Earnings provide support for equities

The final week of January delivered new record closing highs for the S&P 500 and Nasdaq Composite indices, as well as record prices for gold, silver and copper. A steep slide in the US dollar – accelerated by US President Donald Trump’s dismissive comments about its four‑year low – supported gains in precious metals. A packed schedule of heavyweight corporate earnings reports – including statements from Apple, Meta Platforms and Tesla – confirmed that artificial intelligence was still a hit – for Big Tech and investors alike. 

Reports of a possible Labour leadership challenge caused a shiver in bond markets, pushing gilt yields higher.

The FTSE 100 was up 0.4% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading down 0.2%.

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Donald Trump 

Later on Friday, US President Donald Trump is expected to announce his nominee to replace Jerome Powell as chair of the Federal Reserve, a decision that carries major implications for US monetary policy and the global financial system. His comments were widely interpreted as pointing toward former Fed governor Kevin Warsh, one of four shortlisted finalists alongside Fed governor Christopher Waller, National Economic Council director Kevin Hassett, and BlackRock executive Rick Rieder. The move is especially significant because Trump has spent the past year attacking Mr Powell for not cutting interest rates fast enough, while the central bank has tried to maintain its independence amid a Justice Department investigation into renovation spending at its headquarters – a probe Trump has used to further criticise Powell. With Powell’s term ending in May, Trump’s new appointee could drastically shift the Fed’s stance on interest rates, inflation control and financial stability. Markets view the decision as a test of whether the central bank will remain an independent counterweight to the White House or become more aligned with Trump’s aggressive push for lower rates, which could stoke inflation but boost short‑term growth heading into the election cycle. Analysts warn that the pick could reshape global capital flows, affect borrowing costs worldwide, and redefine the boundaries of presidential influence over the United States’ most important economic institution. 

Donald Trump warned Sir Keir Starmer that pursuing closer economic ties with China was “very dangerous” after the prime minister met Xi Jinping and signed agreements including halved whisky tariffs and visa‑free travel for UK visitors, moves Washington fears could weaken Western alignment on trade and security. Trump’s comments reflected broader US anxiety that allies such as the UK and Canada are drifting toward Beijing at a time when his administration is trying to isolate China, raising the risk of diplomatic tension between London and Washington as Starmer attempts a strategic reset with the world’s second‑largest economy.

Mr Trump’s escalating threats toward Iran – including vows that a “massive armada” is heading to the region and warnings that any new US strike would be “far worse” than last year’s bombing of Iranian nuclear sites – have sharply heightened tensions in an already volatile Middle East. His rhetoric, framed as an ultimatum for Tehran to accept a new nuclear deal and halt its violent crackdown on protesters, has been met with defiance. Iran’s leadership has pledged to “respond like never before” and warned that even a limited strike would be treated as an all‑out war. Hezbollah and other Iran‑aligned groups have echoed those threats. The result has been a rapid military build‑up, rising fears of miscalculation, and renewed instability in oil and financial markets as investors hedge against the risk of a wider conflict. 

The president threatened ally and neighbour Canada with 100% tariffs after he claimed that Ottawa’s newly agreed trade arrangement with China risks turning Canada into a “drop‑off port” for Chinese goods entering the US market, undermining Washington’s leverage in its broader confrontation with Beijing. In a series of posts on Truth Social, he accused Prime Minister Mark Carney of enabling China to “devour” Canada’s economy and warned that any move toward deeper trade ties with Beijing would trigger immediate punitive tariffs on all Canadian exports to the US. The outburst came after Carney publicly challenged Trump’s hardline geopolitical stance in a Davos speech and after Canada struck a limited agreement to lower tariffs on Chinese electric vehicles in exchange for reduced Chinese duties on Canadian farm goods – a deal Mr Trump initially praised before turning against it amid what appears to be an escalating personal and political feud between the two leaders. 

President Trump raised tariffs on South Korean goods because he claims Seoul has failed to approve and implement a trade deal the two countries agreed last year, accusing South Korea’s legislature of not “living up to its deal” and using higher levies as leverage to force compliance. In statements on Truth Social, President Trump said that, despite reaching what he called a “great deal” with President Lee Jae‑myung in July and reaffirming it during an October 2025 visit, South Korea had still not enacted the agreement, prompting him to lift tariffs on cars, pharmaceuticals, lumber and other goods to 25% from 15%.

