At the start of each year, the market tends to follow a familiar script: investors trial their strategies, often resulting in sessions that lack coherence. Yesterday was a prime example, marked by emotional swings in the luxury sector and a renewed stampede into semiconductors, following news of hefty investments from Taiwanese chip giant TSMC. The bulk of the world’s electronic machinery would grind to a halt without TSMC - an indication of the group’s clout, especially when it sounds an optimistic note backed by massive capital expenditure. Expanding production capacity means ramping up chipmaking equipment purchases. This explains why the day's biggest gains were seen among the small cadre of industrials that supply such equipment: Europe's ASML (+6%), BE Semiconductor (+7.5%), ASM International (+11%), and VAT Group (+16%), alongside US players KLA Corporation (+7.7%) and Applied Materials (+6%). These firms buoyed a tech sector that otherwise showed limited vigour. The Nasdaq 100 ended the day up 0.3%, though it closed at its intraday low. The index has managed a meagre 1.2% gain year-to-date. The real star is the Russell 2000, tracking small-cap US stocks, up 7.8% after a further 0.9% rise yesterday.

In Europe, the Stoxx Europe 600 continues to perform well, hitting a fresh record at 615 points, buoyed by a 6% surge in its largest component, ASML. Compagnie Financière Richemont, which owns a constellation of high-end jewellery brands including Cartier and Van Cleef, reported 11% organic growth before yesterday’s market open. Five years ago, amid the luxury boom, such a figure might have disappointed. Today, in a more troubled sector, it is relatively rare and was initially well received. In pre-market trading, algorithms went into a frenzy, sending the share up nearly 15%. But the rally quickly fizzled: just +2% at the open and -2.4% by the close. The culprit? The company hinted that its margins would suffer due to soaring gold prices. Eleven percent growth is all well and good, but gold jumped 65% last year. While Richemont likely avoids the spot market, such price moves inevitably feed through. The Geneva-based firm discreetly noted in its statement that "the continued rise in material prices continues to weigh on margins." The initial gains vanished sector-wide, dragging down Kering (-3%) and LVMH (-2%), and pushing the CAC 40 down 0.2%.

After a roaring start to the year, the defence segment took a breather. Thales (-3%) was hit particularly hard, facing profit-taking after a strong run and pressure from a large block trade. Such placements are typically priced at a discount to attract buyers, mechanically weighing on share prices. This foray into the arms sector allows for a brief yet telling anecdote from late last year, originally reported by the Alphaville team at the Financial Times.

As 2025 drew to a close and European leaders scrambled to match their soaring military pledges with funding, attention turned to every possible financial source. One such avenue was easing ESG fund access to defence stocks. The EU sustainable finance framework had previously barred "companies involved in activities related to controversial weapons." Now, it excludes those tied to "prohibited weapons." The difference between "controversial" and "prohibited"? In a word: nukes. Under international treaties, prohibited weapons include anti-personnel mines, cluster munitions, biological and chemical arms. Controversial ones feature depleted uranium, white phosphorus, and nuclear weapons. This semantic shift means nuclear arms could now qualify for ESG inclusion - more likely in Article 8 funds (which incorporate ESG criteria but do not require sustainable objectives) than in Article 9 (which have sustainability as their core goal), though perhaps only with some contortions.

Whether this regulatory tweak helped fuel the rally in European defence stocks early in 2026 remains unclear. However, Jefferies notes that several firms with ties to nuclear weapons may benefit from the change, including Rolls-Royce (which powers the UK’s nuclear submarines), Leonardo and Airbus, and Safran. Thales does not manufacture nuclear weapons but remains heavily involved as a key supplier to the French armed forces. The biggest beneficiary, however, is American: General Dynamics, which is exposed to white phosphorus, depleted uranium and nuclear arms. A clean sweep.

The fundamental question remains: are nuclear weapons a sustainable asset? Current geopolitics might suggest so - at least, as long as they’re not used. In any case, you might soon find more weapons sitting alongside your TotalEnergies holdings in ESG portfolios.

To end this long digression, investors will today keep an eye on big US tech names after Donald Trump hinted they may have to shoulder rising energy costs. In Japan, debate continues over whether authorities will intervene to support the yen. On the commodities front, an apparent easing of tensions in Iran weighed on oil prices, while speculation has somewhat cooled across industrial and precious metals, which nevertheless remain near record highs. Few major earnings are due today, ahead of a busier week ahead featuring the likes of BHP, Netflix, Rio Tinto, Johnson & Johnson, Visa and potentially LVMH, which has yet to confirm its reporting date.

