Tech, tariffs and US jobs data

Sentiment across global equity markets is softening as we approach the end of the first full trading week of the year. US tech stocks were hit yesterday, with Nvidia dipping 2% below its 50-DMA, while the Mag 7 hesitated around their own 50-DMA marks.

US defence stocks rebounded on Trump’s call to increase military spending by $500bn to $1.5trn, while energy stocks jumped, with Exxon shrugging off earlier warnings that Q4 results would be significantly hit by lower oil prices.

In Europe, the FTSE 100 tested but closed the session above the 10,000p level. In Asia, tech stocks are bid this morning. This week, Samsung announced that its profits tripled, thanks to higher memory chip prices driven by soaring AI demand. Meanwhile, a Chinese AI company Minimax gained more than 70% on its first day of trading in Shanghai.

Supportive news and strong risk appetite continue to channel capital into the tech space, but investors are increasingly looking at fresh names as the highly valued, buzzy stocks of the past three years are seeing appetite fade. Nvidia investors, for instance, didn’t flinch after Jensen Huang showcased at the CES conference a new self-driving platform and said Rubin chips are nearing shipment and are faster and more energy-efficient than Blackwell.

As such, investors appear to need a fresh energy boost — something cheerier than the Venezuela headlines, which remain clouded by political and geopolitical uncertainty.

Perhaps today’s jobs data could do the trick. Later today, the US will release the official December employment report. The economy is expected to have added around 66k nonfarm jobs, average earnings may have slightly accelerated, and the unemployment rate is seen easing from 4.6% to 4.5%.

The thinking goes as follows: a softer-than-expected print could revive Fed cut expectations, pull yields lower and support risk assets — with smaller and more cyclical parts of the market benefiting more than big, tech-heavy names. A stronger-than-expected report could push yields higher and weigh on equity valuations, in which case cash-rich tech companies may outperform. That said, a too-soft report could also be negative for sentiment.

Heading into the year’s first NFP release, the probability of a March rate cut sits around 40%, down from closer to 50% earlier in the week. The US 2-year yield — which best captures Fed rate expectations — hovers near 3.50%, while the 10-year yield continues to push higher as investors also assess Trump’s renewed military ambitions and their budgetary implications.

Speaking of the budget, all eyes are on the US Supreme Court today, which is expected to deliver its view on Donald Trump’s tariffs. More than 1,000 companies, including Costco and Goodyear, have filed legal challenges seeking potential refunds should the Court rule the tariffs unlawful. Significant sums are at stake. The Trump administration has reportedly collected $133bn in duties under emergency authority as of December 14. If deemed illegal, those funds would need to be returned — a scenario Trump has described as a “national security catastrophe.”

For markets, it would be a budget catastrophe. Tariff revenues have helped partially offset Trump’s “Big and Beautiful” spending ambitions, contributing to keeping long-term rates in check — alongside the Treasury’s shift toward issuing shorter-dated debt to limit upward pressure on longer-term yields that feed through to mortgages and the broader economy.

Returning those funds would weigh heavily on investor sentiment and could reignite a US bond selloff. Higher yields would likely dampen risk appetite and could trigger a broader global selloff.

That said, US budget concerns have a long track record of being forgotten quickly. With or without tariffs, US debt continues to balloon, now standing above $38.5trn and rising steadily. Only genuine fiscal discipline could reverse this trend – if anyone cares.

Budget discipline, however, appears unlikely under Trump. His latest call for a $500bn increase in annual defence spending could, he argues, be financed through tariff revenue. But the non-partisan Committee for a Responsible Federal Budget has questioned the maths, noting that the proposed military spending would be roughly twice the tariff revenue generated over the next decade. And that’s before considering the risk of tariff revenues disappearing altogether — a scenario that would put renewed upward pressure on long-dated US yields. Oh well..

Broadly, there is little doubt that the debasement trade remains alive in this environment, continuing to favour hard assets — particularly precious and industrial metals.