Metals defy gravity as Trump’s actions catch up with markets

• Metals rally supports FTSE 100.
• Why are base and precious metals surging together?
• Defense and Mining top sectors in FTSE 100 this year.
• BP takes a hit before earnings.
• UK labour market weakness, will it hit the fiscal headroom?  
• Asian stocks take the lead, with Japan in the top spot.
• Slow rotation away from the US continues.

There is a hint of nervousness across financial markets early on Wednesday, after Donald Trump’s many edicts finally caught up with risk sentiment. US stocks closed mildly lower, pulling away from the S&P 500’s record high on Tuesday, and JP Morgan fell more than 4% after reporting weaker investment banking revenues for Q4 and stating concern about Trump’s planned 10% cap on credit card interest rates.

The biggest issuers of credit cards in the US, which includes American Express and Capital One, alongside the biggest provider JPM, have all come under downward pressure in recent days as a political risk premium is building in sectors of the US market that are coming under Donald Treump’s glare.

Metals rally supports FTSE 100

US futures are in the red early this morning, however, UK and European futures are bucking this trend. A strong rally in metals is helping to keep demand for the mining-heavy FTSE 100 alive. The metals rally is lifting all ships: both base and precious metals are rising this morning. The price of tin, silver and gold, all reached records. Silver is now above $90, while gold is trading above $4,630. Anyone who thought the ‘parabolic’ increase in metals would slow in 2026 will need to reassess their view.

Why are base and precious metals surging together?

But why are base and precious metals rising together? A more interventionist Donald Trump who is pressuring the Fed, demanding corporations do as he wishes and plans to take Greenland are all driving flows into the relative safety of gold, however, zinc, copper, tin and aluminum have now joined the party. This is a sign that the market considers global growth to be solid, even with the geopolitical waves caused by the Trump administration. US inflation remains stable, and retail sales are expected to come in on the strong side later today.

Defense and Mining top sectors in FTSE 100 this year

From a stock market perspective, the rally in metals is good news for the FTSE 100’s top performing miners. So far this year, the themes that are dominating in January are playing to the main UK index’s strengths. UK-listed miners including Antofogasta, Fresnillo and Endeavour are top 10 performers YTD, behind defense stocks who take the top spot.

BP takes a hit before earnings

Other UK stocks could also be in focus this morning. BP said that it will take a $4-$5bn impairment charge for Q4, this announcement comes ahead of its earnings report that is scheduled to be released on 11^th February. This is linked to its gas and green energy business, and does not bode well for 2025 results, when the oil price slipped 20%. Its earnings guidance includes flat upstream production for Q4 vs. Q3, and average gas trading results. The stock price is higher by more than 4% in the past week, so this news could take the shine off BP on Wednesday. The oil price is also slightly weaker this morning, which may add to the downside pressure.

UK labour market weakness, will it hit the fiscal headroom?  

There are more signs that the UK labour market is slipping. Recruiter Hays said that net fees fell 10% last quarter. Hiring of permanent staff was a particular weak spot, while there was also weakness in Germany too. It looks like a global labour market softening is taking place, but this is particularly bad news for the UK, where the focus is on our budget dynamics. Labour’s spending binge means that any fall in tax take could threaten Chancellor Rachel Reeves’ fiscal headroom. While we don’t expect Hays’ results to move the UK bond market, this is a theme that is worth watching, and if we get more evidence that the UK’s labour market is weakening then we could see the bond market start to react.

Asian stocks take the lead, with Japan in the top spot

From a global perspective, Asian stocks are outperforming European and US indices, especially in Japan. The Nikkei is higher by nearly 8%, as the yen falls to its lowest level since mid-2024. Even Chinese shares are outperforming their US counterparts so far this year even though the Chinese government has imposed a 100% margin for all stocks bought with finance.

Slow rotation away from the US continues

European stocks are also outperforming their US counterparts, which is a sign that the rotation out of the US assets is continuing as we move into 2026. This is more of a trickle, but the changing world order, caused in a large part by Donald Trump, could see the flow speed up and this is a theme to watch closely in the coming days.

The Dollar is broadly weaker today, although its performance so far this year has been mixed. This suggests that the investing world has not lost confidence in the US yet. However, there is a lot for markets to digest right now, including earnings reports and economic data. Later today, we will get Bank of America, Wells Fargo and Citi. Bank of America and Citi are both large credit card issuers, so it will be interesting to see what they have to say about Trump’s plans to limit interest rates. There is also a chance that the Supreme Court could release their verdict on whether some of Donald Trump’s tariffs are legal. This could keep investors on edge today.