at 0.3% in both November and December. Core inflation of 2.1% was below the Riksbank’s 2.5% target in the latest month.
- Romanian producer price inflation settled back from October’s 29-month high of 7.9% in October to 4.8% in November.
The Canadian trade balance swung from a C$ 240 million surplus in September back to a deficit of C$ 580 million in October.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Euroland economic sentiment, Euroland PPI and unemployment, U.S. trade deficit and labor productivity
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