The week ends better than It began (Just about)

A geopolitical rollercoaster set the tone on markets this week, eclipsing the initial wave of earnings reports - most of which were poorly received, with names like Netflix, Intel, Abbott and several banks underwhelming. The pace of earnings will quicken next week, which will also see a rate decision from the Federal Reserve. It remains to be seen whether the weekend, ripe as ever for fresh Trump shenanigans, will offer investors any respite.

Since Wednesday, equity markets have been channelling the power of positive thinking: if things aren't getting worse, then perhaps they're getting better. Donald Trump, reassuringly, refrained from upending the table in Davos over Greenland, and markets breathed a sigh of relief. Investors, ever fond of a catchphrase, revived the TACO Trade theory (Trump Always Chickens Out): he blusters, then backs down. The only snag is that the so-called "Davos compromise" appears to have been interpreted in a variety of ways. Still, positions once again seem reconcilable, the threat of fresh tariffs has receded, and equities rebounded over the past two sessions.

Elsewhere, however, the story being told by financial assets diverges somewhat. Bond yields remain stubborn. Precious metals continue their strong run - silver is up 38% and gold 15% since 1 January - and the dollar has slumped. The greenback's slide reflects a growing sense that investors are trimming their US exposure, as the country's risk premium rises in response to Donald Trump's latest outbursts.

Today's session will remain geopolitically charged, but will also bear the weight of Intel's disappointing earnings guidance, released after the close on Wall Street last night. The shares tumbled more than 10% in after-hours trading. After a long wilderness period, the stock had surged 150% over the past year, buoyed by a compelling narrative, one which does not tolerate missteps. Tepid growth prospects sit uneasily alongside promises of AI-fuelled boundless prosperity. As a result, sentiment in the tech sector has been dented this morning, though loyalists are already nursing their wounds with the argument that Intel's troubles stem from supply constraints rather than waning demand. US tech outlet The Information nevertheless points out that despite its patchy execution and erratic forecasting, Intel currently enjoys a higher valuation than operationally pristine TSMC - an absurdity likely explained by the flag it flies under.

On the macroeconomic front, markets await the release of preliminary January PMI activity indicators, particularly for the eurozone (this morning) and the US (this afternoon). Overnight, the Bank of Japan left its policy rate unchanged at 0.75%, as expected. It also raised its inflation and growth forecasts, while keeping the door open to future rate hikes later in the year. Market reaction was lukewarm. Oil slipped slightly following relatively upbeat comments about peace talks between Russia and Ukraine - or rather, the negotiations about launching peace talks. In the US, the latest statistics appear inconsistent with any near-term monetary easing. Markets have now priced out rate cuts at the January, March and April meetings. Bets on a cut now cluster around the 17 June meeting: the first of the post-Powell era, and therefore to be chaired by a central banker aligned with President Trump.

In China, the central bank fixed the yuan's daily reference rate above 7 CNY per USD for the first time since 2023. I confess it's not my area of expertise, but very smart people seem to think it's worth keeping an eye on.

Asia-Pacific markets are broadly higher on the final trading day of the week, except for India, where the SENSEX is down 0.3%. Japan and Hong Kong are up 0.3%, South Korea and Taiwan 0.7%, and Australia 0.1%. The MSCI Asia Pacific Index is modestly higher on the week. European futures are treading water, while Wall Street futures have turned green again despite poor results from Intel and Abbott.

Today's economic highlights:

Today's agenda includes: in the United Kingdom, Gfk consumer confidence and retail sales; in Japan, manufacturing and services PMIs followed by the BoJ interest rate decision and quarterly outlook report; in France, business confidence and manufacturing, services, and composite PMIs; in Germany, manufacturing, services, and composite PMIs; in the Euro Area, manufacturing, services, and composite PMIs followed by ECB President Christine Lagarde's speech; in China, FDI year-to-date; in Canada, retail sales; in the United States, manufacturing, services, and composite PMIs followed by the final Michigan consumer sentiment index. See the full calendar here.

• GBP / USD: US$1.35
• Gold: US$4,955.59
• Crude Oil (BRENT): US$64.64
• United States 10 years: 4.24%
• BITCOIN: US$89,444.4

In corporate news:

• Strategic Minerals PLC successfully raises GBP4 million through a share placing due to high investor demand.
• Shell is considering selling its stakes in Argentina's Vaca Muerta shale field.
• Watches of Switzerland acquires US company Deutsch & Deutsch.
• Ericsson reports stronger-than-expected Q4 earnings and proposes a higher dividend.
• Banca Monte dei Paschi di Siena board plans to approve 2025 financial results on February 9.
• BASF misses 2025 earnings forecast but exceeds free cash flow expectations, with FY sales projected at €59.7 billion.
• Tinexta Spa reports a 2% revenue increase, outlines its 2026-2028 industrial plan, and announces its acquisition by Zinc BidCo.
• Wacker Neuson ends acquisition talks with Doosan Bobcat over a potential stake purchase.
• SEB cuts Essity's target price to 310 SEK.
• Nordea reduces its target price for Essity to SEK 300 while keeping a buy rating.
• Czechoslovak Group achieves a record-setting IPO valued at €25 billion.
• JPMorgan expands its presence in the UK pensions technology sector by acquiring WealthOS.
• Shell is considering selling its stake in the Vaca Muerta shale play in Argentina.
• Rolex is expanding its luxury watch retail presence in the US through acquisition.
• Tesla is set to potentially receive regulatory approval for its Full Self-Driving system in Europe and China to bolster software revenue amid slowing vehicle sales.
• Intel shares declined due to a weak outlook caused by supply shortages, despite strong demand.
• Capital One reports its December 2025 net charge-off rates for domestic credit cards and auto loans, along with 30-plus-day delinquency rates.

See more news from UK listed companies here

Analyst Recommendations:

• St. James's Place Plc: RBC Capital maintains its sector perform recommendation and raises the target price from GBX 1300 to GBX 1350.
• Pennon Group Plc: Morgan Stanley upgrades to overweight from market weight with a price target raised from GBX 620 to GBX 680.
• B&M European Value Retail S.a.: Barclays maintains its overweight recommendation and reduces the target price from GBP 2.50 to GBP 2.35.
• Informa Plc: UBS maintains its buy recommendation and reduces the target price from GBX 1075 to GBX 1055.
• Severn Trent Plc: Morgan Stanley downgrades to market weight from overweight with a target price of GBX 3350.
• Watches Of Switzerland Group Plc: Barclays maintains its overweight recommendation and raises the target price from GBP 5.95 to GBP 6.40.
• Supermarket Income Reit Plc: Goldman Sachs maintains its neutral recommendation and reduces the target price from GBX 91 to GBX 87.
• Derwent London Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 2450 to GBX 2790.
• Tritax Big Box Reit Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 180 to GBX 210.
• Unite Group Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 860 to GBX 890.
• Burberry Group Plc: CICC maintains its neutral recommendation and raises the target price from GBX 1000 to GBX 1200.