Market Matters – Trump backs down on Greenland; UK Data firms Sterling

Greenland geopolitics briefly unsettled markets

with early‑week risk aversion triggered by renewed US rhetoric over Greenland and tariff threats. The episode ultimately reinforced a familiar pattern: political noise can spark volatility, but without escalation investors continue to refocus on fundamentals.

US macro data supported a push‑back in rate‑cut expectations

Strong labour market indicators and resilient consumer spending lifted front‑end Treasury yields, flattening the curve. Core PCE remains sticky but stable, and the Fed is expected to keep rates unchanged while emphasising patience. Market pricing now implies one cut by mid‑year and possibly another by year‑end.

UK data surprised positively

with December retail sales stabilising—driven by online, jewellery and food—and stronger‑than‑expected tax receipts. The combination supported a firmer tone in sterling despite still‑cautious consumer behaviour.

Europe and Asia delivered mixed signals

Eurozone PMIs point to modest but unspectacular expansion, leaving regional equities lagging the US. In Japan, fiscal‑policy commentary unsettled bonds and the yen, though the BoJ maintains a moderate‑growth outlook. China remains steady but confidence‑sensitive, with policy support offsetting external uncertainty.

Market breadth continues to improve

with leadership widening beyond US mega‑cap tech. Earnings reinforced a shift toward companies with scale, pricing power and disciplined execution. AI‑related investment remains intact but more discriminating. Emerging Markets participation has strengthened, and upcoming central‑bank meetings and earnings will determine whether this broadening persists.