1) 📊 Last Week in Review (Week ending 30 Jan 2026)

Performance snapshot:

• FTSE 100: 8,420 | +0.8% (YTD +2.1%)
• S&P 500: 6,150 | +1.2% (YTD +3.4%)
• MSCI World: 3,890 | +1.1% (YTD +2.9%)
• UK 10y gilt yield: 4.53% | US 10y: 4.25%
• GBP/USD: 1.3815 | Brent: $70.69

What moved markets:

• The “Warsh” Effect: Markets rallied on Friday following President Trump’s nomination of Kevin Warsh as the next Fed Chair, viewed by many as a more hawkish pick that could stabilise the Dollar.
• Data from the British Retail Consortium showed shop prices jumping 1.5% in January—well above expectations. This pushed 10y Gilt yields to a 2-month high as investors priced out a spring rate cut.
• Energy Resilience: The Energy sector outperformed as natural gas prices increased and oil majors (Exxon, Shell) delivered Q4 earnings beats.

Sector & style:

• Best/Worst sector: Energy outperformed globally on higher crude; rate‑sensitive growth and some EM lagged.​
• Growth vs Value: Value likely edged growth, helped by financials and energy as yields and oil ticked higher

So what?

• The combination of firm yields, firmer oil, and solid large‑cap earnings sets up this week as a test of whether the “soft‑landing + AI + income” narrative can keep driving risk assets.

---

2) 🌟 The Defining Narrative

Jobs, central banks, and AI earnings: can markets live with “higher for a bit longer” rates?

Why it matters (2–3 sentences):

• The US labour report and major central bank meetings this week will shape how quickly markets price rate cuts, which flows directly into bond yields, equity valuations, and FX moves.
• At the same time, a cluster of mega‑cap tech and healthcare earnings will show whether profit growth justifies current lofty multiples, especially in the US.
• Together, these forces will drive global risk appetite and determine whether the recent equity grind higher broadens or starts to stall.

What confirms it / what breaks it:

• Confirms: US jobs data that stay solid but not hot, plus central banks signalling patience rather than a renewed hiking bias.
• Breaks: Upside surprise in wage/inflation metrics or hawkish messaging that pushes cut expectations further out, driving yields higher and compressing equity multiples.

UK investor angle:

• A “higher for a bit longer” path with solid earnings favours global equities and credit, while keeping a bias to shorter/intermediate gilt duration.
• A hawkish surprise or very hot US data would argue for considering the risk in portfolios, and a closer look at defensive income assets.

---

3) 🏦 Central Bank Watch

Bank of England (BoE)

• What’s scheduled: Rate Decision & Monetary Policy Report – Thursday, 12:00 PM
• Market pricing: 90% chance of a “Hold”; pricing suggests first cut in June.
• Key thing to listen for: The “vote split” (how many MPC members vote for a cut) and language regarding “service sector persistence.”
• UK implications: A hawkish hold (no one voting for a cut) could push the 2-year Gilt yield higher and punish UK housebuilders.

Federal Reserve (Fed)

• What’s scheduled: Post-meeting speaker circuit (various governors) – All week.
• Market pricing: March cut probability has faded to ~20%; May is the new “coin toss.”
• Key thing to listen for: Any change in language around inflation persistence and labour markets, and hints on the pace of future easing.

---

4) 🌍 Macro Calendar

Day (UK)	Region	Event	Consensus vs Prior	Why it matters	Most sensitive asset
Mon 09:30	UK	Manufacturing PMI	49.2 vs 48.9	Measures industrial health; above 50 = growth.	GBP / FTSE 250
Tue 10:00	Euro	GDP (Q4 Final)	0.1% vs 0.0%	Confirms if Europe avoided a technical recession.	EUR / DAX
Wed 13:15	US	ADP Employment	145k vs 160k	The “warm-up” for Friday’s official jobs report.	US Dollar
Thu 12:00	UK	BoE Rate Decision	5.25% (Hold)	The biggest domestic event for UK mortgage/bond rates.	Gilts / GBP
Thu 13:30	US	Weekly Jobless Claims	212k vs 210k	Real-time gauge of US labor market cracking (or not).	S&P 500
Fri 09:30	UK	Construction PMI	47.5 vs 46.8	Vital for UK housebuilder sentiment.	Housebuilder stocks
Fri 13:30	US	Non-Farm Payrolls	180k vs 216k	The “Godzilla” of data; moves every market globally.	Global Equities
Fri 13:30	US	Average Hourly Earnings	0.3% vs 0.4%	Wage growth is the main driver of “sticky” inflation.	US 10y Yield

---

5) 📊 Earnings Watch

UK / Europe

• Shell (SHEL) — Thursday:
  • What matters: Following Shell’s massive 2025 performance, investors are looking for a continuation of the $3.5bn+ quarterly buyback pace.
  • The “tell” headline: Any sign that softening Brent prices (now sub-$70) are crimping the dividend cover.
  • Read-across: Directly impacts the FTSE 100’s ability to hold the 10,200 level.