The price of gold has jumped above $5,000 an ounce for the first time as Donald Trump’s chaotic policies and proclamations drive more investors to seek safe harbour in the precious metal. Gold reached a record high of $5,100 (£3,723) on Monday morning, before easing back. Gold’s ascent reflects a powerful convergence of fears over global instability, rising geopolitical flashpoints and mounting economic uncertainty. Investors have piled into the metal as a classic safe‑haven hedge, responding to tensions involving Greenland, Venezuela, Ukraine and the Middle East, as well as growing anxiety over soaring government debt and concerns that policymakers may try to inflate away fiscal burdens. A weakening US dollar has further turbocharged demand by boosting purchasing power for non‑dollar buyers, while threats of aggressive trade actions by President Trump have added volatility and driven capital away from risk assets and into bullion. Together these forces have fuelled a remarkable rally that has nearly doubled gold’s price in a year.

Economics 

In the UK bond market, Gilts were sold off because investors fear that a potential leadership challenge to Prime Minister Keir Starmer signals deeper political instability and the prospect of looser fiscal discipline, prompting them to demand higher compensation for holding UK government debt. Reports of a brewing coup – including accusations that senior figures such as Wes Streeting were positioning for a leadership bid, which he denies – have shaken confidence in the durability of the government’s economic strategy and raised concerns that a change at the top could lead to higher borrowing or policy volatility. The political uncertainty has already pushed up gilt yields, with long‑dated borrowing costs rising as markets price in additional risk.

The British Retail Consortium’s (BRC’s) retail sales monitor showed that UK retail spending ended 2025 on a subdued note, with like‑for‑like sales rising just 1% year-on-year in December. This was the weakest pace in seven months, as consumers reined in festive spending amid persistent cost pressures. Non‑food sales slipped 0.3%, while food sales rose 3.1%, although both fell short of their 12‑month averages. BRC chief executive Helen Dickinson described it as a “drab Christmas”, noting shoppers increasingly waited for discounts, with a late uplift driven by Boxing Day and early January sales.

Geopolitics

The US administration is considering whether to strike Iran as turmoil intensifies. The authoritarian Iranian government is at its weakest point in years, destabilising another Opec nation less than two weeks after the US toppled the government of Venezuela. Protests have erupted in the streets across Iran, and the government’s deadly crackdown on protesters crossed a red line President Donald Trump had drawn. Trump has signalled that his administration is weighing an attack – although on Wednesday, Trump said Washington will continue to “watch and see what the process is” to determine whether to take action against the country.

The European Union (EU) and India sealed what leaders on both sides hailed as the “mother of all deals” – a landmark free‑trade agreement creating a vast two‑billion‑person market and eliminating tariffs on nearly all goods traded between the blocs. After nearly two decades of stop‑start negotiations, the pact slashes duties on 96.6% of EU exports to India and liberalises 99.5% of EU tariff lines on Indian goods, unlocking billions in annual savings for European exporters and offering major new market access for India’s manufacturers in sectors such as textiles, gems and leather. Going far beyond trade, the agreement forms part of a broader strategic alignment, with Brussels and New Delhi framing the deal as a cornerstone of their effort to diversify supply chains, bolster the rules‑based global order and deepen defence and technology cooperation at a time of rising geopolitical tension.

Companies

Apple delivered a record‑breaking first quarter, posting revenue of $143.8bn – up 16% year‑on‑year – as staggering demand for the iPhone 17 propelled the company to all‑time highs in both total revenue and earnings per share. iPhone sales surged 23% to $85.3bn, with strong performance across every region, particularly Greater China, while Services revenue climbed 14% to a new peak of $30bn. Apple now boasts an installed base of more than 2.5 billion active devices and returned almost $32bn to shareholders through buybacks and dividends during the quarter. Executives guided for continued double‑digit revenue growth in the March quarter, though they noted iPhone supply constraints remain a near‑term risk. 

