Quick Summary

The week reflected a “soft-landing, but sticky” macro backdrop: growth held up, but inflation and policy uncertainty kept markets risk-aware and dispersion high. The US remained resilient but uneven, with activity steady while labour demand cooled and the Fed stayed cautious and data-dependent. In Europe, the ECB maintained a steady, meeting-by-meeting stance as it weighed disinflation progress against a still-uncertain growth outlook. In Australia, the RBA’s tightening and mixed domestic signals reinforced a “higher for longer” feel, leaving the ASX in rotation mode—defensives relatively supported while higher-beta and commodity-linked exposures carried most of the downside.

Global Context

US ISM Manufacturing PMI

The ISM Manufacturing PMI rose sharply to 52.6 in January from 47.9 in December, marking the first expansion in a year. The Prices Index edged up to 59.0, indicating that input costs continued rising for a 16th straight month.

Growth broadening was evident: 9 industries expanded and 8 contracted, with notable strength in Transportation Equipment, Machinery, Chemicals, Food & Beverages, and Electronics. ISM noted that tariff uncertainty and preemptive ordering ahead of expected price hikes were key drivers behind stronger new orders and rising prices.

For markets, the key test is whether February’s data (due March 2, 2026) confirms sustained momentum; otherwise, the January rebound could reflect temporary volatility or front-loaded demand rather than a durable manufacturing recovery.

US ISM Services PMI

The January 2026 ISM Services PMI came in at 53.8, just above the ~53.5 consensus, signalling that U.S. service-sector activity remains resilient. Based on ISM’s historical mapping, this level corresponds to around 1.8 percentage points of annualised real GDP growth, reinforcing expectations of a soft landing rather than an economic downturn.

The index’s position well above the overall economy’s expansion threshold of ~48–48.5 indicates that aggregate U.S. output is still expanding, with services continuing to provide a meaningful positive contribution to growth even under tighter monetary policy conditions.

US ADP Non-Farm Employment Change

The U.S. private-sector labour market weakened sharply in January 2026, with ADP reporting just 22,000 new jobs, far below the ~48,000 consensus. December’s gain was also revised down to 37,000, underscoring a tepid start to the year and a clear loss of hiring momentum.Sector trends were mixed: Education and Health Services added 74,000 jobs, but Professional and Business Services lost 57,000, and Manufacturing fell by 8,000. Financial Activities (+14,000) and Construction (+9,000) saw modest gains, while Information (-5,000) declined. Wage growth stabilised, with job-stayers’ pay rising 4.5% and job-changers slowing to 6.4%. Large firms cut 18,000 jobs, while mid-sized ones added 41,000. Overall, the data point to a cooling—not a collapsing—labour market, which could ease labour-driven inflation pressures and influence the Fed’s policy stance if softness persists.

US Unemployment Claims

Initial jobless claims jumped to 231,000 in the week ending January 31, 2026, up 22,000 from the prior week and well above the 212,000 forecast. Analysts mainly blame severe winter weather for the spike, noting that the four‑week average only edged up to 212,000, suggesting no major labour-market deterioration.

The data fit the ongoing “low hire, low fire” pattern—layoffs remain historically low, but hiring momentum is weak, constrained by tariff uncertainty and AI-related structural adjustments. The Fed, which recently kept rates unchanged, is expected to treat this as temporary noise rather than a recession signal, especially since claims do not affect the January payrolls report.

However, if claims stay elevated beyond these weather distortions, it could renew concerns over economic softening and increase pressure on the Fed to consider earlier monetary easing later in the first half of 2026.

US JOLTS Job Openings

The latest JOLTS ( Job Openings and Labor Turnover Survey )elease signals a further cooling in US labour demand, with job openings continuing to trend lower at year-end. The US Bureau of Labour Statistics reported that job openings declined by 386,000 to 6.5 million in December 2025, leaving vacancies down by 966,000 versus the prior year and pushing the job openings rate to 3.9% (little changed on the month).

Prelim UoM Consumer Sentiment and Inflation Expectations

The latest U.S. Preliminary University of Michigan (UoM) Consumer Sentiment release for February 2026 showed sentiment stabilising at depressed levels, with the headline Index of Consumer Sentiment edging up to 57.3 from 56.4 in January and remaining about 20% below its year-ago level. In the composition, current conditions improved to 58.3 from 55.4, while expectations dipped to 56.6 from 57.0, signalling that households are acknowledging some near-term relief but remain cautious about the medium-term outlook.

February 2026 Preliminary University of Michigan Consumer Survey

Prelim UoM Inflation Expectations and Consumer Sentiment indicate a continued, albeit fragile, recovery in US consumer confidence, with the headline Sentiment Index rising to 57.3, exceeding market forecasts of 55.0. This improvement was driven exclusively by a 5.2% jump in the Current Economic Conditions component to 58.3, while the Consumer Expectations component edged lower to 56.6, highlighting a dichotomy in which households feel more secure in the present but remain uncertain about the six-month outlook. Crucially for monetary policy, near-term inflation fears abated significantly, with one-year inflation expectations dropping to 3.5% from 4.0% in the prior month, suggesting that while sentiment remains historically suppressed, the immediate pressure from rising price perceptions is beginning to ease.

