HL commentary as it happens

UK CPI broadly as expected, markets open broadly flat

UK markets kicked off the session broadly flat as investors weighed up the latest December inflation data. CPI came in at 3.4%, fractionally above the 3.3% expected, but a touch below the Bank of England's forecast. From a market perspective, this doesn’t materially shift the narrative, with a February rate cut effectively off the table. The picture looks more encouraging in April when another cut is expected, as inflation could fall sharply towards the 2% target with regulated price increases coming in lower than last year.

US markets jolt, but cooler heads prevail this morning

US markets jolted lower last night in a brief panic sell‑off as trade war fears crept back into focus. The S&P 500 suffered its worst session since October, marking its fourth decline in the past five days. Cooler heads are emerging this morning, and dip buyers are back, with futures pointing to a positive open later today. Investors seem far less unsettled by President Trump’s well‑worn ‘Art of the Deal’ tactics than they were at the start of his term, and earnings season is ramping at a helpful moment to divert attention away from the political noise. S&P 500 earnings are currently tracking 8% higher this quarter, but that tends to improve as higher growth names report – double-digit growth is probably a better steer, and if delivered, could provide a much‑needed lift for markets.

Oil dips as demand outlook comes under trade pressure

Oil prices softened, with Brent crude slipping back towards $64 a barrel as the market gave up some of the previous session’s gains. Geopolitical noise is back in focus, from renewed tariff threats against Europe to tougher enforcement of Venezuelan sanctions, while expectations of rising US crude and gasoline inventories added further pressure. Temporary supply outages in Kazakhstan offered some offset, but with those disruptions likely short‑lived, the balance of risks for oil remains tilted to the downside for now.

What the latest inflation figures mean for savers

There has been a lot of water under the bridge since these figures were collected in December. Global political news has been unsettling, and I expect that will affect base rate forecasts in the short term.

The market isn’t expecting any movement on rates until April, which should open a window of opportunity for those who want to take advantage, and lock in a great fixed deal, before the Bank starts to cut rates. Many fixed-term savings products continue to offer returns of over 4%, providing an opportunity to secure above-inflation and above-base-rate returns while they last.

Core CPI (excluding energy, food, alcohol and tobacco) was 3.2% (unchanged from November) and services inflation was 4.5% (up from 4.4%).

Alcohol and tobacco prices helped push inflation up, but much of that was purely down to timing. Tobacco duty increased at the end of November 2025 – pushing prices up in December, whereas in 2024 it all happened a month earlier. It means that in December, prices were rising faster than they were at the same time a year earlier – which automatically boosts inflation.

Another big mover was transport. Petrol and diesel price rises had very little impact at all. Instead, it was air fares flying high. This owes a lot to timing differences, particularly the fact that this time in 2024 the flight prices being measured were Christmas Eve and New Year’s Eve – whereas in 2025 it was 23 and 30 December. Prices are naturally lower on celebration days, and higher as people flock to get away in time for Christmas.

Food prices tend to rise in the run-up to Christmas as the supermarkets cash in on the golden quarter for sales, so there’s nothing unusual in the rise in December, when food inflation rebounded to 4.5%. Striking annual rises included beef and veal, whole milk and butter. Cattle farmers are still feeling the financial impacts of a poor grass harvest – as well as increased labour costs throughout the production and sales process. Poor harvests further afield mean higher prices for chocolate and sweets too. This will have meant shoppers pocketed less change after filling festive stockings with sweet treats.

CPI inflation rose to 3.4% in December – from 3.2% in November.

Like the best kind of seasonal weight gain, the bump in inflation in December is likely to be a short-lived phenomenon, and it’s expected to drop again in January. It means these figures are unlikely to have much impact on the Bank of England’s rate cutting decisions.

In more normal times, the seasonal inflationary blip, would be unlikely to steer the Bank from a rate-cutting path. Likewise, the easing of wage inflation revealed yesterday would typically add fuel to the fire for a cut – alongside sluggish GDP growth. However, these are far from normal times. There’s the risk of interruptions to global supply chains and increased trade tariffs, which could add more inflationary pressure in the coming months. It means the market isn’t expecting a cut until April.

Expect further volatility today – and tomorrow as Trump takes the stage at the annual World Economic Forum in Davos

Tomorrow, Trump takes the stage at the annual World Economic Forum in Davos, which we expect to cause additional market turmoil, given the current political stance. Navigating these choppy waters is difficult for investors – as we outlined in our 2026 market outlook, uncertainty and geopolitical domination over markets will be a mainstay of the next 12 months, and beyond.

