Humanity has always functioned through power dynamics. In recent decades, such relations were more often than not wrapped in diplomacy, if not civility. That era appears to be over. Interactions have returned to a more direct and abrasive tone. The resulting surge in global tension is proving difficult for many governments to manage, largely due to inexperience. I will refrain from listing all the world’s flashpoints, but several are clearly influencing market behaviour.

On the international front, the United States’ ousting of Nicolás Maduro at the very start of the year signalled a heightened level of interventionism from Washington. Cuba, Colombia and other nations suspected of fostering crime or drug trafficking on American soil are firmly in the crosshairs. Iran, where the regime appears increasingly fragile, remains a major concern. So too does Greenland, now openly claimed by Washington. Germany and the UK are reportedly discussing a NATO mission to the island, aiming to demonstrate that Europe has not ceded ground. Further east, the Trump Administration’s actions have reignited anxieties over Taiwan, a perennial target of Chinese ambitions. Behind this global agitation lies the drive of major powers to assert control - over territory, technology, and resources.

This shift in paradigm is having a profound impact on financial markets. Two examples stand out. First, the defence industry is enjoying a new golden age, not merely a temporary boost linked to the war in Ukraine. Even the most optimistic observers struggle to see how the drumbeat of conflict might subside any time soon. Second, commodities are once again front and centre—particularly metals and the minerals from which they are derived. The G7 Finance Ministers’ meeting, being held today, is focused on rare minerals and will include Australia and India as special guests. The US is pulling every lever to reduce its dependence on China for rare earth elements.

In this context, gold has reached a new all-time high, driven by the rising probability that something may go awry in this increasingly complex world.

To these international tensions must be added domestic ones. In the United States, the standoff between the White House and the Federal Reserve has reached an unprecedented level. The Department of Justice has launched a criminal investigation into Fed Chair Jerome Powell, linked to his Congressional testimony regarding renovations of the central bank's headquarters. In a video of rare intensity, Powell dismissed the investigation as a pretext, framing it as part of Donald Trump's campaign to pressure the Fed into lowering interest rates.

Key Developments to Watch This Week:

  • The United States is juggling multiple foreign policy fronts. It continues to exert pressure on Cuba, Iran (with the Wall Street Journal reporting preparations for a possible intervention), Denmark, and by extension, the EU.
  • Still in the US, the Supreme Court declined to rule last Friday on the constitutionality of certain tariffs. A decision may come on Wednesday, during its next session, though nothing is certain.
  • Also in the US, Friday’s reassuring employment data bolstered market expectations that interest rates will not be cut at the end of the month. The same figures have reduced hopes for an easing at the subsequent March meeting - with the probability now at 29%, down from 44% a week earlier.
  • On the corporate agenda, earnings season kicks off on Tuesday with JPMorgan Chase and Bank of New York, followed by a raft of other US financials. In Europe, Sika will lead the way on Tuesday, followed on Thursday by the first major report from the luxury sector: Compagnie Financière Richemont.
  • Turning to macroeconomic indicators, US December inflation figures (due Tuesday) and Germany’s full-year 2025 GDP (on Thursday) are expected to add some spice to the week.

In Asia-Pacific, the yen has fallen amid rumours of snap elections in Japan. The Tokyo Stock Exchange is closed today for a public holiday. Chinese markets are performing well, with Hong Kong up 1.2% and mainland indices gaining 0.7%. South Korea and Taiwan are drawing strength from their tech sectors, each rising around 0.7%. India is down 0.8%, while Australia has started the week on a positive note, up 0.5%. European markets are expected to open lower, with US futures trending down amid the deepening standoff between Trump and Powell.

Today's economic highlights:

See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,577.96
  • Crude Oil (BRENT): US$63.48
  • United States 10 years: 4.17%
  • BITCOIN: US$91,809.2

In corporate news:

  • Vallourec secured a significant contract with Shell to supply OCTG products for the Orca drilling project in Brazil, set to begin in April 2027.
  • Australian shares rose to a near three-week high, driven by gains in banking stocks, while BHP fell 2.5% amid pressure from Rio Tinto’s potential merger with Glencore.
  • Investor confidence in Italy’s real estate market is rebounding following regulatory reforms and political stability, with Coima and Savills noting increased scrutiny and renewed interest despite ongoing fallout from the Milan building scandal.
  • WH Smith has hired Russell Reynolds Associates to help plan the succession of Chair Annette Court, focusing on board renewal and executive leadership amid broader corporate challenges.
  • Copper prices rose on hopes of stronger demand from China’s upcoming stimulus measures, with market attention on a potential Rio Tinto-Glencore merger that could reshape the mining industry.
  • Rio Tinto's talks to acquire Glencore are putting pressure on BHP to respond, as copper-driven consolidation reshapes the global mining sector.
  • The list of countries affected by Nestlé's infant milk recalls is growing.
  • AP Moller Maersk is exploring increased use of ethanol as a green fuel to reduce its reliance on China, reports the FT.
  • Enel launches a buyback program for 3.2 million shares.
  • Wolters Kluwer acquires Canadian company StandardFusion for €32 million.
  • The CEO of BayWa resigns.
  • ACS and GIP reach a 50/50 joint venture agreement for data centers.
  • Corem Property will sell a plot in New York, with a negative impact of around $95 million on its net income.
  • Exxon says it is ready to consider a return to Venezuela, but its CEO remains cautious, similar to leaders of other major U.S. oil companies.
  • Walmart is partnering with Google to let shoppers browse and purchase products directly through the Gemini AI interface.
  • Donald Trump has demanded that credit card companies (Visa, Amex, Mastercard, etc.) cap their interest rates at 10% by January 20, but experts note such a move would require Congressional action and has no clear enforcement mechanism yet.
  • Prudential Financial is reportedly considering selling its Indian asset management business, according to Bloomberg.
  • Teva expects its 2026 revenue to be stable or slightly lower compared with 2025.

See more news from UK listed companies here

Analyst Recommendations:

  • Auto Trader Group Plc: Berenberg maintains its hold recommendation and reduces the target price from GBX 830 to GBX 665.
  • Babcock International Group Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 1440 to GBX 1670.
  • Chemring Group Plc: Berenberg maintains its buy recommendation and reduces the target price from GBX 630 to GBX 590.
  • Associated British Foods Plc: RBC Capital maintains its sector perform recommendation and reduces the target price from GBX 2400 to GBX 2050.
  • J Sainsbury Plc: RBC Capital maintains its outperform recommendation and reduces the target price from GBX 380 to GBX 375.
  • Associated British Foods Plc: Bernstein downgrades to market perform from outperform and reduces the target price from GBX 3100 to GBX 1800.
  • Reckitt Benckiser Group Plc: Deutsche Bank maintains its hold recommendation and raises the target price from GBX 5700 to GBX 6000.
  • Haleon Plc: Deutsche Bank downgrades to sell from hold and reduces the target price from GBX 360 to GBX 340.
  • Informa Plc: Citi initiates a neutral recommendation with a target price of GBP 9.75.
  • Wpp Group: Citi initiates a neutral recommendation with a target price of GBP 3.65.
  • Sage Group Plc: UBS upgrades to buy from neutral with a price target raised from GBX 1400 to GBX 1425.
  • Travis Perkins Plc: Jefferies maintains its underperform recommendation and reduces the target price from GBX 535 to GBX 531.