Global markets enter a consequential week as a set of postponed U.S. employment figures and new inflation readings take center stage, accompanied by a heavy slate of technology sector earnings and notable political developments in Japan and the U.K.
Key macro releases and corporate updates are likely to intersect with recent market volatility tied to the potential impact of artificial intelligence on software revenues, creating a week that may clarify near-term risks to growth, inflation and market sentiment.
1. U.S. employment report commands attention
The focal point for markets this week is the official January employment report, which was postponed after a brief three-day federal government shutdown that ended last Tuesday. The report, now scheduled for release on Wednesday, is forecast to show the U.S. economy added 70,000 roles in January, down from 50,000 in the prior month.
Economists and investors will be watching closely for confirmation of what Federal Reserve Chair Jerome Powell recently described as a "stabilizing" labor market. Policymakers cut interest rates multiple times in 2025 in an effort to support a labor market that has been slowing amid broad economic uncertainty tied in part to tariffs.
Signals leading into this release were mixed. Last week, initial claims for unemployment benefits rose by more than expected, a move attributed largely to severe winter storms. Separately, job openings in December fell to a five-year low. That decline was concentrated in the professional and business services sector - a shift some observers argue may reflect pressure from artificial intelligence on certain office roles.
2. Inflation readings also loom large
Following the employment report, markets will turn toward January consumer price data, due on Friday. The Labor Department’s headline consumer price index for the 12 months to January is projected to slow to 2.5%, down from 2.7% in December. On a month-over-month basis, the figure is expected to match December’s 0.3% pace.
Both job growth and inflation are central to the Federal Reserve’s dual mandate, and together they will influence how the U.S. central bank frames its approach to interest rates through 2026. Policymakers left rates unchanged at their most recent meeting, citing a labor market that may be steadying and inflation that remains muted, though still above the Fed’s 2% target.
The forthcoming data arrive amid recent market swings, which have been exacerbated by concerns over the impact of AI on the software industry. Equity markets experienced a steep selloff earlier last week before a rebound on Friday. Analysts at Capital Economics suggested that they "suspect U.S. economic data this week might help investors’ nerves recover further[.]"
3. Tech earnings provide a fresh read on AI risks
Corporate results will also be in focus, with a flood of earnings from software and hardware-related companies expected to provide a clearer picture of demand dynamics in an AI-infused market. Notable names scheduled to report include Onsemi, Datadog, Spotify, Cisco Systems, and Applied Materials.
Last week’s volatility in software stocks was triggered in part by the unveiling of a plugin from AI startup Anthropic aimed at legal and administrative workplace tasks, a release that coincided with a sharp decline in software shares as investors assessed the potential impact on sector revenue. As a result, executive commentary on AI strategy and customer demand will be closely scrutinized by analysts.
"[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 said in a note.
Vital Knowledge added: "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’s snap election gives PM wide latitude
Asian markets moved higher on Monday after Japanese Prime Minister Sanae Takaichi secured a decisive victory in a snap election held over the weekend. Takaichi had called the early vote 110 days after becoming Japan’s first-ever female prime minister, and reports indicate her Liberal Democratic Party captured such broad support that it won a rare supermajority in the lower house of parliament.
The scale of the victory appears to clear a path for Takaichi to pursue the fiscal measures she has proposed, including targeted spending increases and tax cuts. Some market participants described the political backdrop as stable in the immediate term, a factor that could underpin a risk-on mood.
"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, in a note.
5. Political pressure in the U.K. clouds fiscal outlook
In contrast to Japan’s consolidation of power, political strain in the U.K. may have broader market implications. Prime Minister Keir Starmer is facing scrutiny over an appointment to a prominent diplomatic role linked to the late Jeffrey Epstein. On Sunday, Starmer’s chief of staff, Morgan McSweeney, resigned, taking responsibility for Starmer’s nomination of Peter Mandelson as ambassador to the U.S.
Files released by the U.S. Justice Department reportedly show Mandelson provided government documents to Epstein and that Mandelson and his now husband received payments from the late American sex offender. The controversy has raised questions about potential Cabinet changes.
"[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 U.K. Economist at Capital Economics, in a note, referring to the possible consequences should Starmer or Chancellor Rachel Reeves be replaced.
Market takeaways and close perspectives
This combination of data releases, corporate reports and political developments means markets will be parsing signals across multiple dimensions - from labor market momentum and inflation trends to tech sector demand and sovereign fiscal stances. Short-term swings may be driven by earnings commentary about AI, while bond and currency markets will be sensitive to any shifts in fiscal policy or leadership in the U.K. and Japan.
For traders and investors, the week offers a high density of information that could alter expectations for growth, inflation and policy paths. As Capital Economics noted, the incoming U.S. data may play a role in calming investor nerves following the recent volatility.
Additional note on market strategies
AI-related shifts in market structure and sector dynamics have prompted vendors of investment research to highlight algorithmically selected portfolios and strategies. One such service noted that year to date, 2 out of 3 global portfolios are beating their benchmark indexes, with 88% of holdings in the green. The provider also cited its flagship Tech Titans strategy as having doubled the S&P 500 within 18 months, including winners such as Super Micro Computer (+185%) and AppLovin (+157%).
Readers and market participants should weigh these performance claims in the context of the broader economic and policy developments outlined above.