The Monday Report – 19 January 2026

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This story features WESFARMERS LIMITED, and other companies.
For more info SHARE ANALYSIS: WES
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets finished slightly down on Friday as the public debate around the next Fed chair –and Greenland– continued. 

After a positive week, ASX200 futures are flat to start the week, but President Trump's tariff threats re Greenland may trigger a risk off mode.

Good Morning,

The ASX200 rose just over 2% last week to 8903, which is the highest weekly close since the all-time record high from three months ago at 9115.2.

The key event on the local data calendar this week is Thursday’s labour force report for December. Last month (November), employment in Australia fell by -21k jobs, falling short of the 20,000 gain the market expected.

The unemployment rate held steady at 4.3%, below the 4.4% expected, largely due to a dip in the participation rate to 66.7% from October’s 66.9%. 

The December 2025 Labour Force Survey is expected to show a rebound in employment, with consensus forecasts pointing to a gain of around 30,000 jobs. The unemployment rate is expected to edge higher to 4.4%, aligning with the RBA’s quarterly forecast for this year and 2027. 

The Australian interest rate market is pricing in 5bp of RBA rate hikes for February. Pricing for a first full 25bp hike has been pushed back to September and there is a cumulative 30bp of RBA rate hikes priced between now and the end of 2026, reports Tony Sycamore, IG.

What happened overnight, NAB Markets Today Research extract

US industrial production for December beat expectations, rising 0.4% m/m. The November reading was revised higher too, suggesting a solid finish to the year for the industrial sector. However, data surprises weren’t all one way, with the NAHB survey for January falling -2 points, its first drop since August.

This was somewhat of a surprise to forecasters given there has been a better tone to housing data of late with new and existing home sales finding some support from falling mortgage rates.

There were no data of note released in the UK or Europe on Friday night; Canada saw better than expected housing starts data for December during the session.

US rates finished the session a touch higher, with 2yr yields rising 2bp and 10yr yields rising 5bp. Markets pared rate cut expectations on news that Kevin Hassett, perceived as a dovish candidate for the Fed Chair role, might be staying in his current position as White House economic adviser.

Over the weekend the US President announced on social media eight countries (UK, Denmark, Germany, France, Sweden, Norway, Finland and The Netherlands) would be subject to a 10% tariff from 1 February (rising to 25% from 1 June) until they agree to support Trump’s ambition to acquire Greenland.

It is likely this latest development will further delay efforts by the European Parliament to vote on the US-Europe trade deal negotiated last year.

On Trump’s plans for the new Fed Chair, the candidacies of Kevin Warsh and Rick Rieder received a boost as the President expressed a desire to keep Kevin Hassett in his current role.

In other Fed news, both the Vice Chairs of the US central bank spoke on Friday night – Vice Chair Bowman reiterated her view that weak labour market conditions require a further easing of interest rates. In contrast. Vice Chair Jefferson was more neutral in his comments, viewing the current policy setting as neither stimulatory nor contractionary for the economy and arguing the Fed was “well positioned” to respond to developments.

Forex moves were relatively muted, with most currencies trading tight ranges. The US dollar (basis DXY) was up 0.4%, AUD traded in a tight range and closed a little below the USD0.67 level, while the Euro fell -0.2%.

The best performer amid G10 crosses was the Yen, which rallied 0.3% on the back of comments from Japan’s finance minister that she was worried about the currency’s recent weakness and that the government was prepared to take bold action.

After a volatile week, Oil prices were up just 0.4% in the session, with Brent futures closing just above the US$64/bbl level. No further news of note on the Iranian situation meant relatively calm trading conditions in the oil market.

In contrast, European gas futures continued their push higher in price on Friday night, to close the week 30% higher. Cold weather, low storage levels and shifts in investor positioning have been cited as the main drivers of the move. 

Gold finished the session weaker as markets pared back expectations that Powell’s replacement would impart a noticeably dovish tone to Fed deliberations.

US equity markets registered very modest declines on Friday night, with the S&P500 and Nasdaq both down -0.1%.

The Tech, Energy, Industrials and Financials sectors all gained a little during the session, but with the 4Q US earnings season about to kick off in earnest, geo-political issues front of mind and a long weekend ahead, there were few reasons for traders to engage during the last trading session of the week.

In Europe, equity markets were also lower, with the EuroStoxx50 registering a -0.2% loss.

Nonetheless, European markets continue to out-pace their US counterparts so far this year (in both local currency and USD terms).

So Far, So good, Market Call, Yardeni Quicktakes extract

Last year, in the December 7 QT, we wrote: “It no longer makes much sense for us to continue recommending over-weighting the Information Technology and Communication Services sectors in an S&P500 portfolio …. The same can be said about over-weighting the United States in the All Country World MSCI portfolio.” 