ECB Monetary Policy Decisions & Press Conference

The ECB’s latest press conference (5 February 2026) signalled a steady policy stance, with the Governing Council keeping the three key interest rates unchanged and reiterating that inflation is expected to stabilise at the 2% target over the medium term. The ECB confirmed the deposit facility rate at 2.00%, the main refinancing operations rate at 2.15%, and the marginal lending facility rate at 2.40%, framing the decision within a data-dependent, meeting-by-meeting approach and explicitly avoiding any pre-commitment to a future rate path. In its macro narrative, the ECB described the euro area economy as resilient despite a challenging global backdrop, pointing to low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure, and the supportive effects of past rate cuts as key growth supports, while also highlighting uncertainty from global trade policy and geopolitical tensions. On inflation, the ECB noted that headline inflation fell to 1.7% in January (from 2.0% in December), with inflation excluding energy and food easing to 2.2% and services inflation declining to 3.2%, and it judged underlying inflation indicators as broadly consistent with the 2% medium-term target while continuing to monitor wage dynamics closely.

Gold and Oil Market Weekly Review

Gold remained exceptionally volatile after setting a record above $5,580 per ounce the prior week and then suffering an abrupt ~9% one‑day fall. Selling pressure was also linked to higher margin requirements at the CME, following the late‑January slide described as gold’s steepest single‑day drop since 1983. By Friday, 6 Feb 2026, gold’s recorded close was $4,705.05 per ounce, down 6.45% on the day, underscoring that the market was still working through forced deleveraging and profit‑taking dynamics rather than a smooth trend. For gold, the near‑term narrative remains dominated by post‑peak stabilisation after the sharp late‑January downdraft, with headlines continuing to emphasise profit‑taking and mechanically driven selling (via margin changes) as key transmission channels.

Gold Spot (XAUUSD) Price Chart – February 2025 to February 2026 – Daily Timeframe, Source: TradingView

Crude ended the week lower, with March WTI settling at $63.55/bbl and down 2.7% on the week, which followed a strong six‑week advance. April Brent settled at $68.05/bbl and was down 1.83% on the week, snapping a six‑week winning streak.

Price action was choppy around Iran–U.S. nuclear talks that at times reduced near‑term disruption fears, while a second consecutive weekly draw in U.S. crude inventories provided some offsetting support. For oil, the balance of risk hinges on whether diplomacy around Iran continues to cool supply‑risk premia or instead reintroduces tail‑risk, with weekly inventory signals still relevant to confirming whether demand is absorbing supply at current price levels.

Bitcoin's Price and Crypto Market Review

This week’s crypto tape read as a risk‑off, high‑beta episode rather than a slow drift, and media coverage emphasised the speed of the move, with CNBC reporting Bitcoin briefly broke below $61,000 and was down nearly 30% on the week alongside a sharp sell‑off in U.S. tech stocks. The BBC also framed the decline as the lowest level since President Donald Trump took office and reported that Bitcoin was down 32% over the prior 12 months, reinforcing the broader drawdown context that investors have been pricing in. In terms of market depth, CoinMarketCap’s snapshots showed Bitcoin at roughly $1.37 trillion in market cap with about $61.35 billion of 24‑hour volume, while Ethereum was shown at about $252.87 billion market cap with roughly $39.12 billion of 24‑hour volume, indicating heavy turnover and active repositioning in the majors during the week.

Crypto Market Cap, Source: coinmarketcap.com

Australian Economic Indicators

Australia’s data flow for the week ending 7 February 2026 was dominated by a monetary-policy tightening and a mixed batch of activity and housing signals, with the Reserve Bank of Australia lifting the cash rate target by 25bp to 3.85% at its 3 February meeting and explicitly citing a material pick-up in inflationary pressures in the second half of 2025 alongside stronger-than-expected private demand and still-tight labour market conditions. Building approvals were volatile, with preliminary building permits falling 14.9% m/m after a 13.1% prior rise, while permits were up 0.4% y/y, and private house approvals rose 0.4% m/m, pointing to a choppy but not collapsing construction pipeline.

Chart RBA Official cash rate, Source: global-rates.com

On the activity side, survey indicators strengthened at the start of the month as the S&P Global final services PMI printed 56.3 and the composite PMI 55.7 (both higher than the prior month’s ~51 readings), consistent with an expansionary services-led pulse coming into February. In contrast, Ai Group sentiment was uneven, with the construction index turning positive at 5.2 while the broader industry index remained negative at -12.3 and the manufacturing index stayed deeply negative at -19.4, reinforcing a two-speed read across sectors.
Externally, Australia’s December goods trade position improved, with the seasonally adjusted balance on goods rising to A$3.373bn from A$2.597bn as exports increased 1.0% m/m and imports fell 0.8% m/m, and the ABS noted the month-to-month lift in exports was driven by metal ores and minerals. The ABS also reported the seasonally adjusted balance on goods increased by $776m in December, framing the net-trade contribution as supportive at the margin even as domestic demand dynamics remain central to the RBA’s reaction function following this week’s hike.

