Today's markets: FTSE rises – but you can sense the tension

It’s a quiet start to the week in Europe with most eyes on the US where president-elect Donald Trump will be inaugurated. He’ll then potentially action as many as 100 executive orders, taking a dictatorship approach and bypassing Congress, with new rules expected on tariffs, border control and gas exports.

Everyone is still unsure what will come, and the dollar has sold off ahead of any changes. US markets are closed today for Martin Luther King Day, so any effects will first be seen in the greenback and Asian stock markets. Unusually, ahead of expected tariffs, Asian stocks rose on Monday with the Hang Seng rising 1.75 per cent on the back of China’s President Xi and Donald Trump exchanging a phone call, and both parties suggesting it went well, which potentially muddles what everyone’s expecting on the tariff front. Japanese shares also rose, despite the yen rising against the dollar, but some of this had to do with the country’s monetary policy.

Back at home, the FTSE 100 is up 0.25 per cent in early trading, with traders still bullish over a potential Bank of England rate cut next month, as data from last week pointed to a fundamentally weak UK economy. Bond yields have fallen back down with the 10-year now trading at 4.66 per cent, down from 4.93 per cent last Monday, although still materially higher than they have been. There’s more to watch with the UK, as tomorrow brings official unemployment figures and the first set to show what happened in the aftermath of the Budget. It’s unlikely anyone went on a hiring spree after finding out the minimum wage and employer national insurance contributions would rise in April. But the data may show whether or not we’ll start to see unemployment climbing the closer we get to the tax hikes. It’s also worth paying attention to earnings growth, which was the sticking point for BoE governor Andrew Bailey and co when it came to cutting rates. With everyone rounding in on a February rate cut, if earnings growth is still higher than expected, the mood could quickly change. That being said, there’s a lot of soft data pushing the case for a rate cut. Surveys from Lloyds showed 11 of 14 industries shrunk in December and Deloitte’s consumer research showed confidence in the economy plunged last year. You only have to look at last week’s very poor retail figures, which started the February rate cut chat, to validate that. 

One seemingly bullish area is the housing market, well, that’s according to the estate agency aggregator website, Rightmove. The brand publishes monthly updates on asking prices, which is an important distinction as it only really offers sentiment, or vibes if you will, rather than any hard figures. It’s still indicative, and asking prices rose 1.7 per cent between December and January. The housing market is in a bit of a fix: demand exists and is growing – Rightmove said interest from buyers was up 8 per cent – because property taxes for first-time buyers, landlords and second-home owners are rising in April, so there will be plenty of people wanting to get deals done beforehand. Supply exists – interest from sellers is up 11 per cent – but sellers are in less of a rush and can benefit from waiting, as they might get a cheaper mortgage deal. The Rightmove numbers are from before gilt yields spiked, which should make mortgage deals more expensive. But then you have a rate cut in February, which adds uncertainty. Basically, buyers need to rush but sellers could save thousands by waiting even a couple of weeks. That’s exactly the kind of thing that will push up prices, but only in the short term, and deals (and asking prices) could crater post-April.

By Taha Lokhandwala