Microsoft delivered a strong second quarter, with revenue rising 17% to $81.3bn as surging demand for cloud and artificial intelligence (AI) services pushed Microsoft Cloud sales past $50bn. Azure remained the standout performer with revenue up 39%, underpinning a broader 26% jump in cloud sales, though investors were unsettled by heavy capital expenditure of $37.5bn – much of it committed to AI infrastructure – and slowing cloud‑growth momentum. Despite the hefty investment bill and concerns about the pace of AI‑fuelled expansion, Microsoft reported a record $625bn in contracted future revenue, underscoring the depth of long‑term demand for its cloud and AI platforms. 

Tesla’s fourth quarter told a story of a company in transition: revenue slipped 3% year‑on‑year to $24.9bn, marking part of its first annual sales decline on record, while net income plunged 61% amid higher operating expenses and weakening vehicle demand. Deliveries dropped 16% in the quarter and 8.6% for the full year as competition intensified – particularly from China’s BYD – and consumer backlash over Elon Musk’s political interventions compounded pressure on an ageing vehicle line‑up. Nevertheless, Tesla beat analyst forecasts and sought to steer attention towards its longer‑term pivot to robotics and AI. Mr Musk confirmed production of the Model S and X will end to free factory space for the Optimus humanoid robot, while the company doubled down on its transformation into a “physical AI” business. Tesla also disclosed a $2bn investment in Musk’s xAI and highlighted growth in its energy and services divisions.

Facebook-owner Meta Platforms posted a 24% jump in revenue to $59.9bn and an 11% rise in earnings, fuelled by record advertising demand, rising ad impressions and higher ad prices. Daily active users across its apps reached 3.58 billion in December 2025, while Meta’s ad-driven “Family of Apps” delivered nearly all of its quarterly revenue. But the standout theme was AI. Mark Zuckerberg hailed 2025 as a year of “major AI acceleration” and the company unveiled an aggressive 2026 investment plan, with capital spending set to almost double to as much as $135bn to build out Meta Superintelligence Labs and other infrastructure. Despite sharply higher expenses, Meta said momentum heading into 2026 remained strong, guided first-quarter revenue above forecasts and outlined a roadmap of new AI models it expects to release over the coming months.

3i Group’s most recent trading update – its third-quarter update to the end of December – showed the private‑equity company extending its strong momentum, with net asset value per share rising to 3,017p from 2,857p the previous quarter and a 20% total return over the nine‑month period. The group’s largest asset, discount retailer Action, remained the standout performer. Beyond Action, disposals such as MAIT generated strong uplifts, while other consumer‑focused holdings including Royal Sanders and Audley Travel continued to contribute positively. 

Texas Instruments’ fourth-quarter revenue rose 10% to $4.42bn, up 10% year‑on‑year but down 7% sequentially. Earnings per share edged down to $1.27, partly reflecting a six‑cent reduction not included in earlier guidance. Management highlighted strong cash generation, with $7.2bn in operating cash flow over the past 12 months and free cash flow rising 96% year‑on‑year to $2.94bn, alongside significant shareholder returns totalling $6.5bn. The company reported steady operating profit growth, disciplined investment in R&D and capital expenditures, and noted continued benefits from its 300‑millimeter manufacturing strategy. Looking ahead, management forecast first‑quarter revenue of between $4.32 billion and $4.68 billion and EPS of $1.22 to $1.48. 

LVMH delivered only modest fourth‑quarter growth, with organic revenue rising 1% to €22.7bn – broadly in line with the previous quarter – but the performance fell short of buoyant results from rivals and sent the shares down as investors judged the update underwhelming. Management flagged an uncertain 2026 outlook amid geopolitical and economic pressures, even as signs of a gradual luxury rebound emerged from China. Full‑year figures highlighted resilient demand but also currency‑related headwinds.

Ryanair’s third quarter results reveal a resilient performance despite regulatory and operational headwinds, with the airline absorbing an €85m Italian antitrust fine that dented quarterly profit but did not disrupt day‑to‑day operations. Management raised full‑year guidance, citing strong fourth‑quarter bookings and fuel hedge advantages, signalling confidence that the airline’s growth plans remain on track despite legal setbacks and continued aircraft delivery delays. Profits were supported by a 6% rise in traffic to 47.5 million passengers and a 2.3% increase in average fares. What lies in store for the airline sector in 2026.

