Sometimes, the usual logic of the stock market just doesn't hold. Yesterday was a good example. Normally, when inflation is lower than expected, investors assume the central bank might cut interest rates. December's US inflation did indeed come in slightly below forecasts, yet markets failed to rally. The reason? Investors still believe the Federal Reserve is unlikely to make any further rate cuts before Jerome Powell steps down as Chair in June.

To be perfectly clear, the inflation print did have a mildly positive effect, but the broader picture dampened sentiment. Wall Street closed moderately lower, with the S&P 500 and Nasdaq shedding about 0.2%. The Dow Jones fell more steeply, down 0.8%, dragged by the financial sector. JPMorgan Chase posted robust earnings, yet Donald Trump's proposal to cap credit card rates triggered a wave of concern. It is the second time in under a week that the White House has signalled its willingness to meddle in private sector affairs: this after a foray into residential real estate. Business circles are unsettled, particularly given the concurrent pressure on the Fed's monetary policy.

After a raucous start to 2026, a few key dynamics have come into play:

  • Geopolitical tensions surrounding two oil-rich nations, Venezuela and Iran = a 9% weekly rise in Brent crude prices.

  • Questions over the Fed's independence, an institution seen as a pillar of stability = a surge in gold and precious metals (silver broke through the USD 90 ceiling yesterday).

  • Robust economic momentum in the US (AI-driven) and China (export boom) = gains in industrial metals.

  • US federal interventionism = sector-specific fears in banking (credit card rate caps), real estate (restrictions on institutional investors), healthcare (drug price regulation), and defence (pricing pressure on US Army suppliers).

These dynamics are not set in stone, but they are shaping the early-year landscape in financial markets.

Looking specifically at today's session, attention will turn once again to US financials reporting at midday: Bank of America, Wells Fargo, and Citigroup are in the spotlight. Early this afternoon, US producer prices will be released. The Supreme Court may also issue a ruling on the constitutionality of Donald Trump's tariffs: a wildcard for the session. No one knows, except the Court itself, whether the decision will come today. But certain days are deemed more likely for such announcements, and this Wednesday is one of them.

This morning's headline news hails from China. First, authorities have raised the minimum margin requirement for financing stock purchases to 100%, up from 80%. This applies to mainland markets (notably Shanghai and Shenzhen) and aims to curb financial risk. Secondly, China has announced a record trade surplus, tariffs notwithstanding. Economist Lynn Song of ING offers a concise analysis. December's trade performance exceeded expectations, lifting 2025 export growth to 5.5% - despite a 20% drop in annual shipments to the US. Gains came from Africa (+25.8%), ASEAN (+13.4%), India (+12.8%) and, naturally, the EU (+8.4%). Leading export categories include semiconductors (+26.8%), ships (+26.7%), and automobiles (+21.4%). Traditional US-bound goods such as toys (-12.7%) and shoes (-11.3%) underperformed. "The structure of exports shows that China continues to move up the value chain," ING notes. Unsurprisingly, China remains the global supply hub, upgrading its capabilities and successfully redirecting trade flows despite US tariffs.

In Asia-Pacific markets this morning, South Korea's KOSPI flirted with ending its eight-session winning streak (it has yet to post a loss in 2026), but rebounded to close up 0.5%. Elsewhere in the region, markets rose - except in mainland China, where the margin hike erased earlier gains on the CSI 300, which closed modestly lower. In Japan, the Nikkei 225 added another 1%, still buoyed by expectations of a bold fiscal stimulus from the Takaichi government. As a consequence, the yen is sliding into a danger zone that typically prompts intervention from the Bank of Japan. Western futures are far less enthusiastic, weighed down by US policy concerns, though not far from recent highs.

Today's economic highlights:

See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,632.43
  • Crude Oil (BRENT): US$65.05
  • United States 10 years: 4.16%
  • BITCOIN: US$95,061.5

In corporate news:

  •  Workspace Group faces pressure from Saba Capital for a managed winddown to address refinancing challenges and return capital to shareholders
  •  AstraZeneca acquired Modella AI to enhance oncology drug research through AIdriven biomarker discovery.
  •  BP plc is involved in contract negotiations at its Whiting, Indiana refinery regarding job cuts and workplace changes.
  •  Prudential appointed Douglas Flint as the new Chair, succeeding Shriti Vadera.
  •  Rio Tinto is considering a $200 billion acquisition of Glencore, with advisory support from JPMorgan, Evercore, and Macquarie.
  •  Rockwool faces potential asset writedowns after losing control of its Russian factories, leading to target price reductions by Bernstein and Morgan Stanley.
  •  Bonesupport Holding AB reported a 36% revenue growth in Q4 2025 and anticipates over 35% sales growth in 2026.
  •  Novo Nordisk plans to launch a pill version of its Wegovy obesity drug amid international market challenges.
  •  Banca Ifis successfully raised €400 million through a Tier 2 bond issuance.
  •  Julius Baer announced a new COO and leadership transition impacting Swiss stocks.
  •  Universal Music Group appointed Hannah Poferl as Chief Data Officer to enhance AIdriven audience engagement strategies.
  •  Engie SA awarded its first hybrid solar and battery storage project in India.
  •  Al Batinah Power announced a fullyear profit of 15.3 million rials and appointed Michael Cunningham as temporary director and chairperson.
  •  Coca-Cola terminated its attempt to sell Costa Coffee due to unsatisfactory bids.
  •  JPMorgan exceeded trading revenue expectations but fell short on investmentbanking fees.
  •  Netflix is considering an allcash takeover offer for Warner Bros. Discovery amidst market skepticism.
  •  Tesla will transition its Full SelfDriving software to a monthly subscription model and is entering mediation with the EEOC over a racism lawsuit.

See more news from UK listed companies here

Analyst Recommendations:

  • Rio Tinto Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 7100 to GBX 7900.
  • Renew Holdings Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 1200 to GBX 1320.
  • Serco Group Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 300 to GBX 330.
  • Diploma Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 6350 to GBX 6600.
  • Clarkson Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 4250 to GBX 4750.
  • Reckitt Benckiser Group Plc: RBC Capital downgrades to sector perform from outperform and reduces the target price from GBX 6400 to GBX 6200.
  • Jupiter Fund Management Plc: Barclays maintains its underweight recommendation and raises the target price from GBP 1.25 to GBP 1.45.
  • Easyjet Plc: Barclays maintains its overweight recommendation and raises the target price from GBP 6.75 to GBP 7.
  • Wizz Air Holdings Plc: Barclays maintains its overweight recommendation and raises the target price from GBP 15 to GBP 16.
  • Whitbread Plc: Morgan Stanley maintains its overweight recommendation and raises the target price from GBX 3100 to GBX 3200.
  • Shell Plc: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 92 to USD 93.
  • Standard Chartered Plc: Goldman Sachs maintains its buy recommendation and raises the target price from HKD 203 to HKD 237.