HL commentary as it happens

Oil prices pull back from six-month high

Oil prices are pulling back from a recent six-month high as the prospect of a US–Iran nuclear deal gathered pace, with further negotiations expected later this week. Iran's foreign minister struck an optimistic tone, suggesting a diplomatic solution is within reach, while reports that any potential US military action would be limited in scope eased fears of broader supply disruptions. Tariff changes are adding further pressure, with traders wary of what a fresh drag on global growth could mean for oil demand.

Supreme Court ruling could be positive in the long run

Wall Street ended last week on a high after the Supreme Court struck down the Trump administration's use of its preferred tariff powers, with investors quickly repricing the outlook for lower effective tariff rates. That optimism is fading somewhat this morning, however, with US futures pointing lower as the dust settles and investors strap back in for another wave of tariff uncertainty.

Taking a step back, though, there’s an argument that this is a positive development for investors. The Supreme Court ruling was largely expected and sends an unambiguous signal that there are limits to the executive's power over trade and tariffs. Tariff headlines will no doubt continue to dominate the news cycle, but the goalposts have shifted – the near-unlimited use of tariffs under the old powers has come to an end, and for markets that have spent months toying with worst-case scenarios, that's a small silver lining.

UK markets lower as tariff agreement comes into question

The FTSE 100 opened slightly lower this morning as fresh trade uncertainty filters through from across the Atlantic. The UK had seemingly done its homework, securing a 10% trade deal with the US, but the White House's new 15% blanket tariff rather takes the shine off that achievement, dragging the UK back into fresh trade uncertainty. The new tariff uses a different legal authority, but it is a far blunter instrument than the flexible, targeted tools the administration had been relying on. While the White House insists that all existing trade deals remain intact, the EU is already making noises about pausing negotiations until the new landscape becomes clearer.

Gold edges higher, despite resilient US jobs data.

Gold prices have edged higher to around $5,010 on Friday as rising geopolitical tensions, particularly around Iran, were enough to offset tempering expectations for rate cuts by the Fed following stronger-than-expected economic data. US jobless claims fell to 206,000 (225,000 expected), highlighting resilience in the labour market. Some policymakers are even considering rate hikes in the near future if inflation remains elevated.

Brent crude prices rise to a six-month high over US-Iran fears.

Brent Crude prices rose to just over $72 per barrel this morning, hitting a six-month high and marking a weekly gain of more than 5%. The higher prices are being driven by fears over potential future supply disruptions as President Trump set a deadline for Iran to reach a nuclear agreement. Negotiations have no more than 10-15 days left to advance, and to put pressure on Iran, the US has deployed its largest military buildup in the Middle East since its 2003 invasion of Iraq.

Significant reduction in UK public borrowing and a surge in January retail sales

The FTSE 100 has opened higher this morning, supported by news of a significant reduction in public borrowing and a surge in January retail sales. For context, the UK government almost always runs a budget surplus in January, but this year’s £30.4bn was the largest on record, well ahead of market expectations and more than double the prior year’s level of £14.5bn. The 1.8% month-on-month uplift in retail sales volumes was also well ahead of forecasts for 0.2% growth, driven by gains across all major categories except department stores. That leaves sales volumes at their highest level since August 2022. But with employment growth flagging and wage growth slowing, households likely won’t be able to maintain this level of spending for long.

Oil extends gains as US-Iran tensions rise

Oil is extending its gains, with Brent crude back above $70 a barrel this morning, building on its strongest daily gain since late October as fears of a military confrontation between the US and Iran rattled energy markets. Nuclear talks between the two sides appear to be going nowhere fast, and the geopolitical premium is clearly back in play. That’s overshadowing a modest draw in US crude inventories that did little to shift the supply picture.

Fed minutes reveal a house divided

The January Fed meeting minutes made for uncomfortable reading, revealing a central bank struggling to find consensus on where rates go from here. In a notable hawkish twist, some officials floated the idea of raising rates if inflation proves stubborn - a far cry from the rate-cutting narrative markets had been banking on. Others maintained that further cuts would be warranted if price pressures continue to ease, leaving the outlook as clear as mud. Bond yields drifted higher following the release, a reminder that the path forward for monetary policy is anything but straightforward.

Wall Street edges higher despite rate jitters

US markets closed in the green last night, with the S&P 500 up 0.5% and the Nasdaq leading the way with a 0.8% gain. It looked set to be an even stronger session, with the S&P 500 up as much as 1% at one point, but the mood cooled after the release of the Fed's latest meeting minutes. US futures are pointing higher this morning, suggesting investors may be ready to look past the Fed noise and push on.

FTSE 100 hits new highs as inflation cools

The FTSE 100 powered to yet another record high yesterday, surging over 1% after UK inflation dropped to 3.0% in January, its lowest level since March last year. Markets now see an 80% chance of a move in March, and with weak jobs data earlier in the week painting a similar picture, the interest rate path looks increasingly supportive for UK equities. The index couldn’t quite hold onto its new title for long, with the FTSE 100 down a touch at the open as investors get stuck into another busy day for corporate results.

Inflation has fallen to a 10-month low thanks to falling fuel and food prices

UK inflation has fallen to 3% for the month of January, down from 3.4% the previous month, according to the Office of National Statistics. Lower fuel and airfares helped ease pricing pressures, as did slower inflation for food and non-alcoholic drinks. Core inflation, which excludes the often-volatile prices of food, energy and alcohol also fell on the previous month, as did services inflation, which has been sticky on the last year. These measures moving in tandem suggests that the outlook from here will be lower inflation, and the Bank of England expects inflation to fall to the target of 2% this year. The welcome news comes following yesterday’s weaker jobs data, meaning a March rate cut now looks certain.

Last time the Monetary Policy Committee met, the vote was split 5-4 to hold rates vs cut them, so the market trajectory is not a surprise – what will be key is the cadence and velocity from here. We expect that the MPC will cut twice this year, having favoured a cautious approach. Markets looking for forward guidance will no doubt place emphasis on the rhetoric from Bank of England Governor, Andrew Bailey, in the press conference following next month’s decision.

Gilt yields have fallen over recent days, with the 10-year dropping below 4.4% having been above 4.5% at the end of last week. As well as supportive UK data, there is also some contagion from the US, where the 10-year Treasury yield has fallen by nearly 20 basis points since the start of last week.