Market Review 19th January 2026
- Simplicity News Desk
- 6 days ago
- 5 min read
Everything you need to know, Simplified!
Summary
UK Prime Minister calls for calm as EU leaders consider retaliatory tariffs in response to US pressure over Greenland
US inflation stayed the course at 2.7% whilst European inflation eased to 2.0%, returning to target
Taiwan Semi-Conductor sparked another leg up in the Artificial Intelligence (AI) rally on strong earnings momentum
Silver prices reached all-time highs, but faced mid-week volatility on ‘critical metal’ tariff exceptions
UK Gross Domestic Product (GDP) bucked the trend and surprised to the upside.
Market Review
Hot off the press
UK Prime Minister, Keir Starmer, has tried to play down talk of a trade war between Europe and the United States. In a press conference this morning, he said “tariffs would not be in anyone’s interests.”
His remarks follow threats by US President Donald Trump to impose further tariffs on European countries following his claims over Greenland. The FTSE 100 is down half a percent this morning.
Over the weekend, President Trump said he would impose a blanket 10% tariff on ‘any and all goods’ from a variety of European countries, including the United Kingdom, France and Germany, commencing 1 February. This will then be increased to 25% on 1 June, until an agreement is reached on Greenland’s sovereignty. The European nations have already planned a €93bn retaliatory package on US goods. Currency markets have borne the brunt of the fallout, with fears that volatility could spread across stocks and bonds.
In a further ratcheting of pressure, President Trump wrote to the Norwegian ambassador saying: "considering your country decided not to give me the Nobel Peace Prize for having stopped eight wars plus, I no longer feel an obligation to think purely of peace". Expect the drama to continue this week.
Cooling inflation, a strong equity rebound and rising commodity pressures
US inflation data provided important insights below the bonnet. While headline numbers were identical to the month prior, core Consumer Price Index (CPI) inflation, which strips out volatile food and energy prices, were marginally below expectations (2.60% vs 2.70%). This provided further evidence that President Trump’s tariff related pressures could be transitory, and that we have potentially entered a disinflationary cycle in the west. Some economists did point out that while goods prices remain benign, housing related costs did increase and food remains elevated, so vigilance is required. Across the pond, the eurozone CPI inflation similarly eased to 2.0%, down from 2.1% in November. This marked the lowest figure since August. Core inflation also fell to 2.3% versus expectations of 2.4%. Importantly, there was a moderation in the growth of service prices, which has given investors confidence that the central banks have finally gained control. Government bond yields remained stable and credit spreads continued to trade tightly on the back of the data.
Equity markets ended buoyantly, which masked a mid-week sell-off and subsequent sharp recovery due to diverting datapoints. Wednesday saw a raft of large bank earnings, which the market interpreted as a mixed bag. JP Morgan beat on earnings but highlighted lower investment banking fees and Wells Fargo noted pressure on Net Interest Income, which possibly implies earnings for the sector have peaked. The short-term gloom was met with a rebound in risk appetite on the back of Taiwan Semi-Conductor’s earnings. The Company confirmed an ongoing shortage of high-performance AI chips due to ‘extremely high’ demand from mega-cap technology companies such as Nvidia, Apple and Tesla. It also foresaw no slowdown in the growth of this demand. The icing on the cake was provided by other banking behemoths later in the week as Goldman Sachs beat estimations on the bottom line and hiked their dividend.
Outside of equity markets, investors will not have failed to miss the parabolic rise in commodity prices, most recently with silver, which reached all-time highs during the week. Prices are surging on the back of a perfect storm of demand from governments, industry and investors. In addition, the data suggests that we have also hit ‘peak silver’, which implies that mining companies need to spend much more money to dig out the same quantity due to mine depletion rates, and thus there is a much tighter supply of the precious metal. As silver is only found as a natural biproduct of other metals (notably copper), it is usually the industrial metal prices which dictate silver production. There was a small pullback in the price towards the end of the week when President Trump announced a decision not to impose tariffs on ‘critical metals’, which also impacted gold and platinum.
Back to home territory and it was a pleasant surprise to see a more vigorous return to UK GDP growth than expected. November’s 0.3% increase versus 0.1% expected, came on the back of suppressed October numbers due to lower car production from Jaguar Land Rover. Some economists have hastened to add that we shouldn’t expect more than a ‘modest’ growth outlook from here due to productivity issues and taxation rates. Irrespective, the domestic stock indices, notably the FTSE 250 index, have begun to positively breakout of their trading patterns after many years of lacklustre performance.
The week ahead
Monday: China GDP growth and industrial growth
Our thoughts: China’s GDP grew 4.8% year-on-year in Q3 2025, marking its slowest pace in a year. Consumer demand softened, and US imposed tariffs impacted trade. In addition, the prolonged property price slump continued. Industrial growth also eased and followed the same pattern as GDP, exhibiting the softest numbers since 2024. Economists are forecasting GDP growth of 4.6% for the final quarter of 2025, suggestive of further easing, juxtaposed against a marginal pickup in industrial production to 5.4% on the back of a renewed increase in mining production.
Tuesday: UK unemployment rate
Our thoughts: The UK unemployment rate increased to 5.1% in October 2025, reaching its highest level since the pandemic. Economists are forecasting an unchanged figure for November, but there is scepticism and renewed focus on this as a barometer for the Labour Party’s success. There is the possibility of further upward pressure as small businesses struggle with elevated costs.
US Supreme Court ruling
We suggested that the Supreme Court would rule on the legality of President Trump’s tariffs, but it is now expected to issue its rulings on Tuesday 20 January.
Wednesday: UK Inflation
Our thoughts: The annual headline inflation rate slowed to 3.2% in November 2025, which was in fact the lowest number in eight months and lower than expected. While food and non-alcoholic beverages accounted for the largest downward pressure, prices also slowed for housing and utilities, which is indicative of a disinflationary cycle. Economists are predicting a marginal slowdown for December to 3.1%.
Thursday: US GDP growth and core Personal Consumption Expenditures (PCE)
Our thoughts: These metrics will undoubtedly set the tone once unveiled. The world’s largest economy has grown above expectations throughout 2025, and the consensus for the final quarter is to match the third, at 4.3%. This would be a remarkable achievement for a highly developed nation and would no doubt lend support to the earnings backdrop for equity markets.
Because of the government shut down last year, the delayed PCE inflation data for October and November will be published this week. Analysts are pointing to a ‘marginal uptick’ on the back of the second wave of tariffs which took effect over the summer. However, President Trump did conduct several U-turns on semiconductors and critical metals, which complicates the backdrop.
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