Cloudy UK inflation data while gold again breaks records
‘’While the direction of UK inflation may pale into importance faced with the trade turmoil once again roiling markets, December’s snapshot is crucial reading for Bank of England policymakers.
After November’s upside surprise, the jump in the headline rate back up to 3.4% puts the decision over an interest rate cut in February back in more tricky territory.
But if you strip out more volatile food, alcohol, tobacco and energy prices inflation hasn’t budged, sticking at 3.2%. Combine this with the cooling off in the labour market, with wage growth easing, then further interest rate cuts this year still look likely.
On a three-month basis, the economy is barely growing, and with fresh tariff threats hanging over the UK and other European nations, lowering borrowing costs may be sorely needed to stop a contraction. While a cut in February hangs in the balance, a reduction in March may be more likely.
Wall Street looks set to be in recovery mode after the sharp slide which was the bitter cherry on Trump’s anniversary cake of chaos. The first year of his second term has been laced with deep foreign policy upset, attempts to interfere in Federal Reserve policymaking and rounded off by threats to annex a NATO ally’s territory.
It’s not surprising that investors are unnerved and are increasingly seeking out safer havens for their money, less reliant on the trajectory of the US economy. The pile-on into gold is continuing, as it again hits fresh records. For now, it seems the only way is up for the precious metal, as unease continues spread about the potential for fresh geopolitical turmoil and a wider trade war. Greenland’s Prime Minister has warned citizens to prepare for a potential invasion, although he described it as unlikely, it won’t help calm tensions. Economic repercussions are looking more likely.
If Europe’s leaders open their shiny new economic toolbox and prepare to use their anti-coercive instrument, it could be deployed to curtail foreign investments or even tech firm’s access to the European market. That’s partly why the Nasdaq fell more sharply on Tuesday than the wider S&P 500. Even without the trade bazooka being launched, European investment institutions who are already unnerved by the growing US debt pile may be nudged into selling by the Greenland crisis. Danish Pensions fund AkademikerPension is already moving in that direction, planning to exit its $100 million holding of government debt by the end of the month.
Drama continues to surround Netflix. Although its earnings growth came in a nudge higher than expected for the last quarter of 2025 there was a sharp slide in its share price. Disappointment seeped in after it projected earnings would be flat in the current quarter. It comes just as it attempts to swallow Warner Bros Discovery studios and streaming business but is trying to fend off a hostile bid from Paramount. Investors are assessing the tricky road ahead, not just in clinching the deal but then combining the two businesses at a time when growth in earnings is harder to come by.”Susannah Streeter, Chief Investment Strategist, Wealth Club
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