Week-in-Review and Thoughts for the Upcoming Week of 01/26/2026

Mr. Trump wrapped up his trip by saying that, after further discussions with the NATO chief, he was satisfied that many of his concerns were addressed and that, under a new deal being crafted, the US would indeed have “total control” over Greenland. And just as abruptly, the matter was “resolved” and receded into the shadows. The tariff threat against Europe was also withdrawn, as were threatened European reprisals against the US. However, the episode was enough to send US equity markets into a tailspin on Tuesday before stocks bounced back the following day. Confidence in the US as a NATO ally, unlike US equities, was dealt a severe blow and will likely take years to recover.

Prime Minister Carney’s speech was another milestone event at the conference. Mr. Carney outlined the changing contours of world trade, emphasizing that “middle powers” like Canada had no choice but to forge new alliances and could no longer depend on the patronage of the old world order. The speech received a standing ovation – the third time this has happened at Davos, following Nelson Mandela’s speech and President Zelenskyy’s address sever years ago. However, Mr. Carney’s remarks — coming shortly after his visit to China, where a renewed trade partnership was announced — apparently did not sit well with President Trump.

On Saturday, the president said that he would impose a 100% tariff on all Canadian imports if Canada went ahead with its trade deal with China. Mr. Trump explained in a social media post that “if Governor Carney thinks he is going to make Canada a ‘Drop Off Port’ for China to send goods and products into the United States, he is sorely mistaken. China will eat Canada alive, completely devour it, including the destruction of their businesses, social fabric, and general way of life. If Canada makes a deal with China, it will immediately be hit with a 100% Tariff against all Canadian goods and products coming into the USA.”

A tariff of this size would be enormously consequential, and we will have to see how markets – and premiums – react to the news this Monday. However, there is a strong possibility that the damage will not to be as severe as advertised. Mr. Carney is already attempting to mend fences, responding on Sunday that he has no intention to conclude a free-trade deal with China. He noted that under the United States-Mexico-Canada agreement (USMCA), signatories are not allowed to conclude trade accords with “nonmarket economies” without prior notification. Instead, Mr. Carney said his visit was designed to “rectify” issues that developed in recent years and that Canadian and Chinese tariffs have been “readjusted.”

That said, Mr. Carney’s agreement to allow the Chinese to export some 50,000 electric vehicles to Canada will not sit well with either Washington or among North American automakers, which are already struggling to get their own EV sales up and running and certainly do not need additional Chinese competition. In fact, Chinese EV’s have already started to penetrate the European market despite steep tariffs. China’s December EV sales into Europe totaled around 110,000 units, up by 126% year-over-year.

If all this were not enough, we also learned Sunday that a senior Chinese general was accused of leaking information about the country’s nuclear weapons program to the US and of accepting bribes. General Zhang Youxia, considered one of China’s “princelings” and whose father fought alongside President Xi’s father during the Chinese Civil War, was arrested on these charges. The move was described as “unprecedented in the history of the Chinese military and represents the total annihilation of the high command,” according to the China Strategies Group consulting firm, which spoke to Wall Street Journal. We hope the charge of selling nuclear secrets to the US is merely a pretext for the general’s removal; otherwise, retaliation from China could further unnerve markets.

As for last week’s action in US equity markets, stocks were volatile before ending with relatively minor changes. The NASDAQ Composite finished roughly flat, while the Dow Jones Industrial Average and the S&P 500 ended the week down about 0.5%. Intel shares plunged by about 18% from their pre-earnings high after the company reported quarterly revenues and profits that fell well below estimates. The semiconductor manufacturer also noted that it was struggling to meet demand for its server chips. This week should be an important one on the earnings front, with several “Magnificent Seven” names reporting, including Apple, Tesla and Microsoft.

US treasury markets finished a volatile week on a steady note. The two-year note yield settled unchanged at 3.60%, while the 10-year note yield ended up one basis point to 4.24%. In the currency markets, the dollar headed for its steepest weekly drop since June. The Japanese yen was particularly volatile amid ongoing talk about central bank intervention and uncertainty over future rate increases.

In commodity markets, strong performances continued across both base and precious metals. Within the London Metal Exchange (LME) complex, tin prices surged 18% on the week. Nickel followed, gaining 6.7%, followed by copper (up 2.4%), zinc (up 1.6%) and aluminum (up 1.1%). Lead was the only metal that finished lower, down by almost 1%. Copper prices were supported by ongoing reports of unrest in Chile, where contracted workers blocked access to roads leading to the Escondida and Zaldivar copper mines.

