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Global equity markets moved higher over the week ended January 30. Investors continued to move towards risk assets with the global economy proving resilient and central banks noting a willingness to lower policy interest rates further if needed. The S&P/TSX Composite Index declined, dragged down by the materials sector. U.S. equities finished higher. Yields on 10-year government bonds in Canada and the U.S. moved higher. The price of oil rose over the week, while the price of gold finished lower. The U.S. dollar fell to its lowest level in four years early in the week amid concerns about the U.S. economy and the rise of the Japanese yen. However, the U.S. dollar recovered as the week progressed.
The Bank of Canada holds steady in January
As widely expected, the Bank of Canada (BoC) kept its benchmark overnight interest rate unchanged at 2.25%, marking its second straight rate hold.
The BoC believes its policy interest rate is at an appropriate level to help support Canada’s economy and keep inflation close to its 2% target.
However, Canada’s central bank did note that trade and geopolitical tensions could disrupt economic activity in Canada, causing some uncertainty.
Given risks, the BoC said it will closely monitor economic conditions and could shift its policy interest rate either up or down.
The Canadian government announced progress towards improving trade with India and South Korea last week. However, trade uncertainty lingers with the review of the Canada-United States-Mexico Agreement set to begin this year. Changes to the trade agreement could shift economic conditions in Canada, including inflation and the labour market, which could prompt the BoC to make changes.
U.S. consumer confidence at lowest level since 2014
A reading from the Conference Board showed that optimism among U.S. consumers has dropped to its lowest level in more than a decade.
The Conference Board Consumer Confidence Index fell to 84.5 in January from 94.2 in the previous month.
U.S. consumers continued to express concern over the economy and labour market. Additionally, many respondents had noted that higher prices for food, oil and gas are weighing on their personal finances.
Consumers will have to wait a bit longer for lower interest rates. The U.S. Federal Reserve Board (Fed) held the target range for its federal funds rate steady at 3.50%–3.75%.
At its meeting, two Fed officials voted for another rate cut. The Fed sees potential downside risks to the U.S. economy despite recent data that shows economic activity has been solid and inflation remains elevated. The Fed said it would carefully monitor incoming economic data when making upcoming rate decisions.
Asian economies need strong industrial output
In China, industrial profits rose by 0.6% in 2025 over the previous year, marking its first increase since 2021.
The private sector posted strong profits over the year, offsetting lower profits at state-owned industrial firms. Profits at manufacturing firms increased by 5.0% in 2025.
Despite the increase in 2025, profits were uneven across sectors amid still sluggish domestic demand. Beijing has taken steps to help improve foreign demand and lower price competition.
In Japan, industrial production declined by 0.1% in December, its second straight decline. A drop in machinery and chemicals output weighed on the industrial sector over the month.
Many Asian countries, including China and Japan, rely on strong industrial activity to fuel overall growth. Industrial output was relatively shaky in China and Japan over 2025, which weighed on economic growth.
Europe’s economy expands in the fourth quarter
Europe’s gross domestic product grew by 0.3% over the fourth quarter of 2025, according to a flash estimate.
This was unchanged from the previous quarter but topped economists’ expectations. There were strong contributions from Spain, Germany and Italy.
Europe’s economy expanded by 1.5% over 2025. The economy continued to expand despite significant pressure from trade tensions with the U.S.
While a trade deal was reached, the European Union remains at odds with the U.S. over Greenland. Tensions simmered down at the World Economic Forum, but the threat of tensions linger.
The European Central Bank (ECB) makes its interest rate announcement this week. At the end of January, economists were expecting the ECB to hold steady. Inflation is hovering close to its 2% target and economic activity has been stable, yet certainly not spectacular.
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