Good morning and welcome back to the City AM liveblog, where we bring you the latest developments from the financial markets and global economic stage.
Inflation Surges Above Forecasts, Pressuring UK Economy
Fresh data released this morning by the Office for National Statistics has revealed an unexpected spike in inflation, which climbed to 3.4 per cent in December. This figure surpassed the Bloomberg poll of economists, who had anticipated a rate of 3.3 per cent, indicating persistent price pressures in the UK economy.
Grant Fitzner, the chief economist at the ONS, commented on the drivers behind this increase. "Inflation ticked up a little in December, driven partly by higher tobacco prices, following recently-introduced excise duty increases," he stated. Fitzner added that airfares also played a significant role in the price hikes, "likely because of the timing of return flights over the Christmas and New Year period."
Market Reaction to Inflation Data
The higher-than-expected inflation reading has sent ripples through the financial markets, contributing to a downturn in stock indices. The FTSE 100 experienced notable volatility, sinking as much as one per cent during Tuesday's trading session before recovering slightly to close 0.7 per cent lower. This decline reflects investor concerns over the potential impact of sustained inflation on economic stability and corporate earnings.
European markets mirrored this unease, with Germany's Dax tumbling over one per cent, France's Cac 40 falling 0.6 per cent, and Amsterdam's AEX dipping 0.2 per cent. The collective downturn underscores the broader apprehension gripping global investors as they navigate uncertain economic conditions.
Trump's Davos Appearance Stirs Global Tensions
As world leaders gather at the World Economic Forum in Davos, Switzerland, the atmosphere is charged with anticipation—and not just due to the crisp Alpine air. All eyes are on former US President Donald Trump, who is set to take centre stage on this grand economic platform today.
Before departing for Davos, Trump addressed the White House briefing room to mark twelve months of his administration, boasting of "365 wins in 365 days." He expressed enthusiasm about his upcoming trip, noting he would soon be in a "beautiful place in Switzerland" where he was "sure [he is] very happily awaited for."
Tariff Threats Escalate Transatlantic Frictions
The backdrop to Trump's Davos appearance is heightened by recent geopolitical tensions. European nations have been thrown into turmoil after Trump threatened to impose a 10 per cent tariff on his NATO peers, effective from 1 February. This move is reportedly in response to their staunch defence of Greenland's sovereignty, a contentious issue that has strained transatlantic relations.
Ursula Von der Leyen, President of the European Commission, has publicly criticised these proposed tariffs, labelling them a "mistake." Her remarks highlight the deepening rift between the US and its European allies, adding to the uncertainty that is weighing on global markets.
With Trump poised to dominate discussions at Davos, the question on many minds is whether his presence will help resolve these tensions or further exacerbate them. The financial world watches closely, as any developments could significantly influence market sentiment and economic policies in the coming days.
Yesterday's Top Stories Recap
As we await further updates, here is a brief look at some of the key stories from yesterday:
- FTSE 100 and Wall Street experienced declines as the war of words between the EU and Trump intensified.
- Elon Musk hinted at a potential acquisition of Ryanair and the dismissal of its CEO, Michael O'Leary.
- An investment trust successfully fended off a hedge fund assault, bringing the Saba saga to a close.
- David Lammy's proposal to seize law firm interest sparked widespread outrage.
- Trump unexpectedly criticised Keir Starmer over the Chagos deal, marking a shift in his stance.
The liveblog has now concluded, with no further updates available at this time. Stay tuned for more analysis and breaking news as events unfold.
