Markets kicked off the week with renewed confidence, though volatility remains firmly in control.
The FTSE 100 opened higher, buoyed by a late-week rebound on Wall Street that helped lift global sentiment. Friday’s rally in US equities appears to have eased immediate fears, but concerns over stretched valuations continue to simmer beneath the surface.
In Asia, Japan’s Nikkei surged to fresh record highs as investors reacted positively to political clarity. Prime Minister Sanae Takaichi’s Liberal Democratic Party secured a commanding two-thirds supermajority, fuelling hopes that her pro-business agenda will reinvigorate economic growth. While election certainty has sparked optimism, ambitious tax cuts could stoke inflationary pressures and reignite concerns over Japan’s already hefty debt burden.
Risk appetite has improved modestly, with cryptocurrencies clawing back some recent losses. Still, markets remain fragile. US equities are struggling to find fresh momentum, with the S&P 500 expected to trade sideways. Ongoing disruption across the tech sector has encouraged selective bargain hunting, but investors may grow more cautious as economic uncertainty clouds the outlook.
Gold has regained its shine, climbing back above $5,000 as demand for safe-haven assets strengthens. Central bank buying continues to underpin prices, with the People’s Bank of China increasing its gold reserves again in January. A weaker dollar has added further support as investors remain in wait-and-see mode ahead of key US data releases. Delayed January jobs figures are due midweek, followed closely by inflation data that could shape expectations for future interest rate moves.
In corporate news, NatWest has agreed to acquire wealth manager Evelyn Partners for £2.7 billion, reinforcing its push to diversify revenues and expand its wealth management arm. The move follows recent pressure on NatWest shares after Bank of England policymakers signalled a greater willingness to cut interest rates this year – a shift that threatens to squeeze net interest income. While structural hedging has softened the immediate impact, this benefit is expected to fade as older swaps mature. By adding Evelyn Partners alongside Coutts, NatWest is positioning itself to tap into a broader pool of affluent clients and strengthen long-term growth.
