27th Jan 2026 06:55
(Alliance News) - Stocks in London are set to open higher on Tuesday, supported by a softer US dollar and firmer trading across Asian markets.
Keir Starmer is confident he can pursue trade deals with China without upsetting US President Donald Trump.
The UK prime minister will travel to China on Tuesday as he attempts to continue building bridges with Beijing after a freeze in Sino-British relations in the final years of the Conservative government.
Ahead of Starmer's trip, a No 10 source said the government was "bringing a hard-headed, grown-up approach to our relationship with China" that would chart a "steady, consistent course" with Beijing.
IG says futures indicate the FTSE 100 to open up 27.2 points, or 0.3% at 10,176.05 on Tuesday. The index of London large-caps closed up 0.1% at 10,148.85 on Monday.
The US dollar remains under pressure amid heightened political uncertainty in the US, as the odds of another government shutdown have risen after Democrats said they would block a federal spending package following fallout from the Trump administration's immigration crackdown.
That political uncertainty, combined with renewed speculation of US intervention to support the yen, has driven further dollar weakness.
Against the yen, the dollar was quoted at JPY154.41 on Tuesday morning, up from JP153.99 on Monday at the time of the London market close.
There was widespread discussion late Friday that the Federal Reserve had begun asking New York banks about their USD/JPY position sizes, akin to a so-called "rate check", often interpreted as a sign that a central bank may be preparing markets for possible intervention.
Sterling was quoted at USD1.3688 early Tuesday, lower than USD1.3704 at the London equities close on Monday.
The euro traded at USD1.1878 early Tuesday, higher than USD1.1884 late Monday.
The leaders of India and the EU will announce the "mother of all deals" on Tuesday, when they meet in New Delhi to formalise a huge trade pact reached after two decades of negotiations.
EU chiefs and Prime Minister Narendra Modi hope the pact, which Modi said was concluded on Monday, will help shield against challenges from the world's two leading economies, the US and China.
"People in the world are discussing this as a mother of all deals," Modi said Tuesday in the capital New Delhi ahead of a meeting with European Commission President Ursula von der Leyen and European Council President Antonio Costa.
"This deal will bring many opportunities for India's 1.4 billion and many millions of people of the EU," Modi said, adding the agreement "represents about 25% of global GDP, and one-third of global trade".
In the UK, shop price inflation accelerated in January amid persistently high energy costs for business owners, data published by the British Retail Consortium and NielsenIQ showed.
Annual shop price inflation rose to 1.5% in January from 0.7% in December, and was above the three-month average of 0.9%. Non-food prices rose 0.3% year-on-year in January, following a 0.6% decline in December and compared with a three-month average fall of 0.3%.
Food inflation accelerated to 3.9% from 3.3% in December, above the three-month average of 3.4%, while fresh food inflation rose to 4.4% from 3.8%, also exceeding its three-month average of 3.9%.
Also in the UK, the government has launched a new team aimed at helping small businesses secure more defence contracts and turn defence into an "engine for growth".
Luke Pollard, minister for defence readiness and industry, described small businesses as the "backbone of UK defence" as he announced the creation of the Defence Office for Small Business Growth.
The DOSBG will be staffed by policy and commercial experts tasked with supporting small and medium-sized UK firms to bid for and win defence contracts.
The initiative aims to reverse the decline in Ministry of Defence spending on SMEs and support the government's pledge to increase defence spending with smaller firms by 50% by 2028.
In Asia on Tuesday, the Nikkei 225 index in Tokyo was up 0.8%. In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong rose 1.3%.
US President Donald Trump said he would raise tariffs on various South Korean goods, taking aim at the country for "not living up to" an earlier trade pact struck with Washington.
"Because the Korean Legislature hasn't enacted our Historic Trade Agreement, which is their prerogative, I am hereby increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%," Trump wrote on his Truth Social platform.
The S&P/ASX 200 in Sydney closed up 0.9%, as Australian business confidence improved in December, survey data showed.
The National Australia Bank business confidence index rose two points to plus three in December from plus one in November, while the business conditions index increased to plus nine from plus seven.
In a week dominated by Big Tech earnings, with four of the so-called Magnificent Seven due to report, Nvidia shares closed down 0.6% on Monday before the company updated investors after the close.
Nvidia said it has invested in artificial intelligence cloud-computing firm CoreWeave as it plans to build more than five gigawatts of AI factories by 2030.
As part of an expanded partnership, Nvidia made a USD2 billion equity investment in CoreWeave at USD87.20 per share. CoreWeave will develop and operate AI factories using Nvidia's accelerated computing platform.
Elsewhere in tech, Microsoft rose 0.7% in after-hours trading after unveiling its new specialised AI chip, Maia 200.
The company said the chip has been engineered to improve the economics of AI token generation and delivers 30% better performance per dollar than the latest generation hardware currently deployed.
The Federal Reserve begins its two-day policy meeting on Tuesday, though markets are not expecting any change in interest rates.
Ipek Ozkardeskaya, senior analyst at Swissquote, said: "Powell is unlikely to say much more than "we are watching the data and it tells us to wait before cutting further." This lack of action is expected to trigger renewed fury from the White House.
"We could even hear the announcement of who might take over the Fed in the coming months. The issue is that the Fed still retains credibility under Jerome Powell, precisely because he has resisted political pressure. The day he is gone, that credibility could come into question — and a loss of faith in the Fed would likely be another tailwind for precious metals."
Gold steadied after its recent surge on strong safe-haven demand, quoted at USD5,090.90 an ounce early Tuesday, slightly lower than USD5,095.11 on Monday.
Brent oil was trading at USD64.48 a barrel early Tuesday, lower than USD65.43 late Monday.
In Tuesday's corporate calendar, it is the start of a busy week on the earnings front, with updates from Cranswick, Dr Martens, Sage and Evoke, while SThree posts full-year results and Time Finance report half-year figures.
In the economic calendar on Tuesday, data due include Spain unemployment figures and the US house price index.
By Eva Castanedo, Alliance News reporter
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