European markets have maintained their downbeat tone, with indices falling back despite speculation of a Chinese 1 trillion yuan sovereign bond plan as they seek to prop up a faltering economy. This morning has seen a particular focus on the UK, with jobs data casting a light on the outlook over the increasing likeliness of a Bank of England pivot in the first half of the year. In the absence of any US influence yesterday, today sees a post-MLK return for US stocks, with all eyes on Tesla in particular given Elon Musk’s warning that he will hold off on developing new AI products within the company unless he holds over 25% of the voting power. At a time when AI-related companies have been trading at a premium, the risk of Musk holding the company at ransom does bring concern that we could see Tesla shares lead a risk-off move for US equities today.
This morning saw UK jobs data dominate, with GBP traders firmly focused on the weakening wage growth figure as grounds for a dovish approach from the Bank of England. Coming ahead of tomorrow’s all-important inflation report, the surprise slump in UK average earnings (to 6.5%) helps ease concerns over the underlying price pressures being felt by businesses. While we are expecting to see a somewhat underwhelming 0.1% decline in the headline CPI figure tomorrow, base effects point towards a sharp decline in UK inflation from February onwards.
US markets are increasingly going to have to prepare for the likely event of a second term for Donald Trump, with Iowa Republicans backing him heavily in a vote that saw Vivek Ramaswamy pull out and endorse Trump’s campaign. Despite the efforts from the more moderate Nikki Haley, it looks increasingly likely to be a fresh showdown between Joe Biden and Donald Trump this year.
Today sees Goldman Sachs and Morgan Stanley head up the earnings, coming hot off the tails of a somewhat mixed bag of bank numbers on Friday. Goldman Sachs shareholders will hope that the investment bank will be able to replicate the impressive outperformance from fellow investment bank JP Morgan, taking advantage of a more upbeat environment in the fourth quarter.
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