Market Commentary 9th February 2026 – from Jamie Annand

The FTSE 100 continued to climb towards the end of last week, securing a second straight weekly gain, driven by strength in banks and oil majors, supported by a broader upswing in commodities, including precious and base metals, alongside rising crude prices. Investor sentiment was further boosted by the recent Bank of England vote on UK interest rates. Although the vote led to the base rate holding at 3.75%, more policymakers than initially expected voted in favour of a cut to the base rate, losing out 4 votes to 5. As the vote proved far closer than expected, economists are suggesting that a cut to the base rate may come earlier in 2026 than previously anticipated.

However, UK macroeconomic markers appeared to suffer in response to the political uncertainty caused by the news of former UK ambassador to the US, Peter Mandelson, and his past links to Jeffrey Epstein. On Thursday, gilt yields reached a three-month high whilst Sterling dropped at the end of a volatile week that put sterling on track for its sharpest weekly decline against the dollar since late October 2025.

The S&P Global UK Construction PMI rose to 46.4 in January 2026, rebounding from December’s five-and-a-half-year low of 40.1 and exceeding market expectations of 42.0. While this marked the strongest reading since June 2025, the index signalled a continued contraction in construction activity. House building was the weakest-performing segment, although the rate of decline eased to its slowest pace in three months. Reflecting a similar trend, business optimism improved to its strongest level since May 2025, but confidence remained well below its long-term average.

The European Central Bank left interest rates unchanged at its first policy meeting of 2026, reiterating that inflation is expected to stabilize at its 2% target over the medium term, while noting that the euro area economy remains resilient despite an uncertain outlook driven by global trade policy risks and ongoing geopolitical tensions.

Germany’s exports grew 4.0% month-on-month to a 20-month high of €133.3 billion in December 2025, well above forecasts of a 1.0% increase, rebounding from a 2.5% fall in the previous month. Export growth was supported by stronger shipments to both EU and non-EU countries. Whilst exports grew, Germany’s industrial output saw its first monthly drop in four months, posting a 1.9% month-on-month in December 2025, worse than market expectations of a 0.3% fall.

The University of Michigan’s consumer sentiment index rose by 0.9 points to 57.3 in February 2026, marking a third consecutive monthly increase and beating market expectations of 55, according to preliminary data. Despite the improvement, sentiment remained roughly 20% below its level in January 2025. The gains were driven largely by consumers with significant stock holdings, while sentiment among households without equity exposure stagnated at depressed levels. Modest improvements in perceptions of current personal finances and buying conditions for durable goods were partly offset by a slight deterioration in long-term business expectations. Concerns over the erosion of household finances due to high prices and the risk of job losses remains widespread.

The labour market in the US appeared to post worrying statistics for its workforce and future jobseekers. Job openings in the US fell by 386,000 to 6.542 million in December 2025, the lowest since September 2020 and well below market expectations of 7.2 million. Meanwhile, the number of job quits in the US rose slightly to 3.204 million in December 2025 from the upwardly revised 3.193 million in November and above 3.095 million a year ago, proving the highest reading in six months.

China General Composite PMI rose to 51.6 in January 2026 from 51.3 in the previous month, marking the highest reading since October. The index also signalled an eighth consecutive month of expansion in private-sector activity, as output growth accelerated across both the manufacturing and services sectors ahead of the Spring Festival. Total new business increased at a faster pace, supported by a renewed rise in overseas demand. Firms resumed hiring, which helped reduce outstanding business volumes.

Japan’s leading economic index, which gauges the outlook for the coming months based on indicators such as job offers and consumer sentiment, increased to 110.2 in December 2025 from a final reading of 109.9 in November, and above market forecasts of 109.8. The latest reading marked the highest level since May 2024, supported by consumer confidence, which was at its highest since April 2024. Meanwhile, cost pressures eased in December, marking their lowest level since March 2022. Japan’s equities seemingly defied a broad selloff in the region as investors focused on the weekend’s national election. Prime Minister Sanae Takaichi called the snap vote to secure backing for increased spending and potential tax cuts, with her ruling coalition widely expected to win by a landslide.

After peaking to a three-month high of 4.61% on Thursday amidst the scrutiny of Peter Mandelson’s links to Jeffrey Epstein, the gilt yields fell on Friday after the Bank of England kept interest rates unchanged at 3.75%.

GBP / EUR – Current 1.1520 Previous 1. 1549

The pound fell 0.55% against the US dollar last week. Against the euro, the pound fell 0.25%. Lingering political uncertainty regarding Kier Starmer’s Labour government and the previous appointment of Peter Mandelson appeared to cause the Sterling to suffer its worst week since late October 2025.