US Futures Climb and Gold Hits Another Record as Markets Steady Ahead of Trump’s Speech at Davos

Economic

Summary:

Global markets steadied ahead of President Trump’s Davos speech, with U.S. futures rising and gold hitting a record above $4,800 as investors sought safety amid tariff tensions and geopolitical uncertainty.

U.S. futures were higher and world shares traded mixed Wednesday ahead of U.S. President Donald Trump’s speech to the World Economic Forum in Davos, Switzerland.

Markets have appeared to steady somewhat after gyrating following Trump’s threats to slap higher tariffs on eight European countries over their opposition to his push for U.S. control of Greenland.

Gold prices crossed the $4,800 mark for the first time, gaining 2.2% as money flowed into assets considered to be safe havens at times of uncertainty.

Bouncing back from steep losses Tuesday, the future for the S&P 500 rose 0.4% and that for the Dow Jones Industrial Average was up 0.2%.

Germany’s DAX shed 0.4% to 24,607.57 and the CAC 40 in Paris slipped 0.2% to 8,050.40. Britain’s FTSE 100 was nearly unchanged at 10,124.24.

Traders were waiting for Trump’s planned speech to world leaders, elites and billionaires gathered in Davos. Trump told reporters he planned to highlight his administration’s accomplishments during his address.

U.S. Commerce Secretary Howard Lutnick, who spoke on a panel on Tuesday, said the U.S. message was that “globalization has failed.”

Trump’s Air Force One returned to Washington after its crew identified “a minor electrical issue” while he was on his way to Davos. He boarded another aircraft and resumed his trip.

In Asian trading, Tokyo’s Nikkei 225 slipped 0.4% to 52,774.64. Markets in Japan have been riled both by geopolitical uncertainty and by domestic issues.

Japanese Prime Minister Sanae Takaichi has called a snap election for Feb. 8, sending yields of long-term government bonds to record levels. The assumption is that Takaichi, who is capitalizing on strong public support ratings to try to consolidate a majority for her Liberal Democratic Party, will cut taxes and boost spending, adding to the challenges Japan faces in handling its massive government debt.

The yield on the 40-year Japanese government bond was trading at 4.061% early Wednesday, down from the all-time high of 4.22% that it hit on Tuesday.

South Korea’s Kospi gained 0.5% to 4,909.93.

Hong Kong’s Hang Seng rebounded to add 0.4% to 26,585.06. The Shanghai Composite index edged 0.1% higher, to 4,116.94.

In Australia, the S&P/ASX 200 gave back 0.4% to 8,782.90.

Taiwan’s Taiex fell 1.6% and India’s Sensex lost 0.4%.

Trump has said he will impose 10% tariffs on Denmark, Norway, Sweden, Germany, France, the United Kingdom, the Netherlands and Finland beginning in February. That would be on top of a 15% tariff specified by a trade agreement with the European Union that has yet to be ratified.

European leaders have hit back as Washington’s relations with its Western allies sour, considering countermeasures, including perhaps slow-walking ratification of the trade agreement or ordering retaliatory tariffs, analysts say.

On Tuesday, the S&P 500 fell 2.1%, the steepest drop for the benchmark index since October. The Dow industrials dropped 1.8% and the Nasdaq composite fell 2.4%.

The Federal Reserve is set to meet next week for a policy meeting, and Wall Street is betting it will hold steady its benchmark interest rate. Japan’s central bank will wrap up its first monetary policy meeting of 2026 on Friday.

In other dealings early Wednesday, U.S. benchmark crude oil lost 71 cents to $59.65 per barrel. Brent crude, the international standard, shed 88 cents to $64.04 per barrel.

The U.S. dollar dropped to 157.94 Japanese yen from 158.16 yen. The euro fell to $1.1708 from $1.1726.

Source: AP

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King Ten

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Formal negotiations to finalize a landmark trade deal between the United States and Switzerland are scheduled to begin in Bern in the first half of February. According to sources familiar with the matter, the talks aim to lock in a preliminary agreement that would slash US tariffs on Swiss goods from 39% to 15%, the highest rate among advanced economies.

February Talks in Bern Mark Critical Next Step

A delegation from the US Trade Representative's office will travel to the Swiss capital for the first formal round of discussions on a legally binding accord. This visit is a significant development, as previous talks for the framework deal announced in November were conducted solely by Swiss delegations traveling to Washington. Insiders suggest this shift makes the process feel less one-sided.

Negotiators on both sides are reportedly aiming to complete the final agreement by the end of March. This timeline is crucial, as the US has threatened to reconsider its concessions if no final deal is reached by then, according to a note in the Federal Register.