For the week ahead (starting 9 February), the calendar flags the monthly household spending indicator (1.0% m/m and 6.3% y/y shown on the schedule), Westpac consumer confidence (index 92.9; -1.7% change), and NAB business confidence (3), which should help refine whether the post-hike growth impulse is cooling or merely rotating across sectors.

ASX Market Overview and Sector Performance

The S&P/ASX 200 Index concluded the week ending February 6, 2026, with a decline of 1.8%, closing at 8,708.8 points, marking its worst weekly performance since November 2025. This downturn capped a particularly sharp sell-off on Friday, when the benchmark fell 2.03% or 180.4 points, its worst session in 10 months, driven by broad-based sector losses amid softening commodity prices, US tech-sector worries, and aftershocks from a precious-metals rout.

Industry/Sector performance in the week ending 6 February 2026, Source: Marketindex.com.au

Outperforming Sectors

Financials (+2.01%)

Financials outperformed, gaining about 2.0% as investors rotated into banks and insurers viewed as beneficiaries of still‑elevated interest margins and relatively benign credit conditions. The sector also tends to be seen as a defensive yield play when growth sectors such as Technology and Materials come under pressure, attracting flows in volatile markets.

Consumer Staples (+0.76%)

Staples rose roughly 0.8%, reflecting their defensive earnings profile and relatively inelastic demand for essential goods amid macro uncertainty. Investors typically favour large supermarket and consumer products names when risk appetite for cyclical exposures fades, supporting modest sector gains.

Health Care (‑1.37%)

Health Care declined about 1.4% as high‑multiple names were caught in the broader de‑rating of growth stocks in response to higher bond yields and risk‑off sentiment. Some profit‑taking in large global healthcare exporters after prior outperformance likely added to the drag.

Underperforming Sectors

Information Technology (‑13.57%)

Information Technology was the weakest performer, tumbling about 13.6% as higher discount rates and risk‑off positioning drove a sharp de‑rating of growth and loss‑making names. The sector’s elevated valuations and sensitivity to changes in long‑term rate and liquidity expectations leave it particularly vulnerable during episodes of market stress.

Materials (‑7.34%)

Materials declined roughly 7.3%, a significant move reflecting their heavy exposure to bulk commodities and base metals, where prices eased on renewed concerns about Chinese demand and global manufacturing momentum. Given the sector’s weight in the Australian market and its operational leverage to commodity prices, even modest downticks in price expectations can trigger outsized share‑price reactions.

Utilities (‑4.80%)

Utilities fell about 4.8%, underperforming despite their usual defensive label, as higher bond yields and regulatory uncertainty pressured the valuation of long‑duration, capital‑intensive assets. The sector is often treated as a bond proxy, so relative weakness is common when real yields rise and investors rotate away from yield plays.

Australian Market Outlook: Rotation on Shaky Ground

Market structure and leadership: Recent trading has featured choppy sector leadership: financials and selected defensives are providing relative support while resources and higher‑beta growth names absorb most of the downside. Despite modest gains in forward earnings, a small de‑rating in the market price‑to‑earnings multiple shows investors are reluctant to pay up for cyclicality while the policy path remains uncertain.

Macro and policy cross‑currents: The RBA’s February projections show GDP growth hovering near 2% with inflation staying above target into mid‑2026, reinforcing a higher‑for‑longer cash‑rate profile and limiting scope for an early easing cycle. That mix—still‑firm demand but sticky prices—keeps pressure on rate‑sensitive sectors and household cash flows, anchoring expectations for only a gradual improvement in domestic earnings leverage.

Commodity‑driven fragility: Materials and Energy remain the swing factors for the index as uranium, precious metals and bulk commodities respond quickly to shifts in global growth expectations and policy headlines. Event risk around single commodities or large resource names can generate outsized sector drawdowns that overpower steadier performance elsewhere, leaving index‑level progress fragile week to week.

Breadth, positioning and risk appetite: Breadth is narrow: a small cluster of large‑cap banks, insurers and quality defensives is doing most of the heavy lifting while many cyclicals, REITs and higher‑multiple growth stocks lag or trade sideways. With institutional positioning still cautious on Australian equities versus offshore markets, rallies are at risk of fading quickly if global data surprise hawkishly or commodity prices roll over.

Tactical implication: In this backdrop, the near‑term ASX profile looks like modest index‑level upside supported by valuation dispersion and selective value opportunities, but punctuated by volatility around macro data and stock‑specific commodity news. Sustained upside likely requires a cleaner disinflation trend and stabilisation in resource sentiment; until then, rotation‑led support rests on a relatively fragile foundation.