Starbucks closed its fourth quarter with modest top‑line growth but sharply weaker profits, reporting a 5% rise in revenue to $9.6bn and the first uptick in global same‑store sales in nearly two years. Same‑store sales were flat in the US but turned positive in September, while international markets – particularly China – helped lift global comparable sales by 1%, though the company also closed 627 stores as part of a sweeping restructuring plan. Operating margins contracted significantly as inflation and labour investments linked to the “Back to Starbucks” programme weighed on performance.

SAP reported a robust fourth quarter driven by strong cloud momentum and record bookings, even as a slowdown in cloud‑backlog growth weighed on investor sentiment. Total revenue rose to €9.7bn, up from €9.4bn a year earlier, while operating profit increased to €2.6bn, supported by rapid expansion in cloud services, which climbed 26% to €5.61bn. The company highlighted a record €77bn total cloud backlog – up 30% – and noted that SAP Business AI featured in roughly two‑thirds of new cloud orders, underscoring AI’s growing importance to its product suite. However, current cloud‑backlog growth of 16% fell short of expectations, prompting concerns about deceleration in 2026 despite management’s insistence that backlog strength should accelerate revenue.

Roche closed the year with an upbeat fourth quarter, posting an 8% rise in sales as strong demand for newer medicines such as Phesgo, Xolair, Ocrevus, Hemlibra and Vabysmo helped lift pharmaceutical revenue, while diagnostics grew modestly despite pricing pressures in China. The company highlighted a rich stream of late‑stage clinical progress – including advances in breast cancer, multiple sclerosis, lupus nephritis and obesity – and secured several key regulatory approvals in the US and EU. The Swiss group proposed lifting its dividend for a 39th consecutive year. 

Sage reported a strong first quarter, with revenue climbing 10% to £674m as growth accelerated across all major regions. This was driven by surging demand for its cloud‑based products. North America led the expansion with a 13% rise, while the UK and Ireland delivered 10%, supported by the rapid scaling of Sage Intacct and continued strength in Sage Accounting and Sage 50. Cloud revenue jumped 15% – including a 24% surge in cloud‑native products – and subscription income rose 12%, pushing subscription penetration to 84%. Management reaffirmed full‑year guidance, citing momentum in recurring revenue and ongoing investment in AI‑powered services designed to boost productivity for small and mid‑sized businesses. 

Otis Worldwide posted a solid fourth quarter, with net sales up 3% to $3.8bn and organic growth of 1%, driven chiefly by an 8% rise in service revenue underpinned by higher maintenance, repair and modernisation activity. Operating performance strengthened as GAAP EPS rose 13% and adjusted EPS climbed 11%, while modernisation orders surged 43% at constant currency and the backlog grew sharply, signalling healthy future demand. Management reaffirmed confidence in its service‑led strategy, which also supported a positive 2026 outlook calling for low‑to-mid single‑digit organic sales growth and mid‑to-high single‑digit adjusted EPS gains. 

Swedish multinational industrial company Atlas Copco delivered a mixed but resilient fourth quarter, posting 4% organic order growth, despite a decline in reported orders due to currency effects. Revenues at the maker of compressors, vacuum equipment, pumps, generators and assembly tools fell 7%, but were flat organically, while reported operating profit dropped 15%, reflecting weaker margins amid adverse currency movements and tariff pressures. Even so, the board proposed holding the ordinary dividend of SEK 3.00 and adding an extra SEK 2.00 distribution, signalling confidence in the group’s financial footing. The company also reaffirmed its near‑term outlook, expecting customer activity to remain stable. 

Canadian Pacific Kansas City reported a resilient fourth quarter, with revenue edging up 1% to C$3.9bn as its precision scheduled railroading model helped offset soft demand and macroeconomic headwinds. Tighter cost control and record operating metrics across train speed, locomotive productivity and car utilisation. The railroad also posted an industry‑leading core adjusted operating ratio of 55.9%, underscoring strong operational discipline despite flat volume growth, and management pointed to record grain harvests as a key driver of its upbeat 2026 outlook.