It was time to rebalance, in our opinion, because the two sectors accounted for a remarkable record 46.7% of the S&P500’s market-cap weight on November 5, 2025, while the US accounted for a staggering 65.0% of the market-cap weight of the All Country World MSCI at about the same time.

In the December 13 QT, we wrote: “The S&P500’s Magnificent-7 might be less magnificent in 2026 as their fierce competition in the AI race starts to erode the monopolies they have enjoyed in search (Google), software (Microsoft), retailing (Amazon), advertising (Meta), electric vehicles (Tesla), smartphones (Apple), and GPU chips (Nvidia). The beneficiaries of that competition are likely to be the S&P500’s Impressive 493.” 

So far, so good. The leadership of both the S&P500 and the All Country World MSCI has been broadening away from last year’s outperformers, which we expect to continue.

S&P500 earnings breadth remains high. The percentages of S&P500 companies with positive three-month percentage changes in their forward revenues and earnings per share remain high at 82.8% and 82.0%. This should underpin the broadening of the bull market in stocks.

The bull market in the S&P500 is showing signs of broadening. The ratio of the S&P100 to the S&P500 might have peaked at the end of last year, well below the peak during the tech bubble of 1999.

If so, then the odds of a bubble bursting now are much lower than they were back then, when the stock market was much more concentrated in tech names than it is now, according to this ratio. So instead of a bursting bubble, we may be seeing a broadening bull market.

The same can be said for the ratio of the S&P500 market-weight to equal-weight indexes. The recent drop in the ratio might be the latest head-fake. However, we’re betting that the ratio will continue to trend lower in 2026 as the bull market broadens.

The equal-weight S&P500 has been setting record highs recently, while the market-weight S&P500 has yet to do so.

Will S&P500 Information Technology and Communication Services sectors continue to gain market-cap share of the index? 

We started to doubt that they would late last year, when together the two sectors had risen to a record 46.7% share of the S&P500’s total market cap; we were skeptical even though their combined earnings share had reached a record 40.0% of the index.

The current market-cap share of the two sectors combined exceeds that at the peak of the tech bubble in 2000, but so does their combined earnings share. We expect that huge AI capital spending and margin pressures will turn both sectors from outperformers to market performers.

Our “Game of Thrones” thesis is working, so far. Until late last year, the Magnificent-7 operated as seven independent kingdoms protected by large moats. Each prospered with its own unique monopoly.

However, the AI arms race has upended that peaceful coexistence by greatly increasing competition among them. The ratio of the S&P500 MAGS to XMAG ETFs peaked after Michael Burry famously tweeted on October 31, 2025, “Sometimes, we see bubbles. Sometimes, there is something to do about it.”

SMidCaps are beating LargeCaps. Also confirming a broadening bull market in stocks is the outperformance of the SmallCap and MidCap stock price indexes (a.k.a. the SMidCaps) so far this year. Again, this development may be the latest head-fake, of which there have been several in recent years.

However, the SMidCaps are still cheaper than the LargeCaps based on their forward P/Es.

In addition, the forward earnings per share of the SMidCaps, which have been in a coma since late 2022, finally have been showing signs of life.

So far this year, the S&P600 SmallCap and S&P400 MidCap indexes are solidly beating the S&P500 LargeCap index.

On a global basis, the US might be at peak exceptionalism as measured by its market-cap share of the All Country World MSCI. The US undoubtedly will remain exceptional in many ways.

However, that might be fully discounted by the US MSCI’s current market-cap share of the All Country World MSCI, at 64.0%. Meanwhile, rapidly growing middle classes in emerging market economies clearly aspire to achieve greater prosperity.

The forward P/E of the All Country World MSCI has been rising over the past three years. However it remains well below that of the US.

As occurred last year, the US MSCI stock price index continues to underperform many of the world’s other MSCI stock price indexes so far in 2026.

Corporate news in Australia 

-HungryPanda approaches annual Australian sales of $800m, ahead of Uber Eats and DoorDash

-Airwallex is seeking removal of media coverage before its IPO

-Blackstone is possibly exiting Australia’s top phase-1 clinical trials company, Nucleus Network

-Wesfarmers ((WES)) has called off plans to support the largest franchisee in its Priceline pharmacy network, Infinity Pharmacy Group

-Orthocell ((OCC)) is increasing its stake in Marine Biomedical to almost 12%

-Macquarie Asset Management ((MQG)) is seeking GIC, Singapore’s sovereign wealth fund, to join as co-investors for the $11.6bn privatisation of Qube Holdings ((QUB))

-Nico Resources ((NC1)) has raised $3m at 30c per share

On the calendar today:

-EZ Dec CPI

-US Markets Closed MLK Jr Day

-YANCOAL AUSTRALIA LIMITED ((YAL)) Dec Qtr Activity

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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