Rhetoric has escalated overnight, with Trump attacking the UK’s foreign policy over Chagos Islands

The European Union has dusted off its playbook from last year’s tariff negotiations and threatened to retaliate on a suspected $108bn of US goods. The US stock market was closed for Martin Luther King national holiday, but futures are down. Should the EU enact these tit-for-tat tariffs, it would be energy, chemicals, agriculture, food and pharmaceutical stocks that would be worst hit. Both the S&P 500 and the NASDAQ are expected to fall on open this afternoon UK time. Markets – and investors – will be balancing the likelihood of tariff rhetoric being a negotiating tactic from which Trump will climb down, or the real deal. The so-called Trump always chickens out trade (with the acronym TACO) was popular last year with global investors playing market volatility to their advantage, but the Trump of 2026 seems to act more decisively – take the military action in Venezuela as evidence of the President saying exactly what he then implemented. Gold and silver rose to fresh highs yesterday as investors loaded up on perceived safety. Investors should expect further volatility today, particularly given the escalation in rhetoric overnight, with Trump attacking the UK’s foreign policy over Chagos Islands and publishing what look like private messages from European leaders inviting conversation.

European markets fell yesterday following weekend threats from US President, Donald Trump, to implement Greenland-related tariffs

It is difficult to comprehend that we are still in January – news flow and market reaction has made this one long year-to-date, averaging weekly market rotations. Yesterday, European markets universally fell, reacting to the news over the weekend that US President, Donald Trump, intended to implement 10% additional import tariffs by 1st February on the eight countries that had – in his eyes – defied him by sending military support to Greenland. In the event a deal was not reached with these countries by 1st June, the US President indicated this rate would rise to 25%. Across Europe, sectors which export the most to the US saw big stock hits.

Jobs market weakness and pay growth set to fall

Unemployment has been climbing fairly steadily for the past three years and has hit 5.1%. It’s a substantial rise since the most recent low of 3.6% in summer 2022 and only just shy of the pandemic peak of 5.3%. And while pay growth looks robust for those still in work, things aren’t quite as strong as they seem.

On the face of it, it’s not all bad news: employment is up over the year, jobs vacancies have risen very slightly over the month, and wages are up 4.7% in a year. However, look a bit closer and real weakness emerges. Vacancies are down 8.6% in a year, while unemployment and redundancies are rising. As a result, there were 2.5 unemployed people per vacancy – up from 2.4 in the previous quarter and 1.9 a year ago. Meanwhile, wages are up just 1.1% after inflation – and this is likely to fall.

There’s a huge difference between wage inflation in the public sector – at 7.9% and the private sector – at 3.6%. This owes much to the fact that some public sector pay rises were paid earlier in 2025 than a year earlier, which will even out in the next few months, automatically bringing the rate down. Once that’s worked its way out of the figures, wage rises will look decidedly less robust. Given they’re currently only 1.1% after inflation, this will be one to watch.

Oil price retreats as focus shifts to demand

Brent crude prices have slid below $64 as tensions between the US and Iran cool a little and traders assess the heightened threat of wide-sweeping global tariffs.

CEOs and world leaders head to Davos in search of the spirit of dialogue

Markets are close to record-highs. If this year’s theme of the ‘Spirit of Dialogue’ at the World Economic Forum in Davos turns out to be more ironic than prophetic, there’s scope for a steeper dip in risk-on assets. With everyone from Presidents Trump & Zelensky through to NVIDIA’s CEO descending on the alpine village this week, the flies on the wall should be party to some tense conversations. The elevated tension level hasn’t been lost on safe-haven investors either, with gold at fresh highs as it approaches the $4,700 per ounce barrier.

This also reflects dampened expectations for an imminent rate cut by the Fed after recent economic data suggested continuing strength in the US economy. American markets are closed today in memory of Martin Luther King Junior, but futures across the Atlantic are also pointing downwards. While investors will be closely following events in Switzerland, there’s plenty of news expected on American soil this week. PCE inflation figures and fourth-quarter GDP are the key metrics that rate setters will be looking at. Forecasts are expecting strong economic growth of around 5.3% and a month-on-month uplift of 0.46% to core prices in the delayed PCE number from November.

Tit for tat tariff threats weigh on global indices

UK and European markets are tracking Asian markets downwards this morning after an extraordinary weekend of economic sabre-rattling over Greenland. Donald Trump’s given eight countries, including three of the World’s largest economies, until 1 February to clear the path for the US acquisition of Greenland, or face a 10% tariff, which could rise to 25% in time. The European Union has hit back with a proposed €93 billion tariff package and has dusted off its never-before-used ACI (anti-coercion instrument), which would further limit US companies' access to major contracts across the single market.

The UK is yet to make a formal response, but the Prime Minister will address the nation today at 2:30pm after reiterating his opposition to Washington’s desire to take control of Greenland in a call with Donald Trump on Sunday. The market reaction to this escalation has been relatively muted compared to the post-liberation day sell-off seen last April. Given the President’s history of dramatic threats and last-minute stand-downs, investors may be pricing in a generous degree of bluff in this high-stakes poker game.