For now, the first full trading week of 2026 is coloured green, thanks to gains notched up on Monday and Tuesday. Since then, the picture has been less clear. Thursday's session ended broadly flat, slightly in positive territory for the US S&P 500, France's CAC 40, Switzerland's SMI, and Germany's DAX, but lower for indices with a heavier weighting in technology stocks, such as the US Nasdaq and the Dutch AEX. After being all the rage in the first three sessions of the year, the AI theme lost altitude yesterday, dragging down the entire ecosystem, from sector champion Nvidia (-2.15%) to chipmaking equipment giant ASML (-3.7%), and including data centre equipment supplier Schneider Electric. Purists will rightly note that Schneider is more than just a data centre supplier, but that is the role it has been assigned in the current AI boom narrative.

As I've mentioned repeatedly this week - so much so that it's clear I've little new to say - the defence sector is the big winner of early 2026. In Europe, eight of the ten top risers on the Stoxx Europe 600 index are defence companies, with gains ranging from 19.3% for Saab to 15.7% for Thales. Amid the many uncertainties of the moment, the global rise in military spending appears to be the one inexorable trend.

On the macroeconomic front, US Treasury yields have remained relatively stable in recent days, pending the release this afternoon of the latest monthly employment figures. That said, mortgage-backed securities did rebound following Donald Trump's surprise announcement of a USD 200 billion repurchase of such bonds. Two key events are on the agenda today. One is certain: the publication of December's US jobs data. The other is less certain, but potentially far more consequential: the Supreme Court may rule today on the legality of a large portion of the tariffs imposed by Donald Trump. Legal experts say the odds of annulment are high, following scepticism voiced by several justices during the November hearings. The US administration would likely seek to re-legitimise the measure by other means, but an annulment would cause significant upheaval and open the door to the repayment of several tens of billions of dollars in improperly collected duties. A full-blown programme that could also call into question existing trade agreements here and there.

Also on the macro front, this time in China, annual inflation came in at 0.8% in December (versus 0.9% consensus), while producer prices continued to contract, albeit slightly less than expected (-1.9%). Monthly inflation ticked up, but only due to higher food prices, with no broader trend. In short, the Chinese economy still shows no signs of acceleration.

The oil market is in a state of confusion. After slumping earlier in the week on the prospect of increased supply if the US begins managing Venezuelan crude, prices have since rebounded sharply. Fears of worsening global geopolitical tensions have reawakened old concerns about supply disruption. Yes, exactly the opposite of Monday's market logic. In truth, the oil market is complex, with the interests of its many stakeholders often diverging. Donald Trump, for example, wants cheap oil - but that's a negative for the North American petrochemical sector, which has higher costs than its global competitors. US shale executives have already warned the White House about the dire consequences that an influx of Venezuelan crude could have on domestic drillers.

In corporate news, the spotlight is on renewed merger talks between Rio Tinto and Glencore, potentially creating a mining behemoth at a time when natural resources are moving back to centre stage. The two firms, which previously failed to reach an agreement, are now exploring a share-based transaction in which Rio Tinto would acquire Glencore. The news sent Rio shares lower and Glencore stock soaring, as the latter appears better positioned in the proposed deal structure.

In Asia-Pacific, Japanese markets rebounded after two down sessions, with the Nikkei 225 closing up 1.5%. Hong Kong and mainland China were also in the green. In South Korea, the KOSPI remains unshaken and continues its upward trajectory. European markets are expected to open slightly higher.

Today's economic highlights:

See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,473.7
  • Crude Oil (BRENT): US$62.6
  • United States 10 years: 4.18%
  • BITCOIN: US$90,953.7

In corporate news:

  • Rio Tinto and Glencore have confirmed they are in preliminary talks for an all-share mega-merger that would create the world's largest diversified mining company, driven by a shared strategic focus on copper and favorable timing amid BHP's recent setbacks.
  • J Sainsbury reported a 3.4% rise in Christmas quarter underlying sales, driven by strong grocery performance, and reaffirmed its full-year profit forecast of over £1 billion.
  • HSBC agreed to pay €300 million to settle a French investigation into tax evasion related to dividend arbitrage trades conducted between 2014 and 2019.
  • The UK's competition regulator will conduct an in-depth probe into Associated British Foods' proposed acquisition of bread brand Hovis, citing market concentration concerns.
  • Tesco reported slowing like-for-like sales growth during the Christmas period, missing expectations, though it maintained guidance and continued gaining UK market share.
  • Puma jumped after rumors that Anta Sports made an offer to buy the 29% stake held by the Pinault family.
  • Repsol has reportedly requested a U.S. license to resume exports of Venezuelan crude oil.
  • Tecan confirmed its 2025 profitability forecast and medium-term outlook.
  • Sunrise will cut 190 jobs.
  • Gurit won a CHF 250 million contract over five years.
  • General motors will record $7.1 billion in Q4 impairments, including $6 billion related to its EV division.
  • Intel was praised by Trump after a meeting with Lip-Bu Tan, now referred to by him as the highly effective CEO of the company.
  • Apple removed the age limit for two of its board members, including the chairman.
  • Eli lilly said that a combination of Taltz and Zepbound showed superior effectiveness in a phase 3b trial for arthritis and obesity.
  • Boeing has moved the B737 Max 10 to the next phase of FAA flight testing, according to The Air Current.
  • Verisk sold its marketing solutions business to Activeprospect.

 

See more news from UK listed companies here

Analyst Recommendations:

  • Clarkson Plc: Panmure Liberum maintains its buy recommendation and raises the target price from GBX 4000 to GBX 4400.
  • Gsk Plc: Goldman Sachs maintains its neutral recommendation and raises the target price from USD 45 to USD 47.
  • Experian Plc: Rothschild & Co Redburn maintains its buy recommendation and reduces the target price from GBX 4346 to GBX 4222.
  • Balfour Beatty Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 760 to GBX 800.
  • The Berkeley Group Holdings Plc: Berenberg maintains its buy recommendation and reduces the target price from GBX 5000 to GBX 4500.
  • Hikma Pharmaceuticals Plc: Deutsche Bank maintains its buy recommendation and reduces the target price from GBX 2500 to GBX 2400.
  • Marks & Spencer Group Plc: Berenberg upgrades to buy from hold and raises the target price from GBX 412 to GBX 415.
  • Serica Energy Plc: Shore Capital maintains its buy recommendation and raises the target price from GBX 230 to GBX 240.
  • Bellway P.l.c.: Berenberg maintains its hold recommendation and reduces the target price from GBX 2900 to GBX 2800.
  • Imperial Brands Plc: UBS maintains its buy recommendation and reduces the target price from GBX 3650 to GBX 3500.
  • Beazley Plc: Morgan Stanley maintains its overweight recommendation and reduces the target price from GBX 960 to GBX 930.