Investors are heading into a pivotal week shaped by closely watched U.S. jobs and inflation figures, a fresh wave of technology earnings after recent volatility, and major political developments in Japan and the United Kingdom. Here are the main issues likely to drive markets over the days ahead.
1. U.S. employment report takes centre stage
The standout item on this week’s economic calendar is the release of delayed U.S. employment data for January. The report, postponed by a brief three-day federal government shutdown that ended last Tuesday, is now scheduled for Wednesday.
Economists expect the data to show the U.S. economy added 70,000 jobs in January, compared with 50,000 in the previous month. Markets will be scrutinising the figures for signs that the labour market is “stabilizing,” a term recently used by Federal Reserve Chair Jerome Powell.
The Fed cut interest rates several times in 2025 in response to a cooling labour market pressured by tariff-related uncertainty. Recent indicators have been mixed: initial jobless claims rose more than expected last week, partly due to severe winter storms, while December job openings fell to a five-year low. Much of that decline was concentrated in professional and business services, which some analysts see as early evidence of AI-driven disruption to white-collar roles.
2. Inflation data in the spotlight
Friday brings another critical release with the publication of U.S. inflation data for January. The headline consumer price index is forecast to slow to 2.5% year on year, down from 2.7% in December, while the monthly increase is expected to match December’s 0.3% pace.
Alongside employment, inflation forms the core of the Fed’s dual mandate, meaning both data points could heavily influence expectations for interest rate policy in 2026. Policymakers left rates unchanged last month, citing signs of a steadying labour market and inflation that remains subdued, though still above the Fed’s 2% target.
The figures arrive after a volatile period for markets, partly driven by concerns over the impact of artificial intelligence on the software sector. Following a sharp sell-off last week, Wall Street stocks staged a rebound on Friday.
Analysts at Capital Economics said they “suspect U.S. economic data this week might help investors’ nerves recover further[.]”
3. Another wave of tech earnings
Also in focus will be a heavy slate of corporate results, particularly from technology companies. Earnings updates are due from ON Semiconductor (NASDAQ:ON), Datadog (NASDAQ:DDOG), Spotify (NYSE:SPOT), Cisco (NASDAQ:CSCO) and Applied Materials (NASDAQ:AMAT).
The reports could offer fresh insight into a sector rattled by rapid advances in artificial intelligence. Last week, software stocks sold off sharply after AI startup Anthropic unveiled a new workplace plugin aimed at legal and administrative tasks, sparking concerns that such tools could erode demand for traditional software services.
As a result, investors will be paying close attention to management commentary on AI strategy and outlook.
“[I]nvestors had a lot to think about following the extreme volatility from the last several sessions, including the huge rebound on Friday, which raises the question of whether the swoon (especially in tech) is over?” analysts at Vital Knowledge wrote.
“We think the recent market swings are simply the most visible manifestations of large structural changes that have been underway beneath the surface for months, specifically in tech and AI[.]”
4. Japan prime minister’s election gamble pays off
Outside the U.S., Asian markets rose on Monday after Japanese Prime Minister Sanae Takaichi secured a decisive victory in a snap election over the weekend.
The vote came just 110 days after Takaichi became Japan’s first female prime minister, making it a high-stakes gamble. Early reports suggest her Liberal Democratic Party won a rare supermajority in the lower house of parliament, strengthening her mandate.
The outcome appears to clear the way for higher government spending and tax cuts, supported by what some observers see as a relatively stable political backdrop.
“Takaichi’s decision to leverage her popularity for her party turned out to be successful. The landslide victory will reinforce her responsible but expansionary fiscal spending and a more Japan-focused foreign policy. Risk-on sentiment will dominate the market for now,” said Min Joo Kang, Senior Economist at ING.
5. Pressure mounts on the UK’s Starmer
While Japan’s leader consolidates power, political risk is rising in the UK. Prime Minister Keir Starmer is facing growing scrutiny over the links between one of his government’s most prominent ambassadors and Jeffrey Epstein.
On Sunday, Starmer’s chief of staff Morgan McSweeney resigned, taking responsibility for Starmer’s appointment of Peter Mandelson as the UK’s ambassador to the U.S. Documents released by the U.S. Justice Department showed Mandelson had provided government papers to Epstein, while Mandelson and his now husband received payments from the late American sex offender.
Markets are watching closely for any fallout. If Starmer or Chancellor Rachel Reeves were to be replaced, “[t]he most likely longer-lasting influence is a loosening in fiscal policy that leads to higher gilt yields than otherwise and a weaker pound than otherwise,” said Ruth Gregory, Deputy Chief UK Economist at Capital Economics.