US / Global

• Alphabet (GOOGL) — Wednesday (Post-market):
  • What matters: YouTube ad revenue vs. AI search integration costs.
  • The “tell” headline: If capital expenditure (Capex) guidance for 2026 scales up significantly again, expect a “margin squeeze” sell-off.
  • Read-across: High sensitivity for the global communication services sector.
• Amazon (AMZN) — Thursday (Post-market):
  • What matters: AWS (Cloud) growth. Markets want to see AWS revenue growth accelerating above 18% to justify the AI hype.
  • The “tell” headline: Any weakness in US consumer spending noted in their retail division.
  • Read-across: The “ultimate barometer” for both enterprise tech spending and global consumer health.
• Disney (DIS) — Monday (Today):
  • What matters: Progress on the new CEO search (Bob Iger’s replacement) and streaming profitability.
  • Read-across: Impacts sentiment for global media and “experience” stocks (Parks).
• Eli Lilly (LLY) — Wednesday:
  • What matters: Guidance on Zepbound/Mounjaro supply. Demand is infinite; the stock moves on their ability to build factories fast enough.
  • Read-across: Affects the broader Healthcare/Biotech sector (including UK’s AstraZeneca).

---

6) 💷 Fixed Income & Currency Outlook

A) UK Gilts / Rates

• Facts: 10y Gilt yield at 4.53%; 2y Gilt at 3.71%.
• View: Neutral/Underweight. (Sticky inflation is making the “long end” of the curve risky).
• Watchlist: Thursday’s BoE decision; if they acknowledge the BRC’s 1.5% shop inflation jump, yields could test 4.60%.
• Portfolio angle: For DIY investors, the “yield to maturity” on Gilts is attractive, but capital volatility is back. Short-dated Gilts (2y) offer a safer “park” for cash with less price risk.

B) FX (GBP focus)

• Facts: GBP/USD 1.3681; GBP/EUR 1.1545. (Weekly change: -0.9% against the USD).
• View: Range-bound (1.35 – 1.38).
• Watchlist: US Jobs data (Friday). A strong US report would likely push GBP/USD toward the 1.35 support level.
• Portfolio angle: The Pound’s recent strength has been a “drag” on unhedged US holdings. This week’s slight GBP weakness actually provides a small +0.9% “currency bonus” to the value of your S&P 500 tracker in Pound terms.

---

7) 🧠 Sentiment Check

Current mood: Moderately risk‑on, but more selective under the surface.

Market gauges:

• VIX / MOVE: VIX remains in the mid‑teens, below levels typically associated with stress, consistent with a “complacent but not euphoric” backdrop.​
• Rates: US 10y near 4.25% signals investors are slowly accepting a higher‑for‑longer rates regime.​
• Credit spreads: Spreads remain relatively tight, consistent with stable growth expectations.​
• CNN FEAR & GREED INDEX: Around 58 (greed), slightly above long‑term averages and pointing to a mild bullish bias.​

Positioning / flows:

• Ongoing inflows into large‑cap US and global equity funds continue, helped by strong earnings and AI themes.
• Flows into money‑market and short‑duration bond funds remain elevated as investors park cash at higher yields.​

Implication:

• With sentiment leaning positive but not extreme, upside may be more selective and driven by earnings beats, while negative surprises in macro or policy could spark disproportionate downside this week.

---

8) 📈 Valuations & Expectations

Valuation snapshot:

• S&P 500 fwd P/E: 22.1x
  • This remains significantly above the 10-year average of 18.8x. Apart from the post-COVID rally and the dot-com era, the US market has rarely sustained a multiple above 22.0x, suggesting the “margin for error” is paper-thin as we enter February.
• FTSE 100 fwd P/E: 13.5x
  • Despite hitting all-time highs above 10,200, the UK’s forward multiple is sitting right on its historical average. While not “ragingly cheap” anymore, it is far from the “bubble” territory seen in US Tech.
• Implication:
  • US valuations are priced for perfect earnings + rate cuts. The UK market is priced for a “steady-as-she-goes” environment, making it potentially more resilient if global growth hits a speed bump.

Earnings expectations:

• Next-year EPS growth (consensus): US 15.2% | UK 14.0%
• Revisions trend: * US: Seeing slight downward pressure on 2026 estimates (down from 15.6% in December) as analysts account for higher-for-longer financing costs.
  • UK: Seeing rare upward revisions, particularly in the Financial and Energy sectors, which make up over 50% of the index’s projected 2026 profits.

---

9) 🗳️ Geopolitics & Wildcards

Event: Japan snap general election — Sun 8 Feb.

• Impact channel: JPY, domestic policy expectations, risk sentiment in Asia.
• What to watch: surprise result that shifts fiscal/BoJ expectations.
• Most sensitive assets: JPY, Japanese equities, global risk tone.

Event: Donald Trump signalling Kevin Warsh as successor to Jerome Powell.

• Impact channel: rate expectations / term premium / USD.
• What to watch: confirmation or pushback; market reaction in US yields.
• Most sensitive assets: US Treasuries, USD, rate-sensitive growth stocks.

---

10) ⚡ The Bottom Line

• If US payrolls come in close to consensus with tame wages, then yields can consolidate and risk assets should trade positively with cyclicals and quality growth leading → watch US 10y near 4.2–4.3% and GBP/USD around 1.36–1.38.
• If BoE and ECB both sound more dovish than expected, then gilts and Bunds should rally while GBP and EUR soften, supporting UK and European equities → watch UK 10y near 4.3–4.4% and FTSE 100 around the 10,200–10,300 area.
• If a cluster of mega‑cap earnings disappoints, especially in AI‑linked tech, then indices could wobble even if macro is fine, with rotation to defensives and income assets.

---

© Clearly Investments Ltd. Educational information only. This is not investment advice.