EMEA Morning Briefing : Stock Futures Mixed Ahead of U.S. Inflation Data
MARKET WRAPS
Watch For:
No major economic events expected; trading updates from Persimmon, Whitbread
Opening Call:
European stock futures traded mixed early Tuesday. Asian stock benchmarks edged higher; the dollar and Treasury yields were little changed; oil futures rose; while gold fell.
Equities:
Stock futures point to a mixed open in Europe on Tuesday ahead of U.S. inflation data due later in the day. The consumer-price index is forecast to have risen 0.3% in the final month of 2025. If the forecasts are spot on, the rate of U.S. inflation will cling close to 2.7%, leaving it stuck well above the Fed’s 2% inflation target.
U.S. indexes closed overnight at a fresh record high as investors bought the dip that was sparked by a new attack on the Federal Reserve’s independence.
“We’re firmly in the buy-the-dip camp this year,” Jeffrey Schulze, head of economic and market strategy at ClearBridge Investments, said in an interview. “But it wouldn’t be a surprise to us if you see a 5% to 10% drawdown somewhere throughout this year.”
He added: “When you have market valuations and high expectations, the markets can sell off in a pretty fast capacity.” But that wasn’t the big risk on Monday.
Forex:
“The USD’s safe haven appeal can further diminish if the Trump administration continues to undermine the independence of key U.S. institutions, notably the Federal Reserve,” CBA’s Carol Kong said.
There are revived worries about ‘sell America’ and ‘currency debasement’ trades, she added.
Bonds:
Turbulent politics mean fixed-income investors may need to take diversification to a new level. “We have been trying to be very diversified within fixed income,” SignatureFD’s Tony Welch said. He sees nearly equal risks that interest rates would go down or up.
“Maybe you want some exposure to floating rate loans, just in case that interest rates start to move higher; exposure to securitized-type products and that type of thing.” He recommends maintaining core bond allocations while getting exposure “to a wide swath of sectors.”
Energy:
Oil rose early Tuesday amid tensions in the Middle East. Trump said Monday that the U.S will place a 25% tariff on any country that does business with Iran. The move comes as the Trump administration weighs how to respond to protests against the Iranian government.
“The prospect of disruption to Iranian energy output presents a bigger threat to global supplies than the situation in Venezuela does, particularly given the potential for instability to affect supply outside Iran itself,” said Capital Economics.
Metals:
Spot gold now has more than 30% chance of hitting $5,000 a troy ounce this year, given recent price momentum and geopolitical dynamics, said State Street Investment Management.
The yellow metal is well-positioned to shine in 2026 amid factors including ballooning global debt loads, Fed policy and potential volatility shocks. U.S. stock-bond correlations could stay positive through 2026, giving room for gold allocations in portfolios to increase as investors could seek liquid alternatives.
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While a weaker U.S. dollar has boosted investor appetite, volatility linked to the reweighting of benchmark commodity indexes has limited gains in copper prices, ANZ said.
The fall comes after a recent surge in prices amid expectations that more metal could be diverted to the U.S. ahead of a potential decision by the Trump administration to impose import tariffs, ANZ added.
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Chinese steel mills are restocking before the Lunar New Year holidays, likely buoying iron ore prices, said ANZ.
However, some fundamentals point to a less rosy outlook, as data from market-intelligence platform Shanghai Steelhome show imported inventories at the country’s ports rose to the highest level since April 2022, ANZ added.
TODAY’S TOP HEADLINES
New York Fed President Defends Chair Amid Investigation
John Williams, president of the New York Fed, defended Federal Reserve Chair Jerome Powell on Monday evening, a day after the news that U.S. prosecutors launched a criminal probe into Powell’s congressional testimony.
Speaking at the Council on Foreign Relations in New York City, Williams said that Powell has embodied the Fed’s public mission over his 13 years among its leadership ranks, praising Powell’s record of “calmly leading the Federal Reserve through times of heightened uncertainty.” Powell “has proven himself to be a man of impeccable integrity,” Williams said.
GOP Senators Criticize Probe of Fed Chair Powell
WASHINGTON-Senate Republicans criticized the Justice Department’s investigation of Federal Reserve Chair Jerome Powell, defending the central bank’s autonomy against what some GOP lawmakers called an overtly political probe by the Trump administration.
Senate Majority Leader John Thune (R., S.D.) said he hadn’t seen the allegations against Powell, but “they better be real and they better be serious.” Thune said the issue “needs to be resolved quickly because the Fed’s role and the Fed’s independence in shaping monetary policy in the country is something we need to ensure proceeds without political interference.”
U.S. to Impose 25% Tariff on Countries Doing Business With Iran, Trump Says
The U.S. will put a 25% tariff on any country that does business with Iran, President Trump said on Monday, raising pressure on the Middle Eastern nation after days of protests against the government.
“Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America,” Trump posted on Truth Social.
ECB’s Villeroy Backs Powell, Sees 2026 Rate Rise as ‘Fanciful’
The European Central Bank is very unlikely to raise its key interest rate this year, with a weaker dollar among a number of potential developments keeping eurozone inflation low, Bank of France Governor Francois Villeroy de Galhau said Monday.
In a speech in Paris, Villeroy also declared his backing for Federal Reserve Chair Jerome Powell, who Sunday accused the Trump administration of using the threat of criminal prosecution to pressure the U.S. central bank into lowering rates.
Behind the Unraveling of Apple’s Credit-Card Partnership With Goldman Sachs
In early December, a long-delayed deal hung over a call between JPMorgan Chase Chief Executive Jamie Dimon and Goldman Sachs CEO David Solomon.
Executives at the two banks had been negotiating for months on trading the massive Apple credit-card program and its roughly $20 billion in balances, but the talks had stalled. Privately, bankers on each side were blaming the other for needlessly slowing down the negotiations.
Alphabet Becomes Newest $4 Trillion Company, Joining Nvidia
Google parent Alphabet’s value topped $4 trillion, making it the latest tech company to cross that threshold as investors reward the internet-search leader for its artificial-intelligence gains.
Shares in Alphabet rose 1% to a record $331.86 on Monday, putting its market capitalization just above $4 trillion. Its shares rose 65% last year.
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Expected Major Events for Tuesday
00:01/UK: Dec BRC-KPMG Retail Sales Monitor
05:30/NED: Dec CPI
07:00/TUR: Nov Balance of Payments
07:30/HUN: Dec CPI
08:00/SVK: Nov Construction production
08:00/CZE: Dec CPI
08:00/CZE: Nov Import & export price indices
09:00/BUL: Oct Trade with EU Member States – preliminary data
09:00/BUL: Nov Trade with third countries – preliminary data
09:00/CZE: Nov Monthly Balance of Payments
10:00/EU: 3Q Quarterly Balance of Payments
10:00/EU: 3Q Quarterly sectoral accounts
10:00/CRO: Dec PPI
10:00/GRE: Dec CPI
11:00/IRL: Nov Retail Sales Index
11:00/POR: Dec CPI
13:00/POL: Nov Balance of Payments
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
01-13-26 0017ET
