Oil prices surge as Trump blocks Venezuelan tankers

European markets are enjoying a positive start to the day today led by the FTSE 100 which has been in buoyant mood following a welcome decline in UK inflation this morning. The latest CPI numbers brought a -0.2% decline for both headline and core metrics in the month of November. While the annual figures now stand at 3.2%, it is worthwhile noting that the past seven months have seen inflation tracking at a pace consistent with a decline to 1.7-1.8% by May 2026. Coming off the back of a jobs report that saw a higher unemployment rate, lower employment count, and higher claimants, markets can not only look forward to a rate cut but also a likely dovish tone from the BoE tomorrow. While markets are currently pricing a mere 50% chance that we see either 25bp or 50bp worth of cuts next year, the deterioration in the jobs market coupled with falling inflation could help raise hopes of a more accommodative BoE than has been predicted.

Markets have struggled to decipher the exact implications of yesterday's jobs report, with Novembers better-than-expected payrolls figure offset by a sharp -105k decline for October. While we can see that the October reading was largely a result of the government shutdown (government payrolls fell -157k), the jump in total unemployment (U6) from 8% to 8.7% certainly serves as a warning sign to the Fed. Yesterday’s market reaction was one of relative concern, with the cyclical stocks losing traction as investors pile back into the big tech names. In a climate of fear around the AI bubble, we have reached a period where traders are struggling to gauge whether it is time to diversify or simply ride to tech train higher once again. With the latest CPI inflation data released tomorrow, we should expect further fireworks despite the fact that interest rates look likely to remain steady for the time being.