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London Quick Take – 23 Jan - Gold nears $5k, FTSE 100 climbs again, yen intervention

Equities 3 minutes to read
Neil Wilson
Neil Wilson

Investor Content Strategist

Note: This is marketing material. This article is not investment advice, capital is at risk.

Better to be an optimist and wrong than a pessimist and right. That’s how Tesla CEO Elon Musk signed off his world view from Davos yesterday. Don’t tell the UK consumer though! I think this goes for investing – permabears keep missing out. It’s easy to sound alarm bells and look clever. But over the span of the last 150 years bulls have made a lot more money, even if they occasionally get over their skis. We might be a bit over our skis right now. But the outlook for earnings is good, US growth is going to be strong, the global growth outlook is strong too. We'll have wobbles this year for sure and I don't rule out a correction in US stocks if we don't make a new high soon.

No optimism please, we're British. The GfK consumer confidence reading for Brits hasn’t been positive for ten years – the January reading ticking up 1pt to –16. It hasn’t been positive since before the Brexit vote...maybe that has something to do with it? Or maybe we’ve been ground down for years with nothing but higher taxes, less community cohesion, Covid, rampant inflation, stagnant wages and governments that just do nothing. Despite this UK retail sales surged in December. 

Stocks this morning turned broadly firmer, with the FTSE 100 rising a quarter of a percent, while the DAX and CAC also rose after a soft start. US markets rose yesterday off the back of President Trump’s decision to remove the threat of tariffs over Greenland. A sharp selloff on Tuesday has largely been reversed, though the S&P 500 is still not back to where it was at Friday’s close. The broad market finished off its highs of the day at 6,913, a gain of 0.55% with the 20-day moving average acting as the near-term resistance at 6,911 –looking today for the gap to be closed to Friday at 6,940. Mag7 gained - Meta jumped 5% to lead the tech rally with Tesla, +4% and Nvidia, Alphabet, Microsoft, Amazon and Apple all higher.

Gold pressed on to a fresh record high as geopolitical tensions remain elevated. The extreme tail risk of a US military intervention in Greenland was never being priced by markets. Worries about an escalatory trade war were. The fact is there is a much stronger driver behind gold and that’s all about currency debasement and rising debt levels – a unslakeable thirst for real money and hard assets. Spot gold pushed up to $4,967 before trimming gains but the $5k call I had late last year for gold is now upon us and it’s only January! Silver also posted a new all-time higher before trimming gains. Crude oil prices were set for a fifth consecutive week of gains after Trump hinted at possible military action in Iran, saying the US had a "armada" heading to the Persian Gulf. Certainly the USS Abraham Lincoln and its carrier strike group are en route and likely to arrive in the next few days.

The Japanese yen shot higher briefly this morning on an apparent intervention after the Bank of Japan was unchanged with a lone dissenter voting for a hike. The BOJ upgraded its growth and inflation forecasts and appears to be laying groundwork for a hike. The move in USDJPY had the hallmarks of intervention, but it could also be a “rate check” because full intervention would create a larger move. Either way it has yen bears on notice around the 159 area to be careful about leaning into a one-way yen trade. With the dollar pressured it’s a neat window for a pushback against the yen bears. Markets expect fiscal loosening after a snap election on 8 Feb.

Finally, in the defence space Babcock shares slipped in early trading on Friday on news of the retirement of its CEO. Dave Lockwood departs on a high after overseeing a six-fold increase in the share price. Trading and contract wins remain positive.


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