Precious metals prices remain on a tear. Silver ended above $100 an ounce for the first time on Friday, while gold hit another record on its way to $5,000 an ounce. Central bank buying and a broader move away from the dollar have supported bullish sentiment across both complexes. Platinum also soared to a record high just under $2,780 an ounce, as a structural deficit of roughly 1.2 million ounces expected for this year continued to lift prices. Palladium finished just under $2,000 an ounce in a robust showing as well.

In the energy markets, oil settled at a one-week high on Friday on concern about developments in Iran. A US naval carrier group is now approaching the Persian Gulf as markets await further developments. Internet access is slowly being restored in Iran, but confusion remains over how many people were killed, injured or arrested. Meanwhile, the US on Friday imposed sanctions on nine vessels and eight related firms involved in transporting Iranian oil and petroleum products.

Natural gas futures surged last week, rising by almost 5% on Friday alone and posting a roughly 70% advance for the week – among the largest percentage weekly gains on record. Prices were boosted by extreme cold engulfing much of the US, with frigid conditions expected to persist for the next two weeks. Plunging temperatures could prompt oil and gas wells to shut down due to equipment freeze-ups, further constraining supply. The EIA reported Thursday that gas stocks fell by 120 billions of cubic feet (bcf), larger than the 106 bcf expected, but came in below the 228 bcf draw seen during the same week last year. In Europe, Dutch and British wholesale gas prices were steady due to warmer-than-expected February forecasts. 

Macro readings and other news from the past week

* December pending home sales fell by a seasonally adjusted 9.3%, an unusually sharp decline and well below the 0.7% drop expected. The decline was broad-based, with all four regions posting month-over-month declines. That said, December is typically a slow period for housing due to holidays and winter weather. Other leading indicators—notably purchase mortgage applications — point to improvement. The latest weekly MBA mortgage application index rose by 14%, adding to last week’s 28% increase, suggesting sales could pick up heading into the spring. Separately, October construction spending rose by 0.5%, nearly offsetting September’s 0.6% decline, though both figures are somewhat stale at this point.

*  Weekly initial jobless claims totaled 200,000, essentially unchanged from last week’s revised 199,000. As one analyst noted, “the key takeaway from the report is that the low level of initial jobless claims substantiates the view that labor market is still operating in a low-firing environment, which is supportive for consumer spending activity and the growth outlook.”

* October personal income rose 0.1%, below the 0.3% expected and worse than September’s 0.4%. The October personal spending rose 0.5%, well above the 0.1% expected and also higher than September’s 0.4% gain.

*  The latest personal consumption expenditures (PCE) price index showed no surprises, with inflation coming in at 0.2% in November, in line with estimates and matching October’s increase. The year-over-year reading was unchanged at 2.8%. The report is unlikely to alter the Federal Reserve’s interest rate decision this week, as the inflation picture remains largely unchanged.

* China’s total domestic auto sales reached 27.3 million units, of which electric/hybrid (NEV) sales totaled13.87 million units, up nearly 20% year over year. China’s NEV penetration rate reached 54% in 2025, according to trade association data.

* There was little change in the monthly S&P Global Purchasing Managers Index (PMI) readings. The January US manufacturing index was virtually unchanged from the month prior at 51.9, while the services PMI held at 52.5.

* The January University of Michigan consumer sentiment index rose to 56.4, beating estimates and edging above December’s 54 reading.

* The US Midwest aluminum premium shattered another record, moving above $1 per pound mark. Remarkably, the premium now accounts for nearly 70% of the outright LME aluminum cash price of roughly $1.40 per pound.  

This week’s US macro readings

On Monday, November durable goods orders will be released (delayed, expected at +4.5%, last -2.2%). Tuesday brings January consumer confidence (expected at 90 vs. 89.1). Wednesday features the Federal Reserve’s policy statement followed by Jerome Powell’s press conference, which is likely to be the week’s highlight. Thursday brings weekly initial jobless claims (expected 209,000 vs. 200,000), followed by the November US trade deficit (expected -$45 billion vs. -$29 billion) and Q3 productivity (expected +4.9%). Friday closes the week with November factory orders (delayed; expected +1.1% vs. -1.3%).

We wish all our readers all the best for the upcoming week.