In the Asia-Pacific region, Australia just logged a fifth straight gain (+0.5%). South Korea extended its winning streak to an 11th session. India and Taiwan are also trading higher. Japan is more subdued, with the Nikkei 225 down 0.3% in the week's final session. China and Hong Kong are also slightly in the red. European futures are showing a cautious tone ahead of today's options expiry session.

Today's economic highlights:

On today's agenda: housing starts in Canada; in the United States, monthly industrial production, the NAHB housing market index, and the Fed Bowman speech. See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,596.17
  • Crude Oil (BRENT): US$63.6
  • United States 10 years: 4.17%
  • BITCOIN: US$95,681.9

In corporate news:

  • HSBC is conducting a strategic review of its Singapore life insurance business to streamline operations and concentrate on core markets.
  • JTC PLC shareholders have approved the buyout.
  • YouTube has announced its first content partnership with the BBC to expand digital reach.
  • Nanoco Group secured a $5 million settlement from LG Electronics over a patent infringement dispute.
  • Mkango Resources has inaugurated the first recycled rare earth magnet facility in the UK.
  • UBS secures a national bank charter in the U.S. and receives regulatory approval from the US OCC.
  • Sunrise Communications shares, approximately 4 million, were fully covered in the ABO offering by Baupost Group at EUR 40.25 each.
  • Kesko Oyj experienced a 9.3% increase in total sales in December 2025.
  • Swissquote projects a minimum net revenue of CHF 720 million by 2025.
  • Blackstone is investing approximately $4.65 billion (€4 billion) in a data center in Germany.
  • MPS successfully raised €750 million through a qualified covered bond issuance, attracting over €2.4 billion in orders.
  • Grasim Industries has appointed Sachin Sahay as the CEO of Birla Opus Paints.
  • Equinor resumes construction on the Empire Wind project in New York after a federal judge overturned a Trump-era decision.
  • Worthington Steel has announced its acquisition of metal processing firm Klöckner & Co SE in a $2.4 billion deal.
  • TSMC expansion in U.S. semiconductor manufacturing and strong earnings have driven tech sector rallies.
  • Ford has entered into a deal and collaboration with BYD for hybrid vehicle battery supply.
  • OpenAI is expanding its AI initiatives by launching a request for U.S. manufacturing proposals and investing in Merge Labs.
  • Exxon Mobil has secured a seismic survey contract in Trinidad and Tobago.
  • James Hardie Industries is closing its manufacturing plants in Fontana, CA, and Summerville, SC, to enhance productivity and cost efficiency.

See more news from UK listed companies here

Analyst Recommendations:

  • Zegona Communications Plc: Grupo Santander maintains its outperform recommendation and raises the target price from GBX 1870 to GBX 1950.
  • Diploma Plc: Investec maintains its buy recommendation and raises the target price from GBX 6000 to GBX 6150.
  • Oxford Instruments Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 2400 to GBX 2700.
  • Dunelm Group Plc: Berenberg maintains its buy recommendation and reduces the target price from GBX 1480 to GBX 1425.
  • Savills Plc: Peel Hunt downgrades to add from buy and raises the target price from GBP 11 to GBP 12.
  • Atalaya Mining Plc: Peel Hunt maintains its buy recommendation and raises the target price from GBX 760 to GBX 1200.
  • Grafton Group Plc: RBC Capital maintains its outperform recommendation and reduces the target price from GBX 1190 to GBX 1170.
  • Howden Joinery Group Plc: RBC Capital maintains its sector perform recommendation and reduces the target price from GBX 900 to GBX 890.
  • Travis Perkins Plc: RBC Capital maintains its outperform rating and reduces the target price from GBX 865 to GBX 850.
  • Wise Plc: UBS maintains its buy recommendation and reduces the target price from GBX 1320 to GBX 1240.
  • Pearson Plc: Barclays maintains its equalweight recommendation and reduces the target price from GBP 11.75 to GBP 10.70.
  • Gsk Plc: UBS maintains its neutral recommendation and raises the target price from GBX 1900 to GBX 1940.
  • Shell Plc: Gerdes Energy Research LLC maintains its buy recommendation and reduces the target price from USD 95 to USD 94.
  • Tesco Plc: Jefferies maintains its hold recommendation and reduces the target price from GBX 450 to GBX 430.