Markets Today: Euro Area Inflation Cools, Silver Peaks Above $80/oz, Gold Retreats Ahead of Key US Data Releases

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The global stock market rally stalled in Asia on Wednesday, with Japan's Nikkei index dropping roughly 1% as investors sold shares to lock in profits after a record-breaking start to the year.

Market sentiment was also hurt by rising tensions between China and Japan; China has banned the export of "dual-use" items materials like rare earths that can be used for both civilian and military technology to Japan. This news dragged down major manufacturers, with automakers like Toyota and Honda falling over 2% and chip-maker Advantest dropping 4.4%.

However, there were some big winners: Toyo Engineering, which develops technology to extract rare earths, surged nearly 20% on the news of the ban, and Hisamitsu Pharmaceutical jumped about 19% after announcing a $2.55 billion plan to take the company private.

Inflation in the Euro area cooled to 2.0% in December 2025, its lowest level since August, perfectly hitting the European Central Bank's target. This milestone suggests that interest rates will likely remain steady for the near future.

The drop was largely driven by falling energy costs and slower price increases for services and manufactured goods, though food and tobacco prices did rise slightly faster than before. "Core" inflation, which ignores volatile items like fuel and food, also improved to a four-month low of 2.3%, beating analyst expectations.

Across the region, inflation slowed down in Germany, France, and Spain, while Italy was the outlier with a small increase.

German retail sales unexpectedly dropped by 0.6% in November 2025, marking the first monthly decline since August. This weak performance fell short of the 0.2% increase that experts had predicted and reversed the gains seen in the previous month.

The primary cause for the slump was a sharp 1.9% decrease in food sales, which outweighed a small 0.3% rise in non-food sales and a solid 0.9% boost in online shopping. Compared to the same time a year ago, retail growth slowed to 1.1%, down from 1.6% in October.

Despite this stumble late in the year, early estimates suggest that total retail sales for 2025 still grew by 2.4% overall.

European stock markets took a break from their recent record-breaking rally on Wednesday, holding steady as investors reviewed the latest updates on the US and Venezuela.

The main European index rose just a fraction, while German stocks added roughly 0.4%; meanwhile, markets in Spain and Italy stayed flat after hitting all-time highs yesterday. Oil companies like Shell and BP saw their share prices drop after President Trump announced a deal to import $2 billion worth of Venezuelan crude, which is expected to increase the amount of oil available globally.

In other news, Nestle shares fell 1.2% as the company recalled some baby formula due to contamination fears. Traders are now waiting for a key report on US job openings (JOLTS) later today to help predict where the economy is heading next.

On the FX front, the US dollar remained mostly steady on Wednesday as traders waited for key economic reports that will likely determine future interest rates, which investors currently view as more important than recent political conflicts.

The overall value of the dollar rose slightly to 98.63, while the Euro dropped a small amount to $1.1676, continuing its decline from the previous day. The dollar also weakened slightly against the Japanese Yen.

Meanwhile, the Australian dollar reached its highest level since late 2024 following an inflation report that suggested interest rates there might go up soon, while the New Zealand dollar traded at $0.5783.

Currency Power Balance

Gold prices dropped on Wednesday as a stronger US dollar and changing views on the situation in Venezuela made the metal less attractive to buyers.

Gold fell 0.8% to roughly $4,461 per ounce, moving further away from the record high it set in late December.

Other precious metals suffered even bigger losses: silver dropped 2.3%, palladium slid 4.5%, and platinum plunged 6%, reversing earlier gains.

At the same time, oil prices also declined after President Trump announced a deal to import $2 billion worth of Venezuelan oil.

This news, which suggests an increase in oil supplies for the US, pushed Brent crude down to $60.59 per barrel and US crude to $56.86.

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The European session is quiet moving forward with most of the data already released this morning.

Moving into the US session, unless the US issues new threats against Greenland or takes further action in Venezuela, investors are expected to stop focusing on politics and turn their attention back to economic data for the rest of the week.

Today's report on the service sector is predicted to be weak, but the real market movers will likely be the ADP private employment figures and the JOLTS report on job openings. Since the ADP report has come in lower than expected seven out of the last ten times, and because the job market appears to be cooling, there is a strong chance that these upcoming reports will be negative, which would likely drag the value of the US dollar down.

From a technical perspective, the FTSE 100 index has finally breached the psychological 10000 mark.

Price has pulled back since with bouts of volatility and that shouldn't be a surprise. When price breaches such psychological levels we do tend to see some volatile price swings.

The one concern for bulls at the moment is that the index is hovering in overbought territory which means a pullback may be imminent.

Immediate support which may be tested in the near-term include the 9973 and 9943 handles respectively.

However, a key level on the four-hour chart for bullish continuation will be the psychological 10000 mark. A break of this level could bring a deeper correction into play.

FTSE 100 Index Daily Chart, January 7, 2026

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