High-Level Support Voiced at Davos

The negotiations appear to have strong political backing. Speaking in Davos on Wednesday, US Treasury Secretary Scott Bessent confirmed he was meeting with Switzerland's President, Guy Parmelin, later that day and described the relationship between the two nations as "very good."

Bessent praised Parmelin as a "fantastic advocate" for his people. "I think with his leadership that we will be able to land a trade deal that is fair for the American people and ensures continued prosperity in Switzerland," he stated.

Official channels have remained quiet on the upcoming talks. A spokesperson for the Swiss economy ministry declined to comment, while the USTR could not be immediately reached outside of office hours.

What's on the Table: Tariffs vs. Investment

The proposed agreement is built on a clear set of trade-offs. In exchange for the substantial reduction in US tariffs, Switzerland has committed to two key concessions:

• A $200 billion investment pledge from Swiss companies.

• Easier market access for certain American agricultural goods, including fish, seafood, and some meats.

The tariff relief has already taken effect retroactively from the date of the initial deal, but its permanence is contingent on successfully finalizing the accord in the coming weeks.

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Isaac Bennett

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Washington Criticizes French Proposal at Davos

The United States has sharply criticized a French proposal for a NATO-led military exercise in Greenland, escalating a diplomatic feud over President Donald Trump's ambitions to take control of the territory.

Speaking Wednesday at the World Economic Forum in Davos, Treasury Secretary Scott Bessent warned European nations against sending troops to the island. "If this is all President Macron has to do when the... French budget is in shambles, I would suggest that he focuses on other things for the French people," Bessent told reporters.

The French suggestion came after eight European allies participated in a Danish-led planning exercise in Greenland. French President Emmanuel Macron argued that the entire NATO alliance should organize a drill on the island, which is a semi-autonomous territory of Denmark. Bessent questioned the message behind these military moves just before Trump was scheduled to arrive in Davos.

Trump Escalates Pressure with Tariff Threats

Tensions are running high as global leaders brace for a potential clash between Trump and European allies. The conflict centers on Trump's demands that Denmark relinquish Greenland to the United States.

The US president has intensified his campaign to acquire the island, threatening to impose tariffs on eight NATO allies who oppose his plans. Underscoring his intentions, Trump posted an AI-generated image on Tuesday showing him planting a US flag on Greenland's landscape.

In response, European leaders are reportedly considering economic countermeasures if the tariffs are implemented on February 1. The European Parliament has already signaled it may delay the ratification of a major EU-US trade deal over the crisis. However, Bessent forcefully dismissed the possibility of significant European retaliation, urging nations to honor their existing trade agreements with the US.

Calls for De-escalation and an Arctic Strategy

Amid the standoff, some leaders are searching for a diplomatic off-ramp. NATO Secretary General Mark Rutte is reportedly working behind the scenes to diffuse the tension.

Finnish President Alexander Stubb called for a dedicated NATO summit to address Arctic security, suggesting the intent behind the military exercises had been misunderstood. "Now what we need to do is to bring down the temperature," Stubb told Bloomberg. "I wish we could have a NATO summit where we all agree on a new Arctic security structure."

Interest in Arctic security has grown within NATO, particularly since Finland and Sweden joined the alliance following Russia's invasion of Ukraine.

Greenland and Denmark Prepare for Contingencies

Denmark has stated that its military exercises were intended to address US security concerns and had invited American participation. The country is also drafting plans for a larger deployment of up to 1,000 Army soldiers to Greenland for exercises in 2026, with potential support from its Navy and Air Force, according to Danish broadcaster TV2. A final decision on the scale has not yet been made.

Meanwhile, Greenland's Prime Minister Jens-Frederik Nielsen advised the territory's population and authorities to begin preparing for a possible military invasion, while acknowledging it remains an unlikely scenario.

Greenland has a population of 57,000 and is part of the Kingdom of Denmark. It maintains its own government for most domestic affairs, while Denmark manages its defense and foreign policy.

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Gerik

Economic

Headline Inflation Edges Higher Than Expected

The UK inflation rate increased to 3.4 percent in December, exceeding the 3.3 percent forecast by economists surveyed by Reuters. The data marked a modest acceleration from November, when inflation cooled to 3.2 percent, a slowdown that had previously supported the Bank of England’s decision to cut interest rates at its final policy meeting of last year. While the increase was small in magnitude, it interrupted the recent disinflation trend and reintroduced caution into the policy outlook.

Core inflation, which strips out volatile components such as energy, food, alcohol, and tobacco, remained unchanged at 3.2 percent. This stability suggests that underlying price pressures have not intensified materially, even as headline inflation ticked higher.

Drivers Behind December’s Price Increase

According to the Office for National Statistics, December’s rise was driven primarily by higher tobacco prices following recently introduced excise duty increases. Temporary factors also played a role, with airfares rising more sharply than a year earlier, reflecting the timing of return travel over the Christmas and New Year period. Food prices contributed to the upside as well, particularly bread and cereals, indicating some persistence in essential household costs.

