The first full week of trading in 2026 proved anything but boring. A military intervention that seemed straight out of a geopolitical thriller, a wave of technological innovation at CES in Las Vegas, and China's strong return to the spotlight with its chip companies. Let's take a look at what happened.

Europe: Record after Record between Defense and Technology

European markets started 2026 on the right foot, and it's not just a technical rebound. The STOXX 600 closed the week with a robust +2.23%, while the STOXX 50 reached 5,996 points, marking new all-time highs. But the real star was the German DAX, which posted an impressive +2.86%, driven by renewed confidence in the industrial sector and the gradual easing of energy concerns that had plagued Germany in recent years.

The French CAC 40 added 1.89%, buoyed by the strength of the luxury sector, which, despite persistent uncertainty about Chinese demand, saw names like Hermès and LVMH gain ground. The UK FTSE 100 rose to nearly the psychological threshold of 10,000 points, closing up 1.82% thanks to the boost from energy and financial stocks.

Southern Europe showed more modest but still positive performances: the Italian FTSE MIB gained 0.75% while the Spanish IBEX 35 closed up 0.92%, with banking stocks consolidating after a decidedly generous 2025 outlook.

Defense Flies, Semiconductors Follow

The European defense sector had a remarkable week. The STOXX Europe Aerospace and Defense index soared to its highest level since October, with Rheinmetall up more than 9% on Monday alone, followed by Hensoldt (+8.2%), Renk (+8%), and Leonardo (+6.3%). The catalyst? The US military intervention in Venezuela, which reminded investors how rapidly the global geopolitical landscape can change.

European semiconductors were no exception. ASML, the Dutch jewel in the crown that produces the world's most advanced lithography machines, gained nearly 7% in Friday's session alone, while SAP and Infineon each added over 2%. The positive sentiment stemmed partly from CES in Las Vegas, where Nvidia dominated the show, and partly from the news that Taiwan Semiconductor had obtained a one-year license to import American equipment to its Nanjing facilities.

Macroeconomic data provided further support to markets. French inflation unexpectedly fell to 0.8%, while German inflation surprised to the downside, fueling expectations that the ECB may proceed with further rate cuts later in the year. This environment, combined with the stabilization of European manufacturing, allowed cyclicals to outperform defensives for the first time in several weeks.

United States: Venezuela, CES, and New Records

If you thought 2026 would start quietly, the Trump administration made it clear from the start that this would not be the case. Over the weekend of January 3-4, US special forces conducted a lightning operation in Caracas, capturing Venezuelan President Nicolás Maduro and his wife, Cilia Flores, now under indictment for drug trafficking in the Southern District of New York.

The markets reacted with surprising composure. Stocks opened in the green on Monday, and throughout the week, the indices rattled off record after record. The Dow Jones surpassed the 49,000-point mark for the first time in history, closing Friday at 49,526, a weekly gain of 1.2%. The S&P 500 added 1%, hitting new highs of 6,966, while the Nasdaq did even better, gaining 1.3%.

American Defense Takes Off

On Thursday, Trump dropped another bombshell, this time figurative: he asked Congress for a $1.5 trillion defense budget for 2027, a 50% increase from the $901 billion approved for 2026. Aggressive rhetoric on Greenland and operations in Venezuela did the rest. Lockheed Martin jumped 8%, Northrop Grumman gained 8.4%, L3Harris 11% since the beginning of the year, and even the smaller Kratos Defense posted an incredible 14% gain in a single session.

Jensen Huang Steals the Show at CES

While politics dominated the headlines, the future of technology was being written at the Consumer Electronics Show in Las Vegas. Jensen Huang, CEO of Nvidia, held court for nearly two hours, presenting the new Vera Rubin platform—the successor to the Blackwell architecture—which promises five times faster AI inference performance and a tenth of the cost per token.

Huang's message was clear: the "ChatGPT" moment for physical robotics has arrived. No longer text-generating chatbots, but machines that understand, reason, and act in the real world. Semiconductor stocks responded enthusiastically: Micron +13%, LAM Research +16%, Broadcom +3.8%, Intel +10.8% on Friday alone.

The Job Market Slows, But Without Drama

The December employment report, released Friday morning, showed a moderate picture. Nonfarm payrolls increased by just 50,000, below expectations of 73,000 and down from the revised 56,000 in November. Unemployment, however, fell to 4.4% from 4.5%, a sign that the labor market is cooling without collapsing.

The year 2025 ended with just 584,000 jobs created—an average of 49,000 per month versus 168,000 in 2024—the worst non-recession performance since 2003. As Heather Long of Navy Federal Credit Union summarized it: "The United States is experiencing a no-hiring boom, where growth is strong but businesses aren't hiring. Great for Wall Street, scary for Main Street."

China: AI Chips Dominate Hong Kong

While the West was distracted by Venezuela, China began 2026 with an explosive rally that reminded everyone why ignoring this market is always a mistake. The Hang Seng Index opened the year with a 2.76% jump—its biggest daily gain since May—driven by a wave of enthusiasm for technology and semiconductor stocks.

Shanghai Biren: The IPO of the Year

The standout performer was Shanghai Biren Technology, an AI chipmaker that debuted on the Hong Kong Stock Exchange on Friday, soaring nearly 120% from its initial public offering price. The IPO raised HK$5.58 billion (approximately $717 million), with the retail tranche over 2,300 times subscribed—the highest level of participation in the past twelve months.

This isn't an isolated case. Baidu announced that its AI chip division, Kunlunxin, has confidentially filed for a Hong Kong listing, sending the search engine giant's stock soaring 9.4% in a single session. At least ten other tech companies are expected to debut in Hong Kong this month, including Knowledge Atlas Technology (Zhipu AI) and Shanghai Iluvatar CoreX Semiconductor.

Goldman Sachs Raises the Stakes

Goldman Sachs analysts issued a decidedly optimistic note, forecasting gains of 15-20% for Chinese stocks in 2026 and 2027. According to their calculations, Chinese stocks still trade at a significant discount to international peers, and earnings growth is expected to accelerate to 14% annually—up from a meager 4% in 2025.

The drivers? The adoption of artificial intelligence, the expansion of Chinese companies in global markets, and the government's "anti-devolution" policies. And then there's the liquidity factor: the 163 trillion yuan ($23.2 trillion) in Chinese household deposits are seeking better returns than those offered by banks, with rates continually falling and a still-depressed real estate market.

What awaits us

The first week of 2026 set the tone for what could be a year full of surprises. Markets demonstrated remarkable resilience in the face of a geopolitical shock of historic proportions, signaling that the appetite for yield remains strong and that liquidity continues to seek opportunities.

AI remains the dominant theme, with Nvidia consolidating its leadership position and China accelerating its path to technological self-sufficiency. The defense sector has returned to the spotlight forcefully, and could remain there for a long time if the Trump administration's aggressive rhetoric translates into concrete action.

For investors, this week's lesson is twofold: markets can absorb significant shocks when liquidity is abundant, but volatility is likely to remain high. In this environment, geographic and sector diversification is not optional—it's a necessity.