According to a research report from Guotai Haitong, emerging market gains narrowed last week while developed markets ended flat. The nomination of former Federal Reserve Governor Kevin Warsh as a candidate for Fed Chair by former President Trump triggered a "hawkish" trade, with safe-haven assets and non-ferrous metals leading the declines. On the liquidity front, the market's expectations for Fed rate cuts weakened due to the hawkish-leaning nominee for Fed Chair. Fundamentally, profit expectations for Japanese and European stocks were revised upwards last week, while high-frequency economic sentiment indicators for the US and Europe were also upgraded. The main views of Guotai Haitong are as follows:

Market Performance: Gains in emerging markets narrowed last week. In equities, the MSCI World Index rose +0.2%, with the MSCI Developed Markets Index up +0.0% and the MSCI Emerging Markets Index gaining +1.4%. In bond markets, the US 10-year Treasury yield recorded the largest increase. For commodities, crude oil surged, while gold and silver experienced significant pullbacks. In currencies, the US Dollar depreciated, while the British Pound, Japanese Yen appreciated, and the Chinese Renminbi depreciated. The global energy sector saw unanimous gains last week, Chinese equities showed relative strength in cyclical sectors, while Utilities & Communications performed better in Europe and the US.

Trading Sentiment: Trading volume increased broadly across global markets last week, with the volatility of major indices rising. In terms of turnover, trading volume rose for A-shares, Hong Kong, US, European, and Japanese stocks, while declining for South Korean stocks. Regarding sentiment, Hong Kong stock investor sentiment rose sequentially and remained at historically high levels; US stock investor sentiment also stayed at a historical peak. Looking at volatility, the volatility of Hong Kong, US, European, and Japanese stocks increased last week, while US Treasury volatility decreased. From a valuation perspective, valuations in both developed and emerging markets improved compared to the previous week.

Earnings Expectations: Earnings expectations for Japanese and European stocks were revised upwards last week. Comparing horizontally, as of January 30, 2026, Japanese stocks showed the best marginal change in 2025 earnings expectations for the week, followed by US and European stocks, with Hong Kong stocks performing the weakest. Specifically: 1) Hong Kong stock earnings expectations were revised up, with the Hang Seng Index's 2025 EPS expectation adjusted from -2.1% to -2.0%. 2) US stock earnings expectations were revised up, with the S&P 500 Index's 2025 EPS expectation raised from +10.5% to +11.8%. 3) European stock earnings expectations were revised up, with the Eurozone STOXX 50 Index's 2025 EPS expectation adjusted from -4.5% to -4.4%.

Economic Expectations: High-frequency US economic sentiment improved last week. Over the past week, the Citi US Economic Surprise Index rose, potentially due to some corporate earnings reports exceeding expectations and the easing of the Greenland dispute. The European Economic Surprise Index also rebounded, likely buoyed by the Eurozone's Q4 GDP exceeding expectations quarter-on-quarter and the resolution of the Greenland dispute. The Citi China Economic Surprise Index showed marginal improvement, possibly supported by policy expectations for real estate and service consumption, as well as an easing of Sino-British relations.

Capital Flows: Hawkish candidate Kevin Warsh was nominated as the next Fed Chair. Regarding central bank policy rates, the Fed's January decision to hold rates steady, combined with Trump's nomination of Warsh as a candidate for Fed Chair, triggered hawkish market expectations. As of January 30, the market was pricing in 2.1 rate cuts for 2026, a slight decrease from the previous week. US Dollar liquidity changed little, with the SOFR-OIS spread narrowing compared to last week. On global micro-liquidity, capital primarily flowed into Mainland China, the US, South Korea, India, and Europe in November; last week, the largest incremental funds for Hong Kong stocks came from the Southbound Stock Connect.

Risk Warning: Some indicators are calculated estimates; the Federal Reserve may cut rates faster than expected, and there is uncertainty surrounding Trump's policies.