Trump claims he would rather not put tariffs on Chinese imports

• Stronger European PMI surveys lift EUR and GBP.

• BoJ hike rates and lift inflation forecasts.

• Trump claims he would rather not put tariffs on Chinese imports.

Mainland European markets are leading the way with the FTSE 100 turning lower after a strong set of PMI figures brought fresh concerns about a resurgence in inflation pressures. Overall, the raft of PMI surveys released throughout Europe this morning have brought a significant degree of optimism, coming as global leaders discuss the hopelessness of the region in Davos. Nonetheless better than expected readings almost entirely across the board for France, Germany, the eurozone and UK do provide some food for thought within a financial system that seems entirely geared towards a US centric investment thesis. Despite the strength of this morning’s UK PMI figures, the mining sector represents the only standout performer as markets remain concerned over the acceleration if inflation pressures. With the S&P report highlighting that UK businesses have been cutting employment in the face of weak demand, the BoE are faced with the decision to prioritise fixing a weakening jobs market or holding off on inflation concerns.

The Japanese yen has seen a fresh bout of volatility overnight, following a BoJ rate decision that saw the third rate hike of this cycle. The 25-basis point hike represents the largest yet, with rates now at their highest level since 2008. Crucially we also saw the bank update its latest quarterly forecasts, raising their core CPI 2025 outlook by a lofty 50bp to 2.4%. This appears to pave the way for further tightening, raising the prospect of a stronger yen.

Looking ahead, the US PMI report provides a focus for traders, as they weigh up the merits of buying US stocks irrespective of a lack of easing at the Fed. Next week brings another likely pause from the FOMC, but markets are expected to ultimately look beyond the bank’s policy as the driver of market sentiment if the economy continues to strengthen. Inflation concerns eased somewhat after Trump noted that he would rather not put tariffs on Chinese imports, highlighting his somewhat less combative approach this time around. With the S&P 500 hitting record highs after hours, there is a clear optimism that we will see US businesses go from strength to strength under Trump.