These upward pressures were partially offset by easing rents inflation and lower prices across several recreational and cultural categories. This offsetting dynamic points to a mixed inflation profile, where specific policy-driven and seasonal factors are lifting prices, while broader demand-related pressures continue to moderate.

Currency Reaction And Market Interpretation

Sterling showed little reaction to the data, trading largely flat against the US dollar at around $1.3231. The muted currency response suggests that markets view the inflation surprise as marginal rather than a decisive shift in the policy trajectory. Instead, investors appear focused on the broader trend, which still points toward gradual cooling rather than renewed inflationary acceleration.

The data arrive alongside recent labour market figures showing further cooling in employment conditions, complicating the interest rate outlook. While headline inflation remains above target, moderating wage growth has reduced fears of a wage–price spiral. This weakens the case for maintaining a restrictive stance for an extended period, even as short-term inflation volatility persists.

Scott Gardner of J.P. Morgan Personal Investing noted that a small monthly increase is unlikely to trouble policymakers in the near term, particularly given the downward trajectory in pay growth. He argued that if wage moderation continues and feeds through into inflation, it could eventually increase pressure on the Bank of England to cut rates more quickly than currently anticipated. Markets are pricing in one to two rate cuts over 2026, though that expectation remains sensitive to incoming inflation data.

Policy Caution Likely To Persist

Matthew Ryan, head of market strategy at Ebury, expects the central bank to remain on hold for at least the next couple of meetings. He pointed out that while more hawkish members of the Monetary Policy Committee have long warned about upside inflation risks, those arguments are losing traction as the employment outlook deteriorates and wage pressures ease.

This suggests a relationship of correlation rather than direct causation between December’s inflation uptick and future policy decisions. While higher prices complicate the narrative, they do not yet overturn the broader disinflation trend. As a result, the Bank of England is likely to prioritise confirmation of sustained moderation in wages and core inflation before committing to further rate cuts, keeping policy finely balanced as 2026 unfolds.

Source: CNBC

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Oil prices declined on Wednesday as market focus shifted to an anticipated increase in U.S. crude stockpiles, outweighing the impact of a major production halt in Kazakhstan and persistent geopolitical tensions.

Brent futures fell by 97 cents, or 1.5%, to trade at $63.95 a barrel by 0745 GMT. At the same time, U.S. West Texas Intermediate (WTI) crude lost 78 cents, or 1.3%, to hit $59.58 a barrel.

The drop reverses gains from the previous session, where both contracts closed nearly $1 higher. Those earlier gains were driven by strong economic data from China and news of the production outage in Kazakhstan.

Kazakhstan Outage Offers Temporary Support

Output at the major Tengiz and Korolev oilfields, operated by OPEC+ producer Kazakhstan, was halted on Sunday due to issues with power distribution. According to industry sources, production could remain offline for another seven to ten days.

However, market analysts see this disruption as a short-term issue. IG market analyst Tony Sycamore noted on Wednesday that the production halt is temporary. He argued that persistent downward pressure from rising U.S. inventories and other geopolitical factors would likely dominate market sentiment.

All Eyes on Rising US Crude Inventories

The primary driver for the current price drop is the expectation of growing crude oil stockpiles in the United States.

A preliminary Reuters poll of six analysts on Tuesday indicated that U.S. crude inventories likely rose by an average of 1.7 million barrels in the week ending January 16. The poll also suggested that gasoline stockpiles increased, while distillate inventories probably fell.

Traders are now awaiting official data to confirm the trend:

• The American Petroleum Institute (API) will release its weekly inventory data at 4:30 p.m. EST (2130 GMT) on Wednesday.

• The U.S. Energy Information Administration (EIA) will publish its official figures at 12:00 p.m. EST (1700 GMT) on Thursday.

Both reports are being released one day later than usual due to a U.S. federal holiday on Monday.

Geopolitical Pressures Create Two-Way Risk

Adding to market concerns are ongoing geopolitical tensions. U.S. President Donald Trump's threat of new tariffs on European nations—tied to his goal of gaining control over Greenland—is weighing on oil markets by risking a slowdown in economic growth. Trump stated on Tuesday there was "no going back" on this objective.

However, other conflicts could still push prices higher. Gregory Brew, a senior analyst with Eurasia Group, said that the potential for U.S.-Iran tensions to re-escalate would help support oil prices. Trump recently threatened to strike Iran following its crackdown on anti-government protests.

Tensions flared after Iran's national security parliamentary commission was quoted on Tuesday stating that any attack on Supreme Leader Ayatollah Ali Khamenei would trigger a declaration of jihad.

