US jobs data in focus, while Trump tariff speculation drives volatility

Mainland European indices are pushing higher, as the FTSE 100 lags behind in early trade today. Key amongst the FTSE laggards have been the banks and housebuilders, responding to the news that UK house prices fell for the first time in nine-months. While UK interest rates had been expected to tumble over the course of this year, inflation concerns have held limited the decline in mortgage rates thus far. While many predict a pro-growth phase coming into fruition over the years to come, the outlook for the UK remains somewhat uncertain as businesses predict further price hikes and job cuts in response to the recent tax hikes.

Yesterday’s unwelcome rise in German inflation served as a warning sign of what was to come today, with eurozone CPI rising 0.4% for the month of December. While year-on-year headline (2.4%) and core (2.7%) inflation came in as expected, the monthly rise of 0.4% represents the highest figure since April 2024. This has been led by a whipping 0.8% rise in services inflation, while the energy component rose 0.6% for the month. With Russian gas flows finally coming to a halt after Ukraine ended the flow of energy through their pipelines, Europe is faced with yet another potential squeeze in energy prices as we clamour around for gas to counteract those lost supplies. This is also bad news for European manufacturers, with energy intensive production likely to continue feeling the squeeze under the weight of elevated input prices.

US markets start to gain focus this afternoon, with the JOLTS job openings release providing the first of many employment related data points that culminate in Friday’s jobs report. Coming at a time where bad news is deemed as a potential benefit owing to the influence on monetary policy, the direction of travel for US jobs will be key as the S&P 500 eyes up fresh highs. Tech stocks have led the way once again this week, with Nvidia into record levels after Jensen Huang unveiled a $3k supercomputer powered by a GB10 Grace Blackwell Superchip. While this is primarily aimed at developers, students, and researchers, it does mark the beginning of a move which sees standalone Nvidia branded products come to market. With Trump entering office in less than two-weeks time, markets are likely to become increasingly sensitive to any indication over how policy will take shape. Rumours of a more considered and targeted approach to tariffs helped lift sentiment yesterday, despite Trumps swift rebuttal. Nonetheless, it did provide a key insight into the restraint currently being shown by markets, with pent up demand in place as we await clarity over exactly how this Trump Presidency might shape economics relations.