Market Commentary 27th January 2026 – from Jamie Annand

The UK S&P Global Composite Purchasing Managers’ Index (PMI) rose to 53.9 in January of 2026 from 51.4 in the previous month, well above market expectations of 51.5 to mark the sharpest growth in the UK private-sector activity since April of 2024. Business activity surged for the services sector to 54.3, while that for manufacturers rose notably to a 17-month high of 51.6.

UK consumer price inflation rose to 3.4% in December 2025, up from November’s eight-month low of 3.2% and slightly above market expectations of 3.3%. This year-end acceleration, the first since July, could complicate the Bank of England’s efforts to guide inflation back toward its 2% target, though the rise is expected to be temporary thanks to government interventions. The increase was largely driven by higher prices for alcohol and tobacco, which jumped to 5.2% from 4.0% in November due to the timing of tobacco duty changes, and transport costs, which rose to 4.0% from 3.7% on the back of higher airfares.

France’s HCOB Manufacturing PMI rose to 51.0 in January 2026 from 50.7 in December, beating market forecasts of 50.5. This marked the highest PMI reading since June 2022, driven by a sharp expansion in output, which grew at its fastest pace since February 2022. Outstanding orders also rose to their steepest level in almost four years, though new business remained in contraction amid subdued domestic and export demand. Factory employment was unchanged, while input costs rose modestly and output prices were stable.

Similarly to France and the UK, the HCOB Flash Germany Composite PMI rose to 52.5 in January 2026, its highest level in three months, up from 51.3 in December and well above expectations of 51.6. The reading points to a strengthening in private-sector activity, driven primarily by faster growth in the services sector to 53.3, while manufacturing production returned to growth at 50.5.

The US economy expanded at an annualized rate of 4.4% in Q3 2025, slightly above the initial estimate of 4.3% and marking the strongest GDP growth since Q3 2023. The upward revision primarily reflected stronger exports and a smaller drag from inventories. Robust growth was driven by firm consumer spending, a rebound in exports, and higher government spending.

The S&P Global US Flash Composite PMI inched up to 52.8 in January 2026 from 52.7 in December, signalling a modest pickup in business activity, though growth remained subdued relative to the stronger expansion seen in the second half of 2025. Manufacturing growth accelerated to 54.8, outpacing that of services, which remained at 52.5. Meanwhile, confidence in the year ahead outlook remained positive but dipped slightly lower, as hopes for sustained economic growth and favourable demand conditions were offset by ongoing worries over the political environment and higher prices.

The Chinese economy grew by 5% in 2025, the same pace as 2024 and meeting the government’s target, with analysts forecasting similar levels for 2026. Growth was supported by strong exports, as companies diversified shipments to Europe and Latin America to offset weak domestic consumption and US tariffs. Total goods trade reached RMB 45.47 trillion, with exports up 6.1% and imports 0.5% as private firms accounted for 57.3% of Chinese trade in 2025. The primary sector expanded 3.9%, the secondary sector 4.5%, while the services sector led growth at 5.4%, with IT & software (+11.1%) and leasing & business services (+10.3%) performing particularly strongly.

Japan’s core consumer price index rose 2.4% year on year in December 2025, easing from 3% in November and marking the weakest pace since October 2024. The reading was in line with market expectations and comes ahead of the Bank of Japan’s upcoming policy decision, where policymakers are widely expected to keep interest rates unchanged after December’s hike. Additionally, Japan’s S&P Global Composite PMI rose to 52.8 in January 2026 from 51.1 in December, the highest reading since August 2024, and marking the 11th consecutive month of private-sector expansion.

The UK 10-year gilt yield hit its highest level since January 5, as traders pared back expectations for Bank of England rate cuts following remarks from policymaker Megan Greene and stronger-than-expected economic data. Greene noted that a central bank survey suggests the decline in wage growth has run its course and expressed less concern over slowing disinflation, while looser US monetary policy could support higher UK inflation.

GBP / EUR – Current 1.1542 Previous 1.1536

Sterling rose by 1.97% against the dollar last week and gained 0.05% versus the euro. The British pound rose to the highest in over two weeks, as US-Europe tensions appeared to ease temporarily. US President Donald Trump said he would refrain from imposing tariffs on goods from European countries opposing his plan to take control of Greenland. He also noted that a “framework for a future deal” had been agreed following talks with NATO, though details of any agreement remain unclear.