"While the U.S. demurred from striking Iran immediately, tensions are likely to remain high as additional U.S. military assets move to the Middle East and diplomacy to de-escalate tensions fails to make progress," Brew commented in a note.

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The Indian rupee tumbled to a record low on Wednesday, marking its most significant single-day drop in two months amid a global bond sell-off and rising investor anxiety over capital outflows.

The currency fell for the sixth consecutive session, hitting an unprecedented 91.7425 against the U.S. dollar. It ultimately closed at 91.6950, a 0.8% decline from the previous day's 90.9750.

Market traders noted that the fall was amplified by the Reserve Bank of India’s decision to refrain from intervening with dollar sales. As the worst-performing currency in Asia for the day, the rupee has already weakened by 2% this month, extending the approximately 5% decline it registered in 2025.

The USD/INR exchange rate trended consistently upward from 2025 to 2026, signaling a persistent weakening of the Indian rupee.

Persistent Outflows Rattle Markets

Many of the headwinds that pressured the rupee in 2025 have carried over into the new year. A key factor is the continued exit of foreign capital from Indian equities.

Foreign investors have already pulled around $3 billion from Indian shares in January, following record outflows of nearly $19 billion in 2025. This trend has put pressure on the domestic stock market, which fell 0.3% on Wednesday after its largest drop in over eight months the day before.

"Flows mainly drive the USD/INR pair, thus weakness may continue to persist with interim legs of intervention expected from RBI in case of excess volatility," said Kunal Sodhani, head of treasury at Shinhan Bank India.

Foreign investment data shows significant equity outflows from India in 2025, a trend that has continued into the current year.

Economic and Geopolitical Pressures

Analysts point out that while India’s current-account deficit is manageable, a lack of sufficient capital inflows leaves the currency vulnerable. This situation is worsened by importers, who are more inclined to hedge their dollar exposure than exporters are, anticipating further rupee depreciation.

According to India Forex Advisors, the currency will remain sensitive to shifts in corporate demand and portfolio flows. An increase in global risk aversion, fueled by factors like a global bond rout and U.S. threats regarding Greenland, would likely accelerate outflows and intensify the downward pressure.

Adding to the currency's challenges this year are several external factors:

• Regional Weakness: Unlike in 2025, most of the rupee's Asian peers are also experiencing weakness, removing a potential source of relative stability.

• Trade Deal Stalemate: A lack of progress on a trade agreement with the United States has deprived the rupee of a potential catalyst for inflows.

With multiple pressures mounting, investors are now closely watching for U.S. President Trump's upcoming speech in Davos for further direction.

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Warren Takunda

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UK CPI inflation rose from 3.2% y/y in November to 3.4% in December, beating expectations for 3.3%.

The beat on expectations should, all else equal, be supportive of the pound as it lowers the odds of a second interest rate cut at the Bank of England this year.

The rise was driven by a 0.4% m/m increase in prices, up from -0.2% in November.

Core CPI was unchanged at 3.2% y/y, which was slightly softer than the 3.3% expected.

Services inflation, which is closely watched by the Bank of England, rose to 4.5% from 4.4%, even if this was slightly lower than expectations.

These data mean the Bank will be cautious in considering future interest rate cuts, even as job losses start to mount.

The GBP/EUR exchange rate - which has been under pressure over recent hours owing to a deterioration in market sentiment - rose to 1.1490 from 1.1460.

The GBP/USD was relatively unchanged at 1.3435.

Sterling's sanguine market reaction tells us there's nothing in the data to materially alter the Bank of England's interest rate path: There is enough concern about the jobs market to get another cut across the line by April.

However, inflation is still looking stubborn at these above-target levels. The split on the Bank's Monetary Policy Committee isn't likely to close, and this will ensure there's enough debate for the Bank to remain cautious.

"Core CPI broke a run of three consecutive months of MoM misses to the downside. A further miss could have made for an interesting MPC meeting on 5th Feb - but as it stands the market looks about right in pricing just a 5% chance of a 25bp cut," says economist Simon French at Panmure Liberum.

However, Kallum Pickering, economist at Peel Hunt, says "don’t sweat the UK inflation uptick, it won’t last."

He explains the December jump in the headline number was driven by erratic components such as tobacco duty and airfares.

"Importantly, measures of underlying price pressures offered comfort against the headline jump. Growth in core prices, which exclude energy, food, alcohol and tobacco, remained stable," he says.

Image courtesy of Peel Hunt. It shows that on an annualised basis, inflation is back to target.

On balance, the tick higher in prices should ensure UK bond yields remain supported, which can support the pound.

From a near-term perspective, however, the currency market will take its cues from geopolitics and headlines out of Davos concerning the EU-U.S. confrontation over Greenland.