Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US, and Asia – giving you clear insights to support client conversations.
This week's headlines:
- Tech plunges – tech stocks fell this week after investors got nervous about how expensive they’ve become, dragging the Nasdaq lower as investors reassessed lofty valuations amid a series of unsettling earnings updates. The downturn accelerated after Alphabet projected a major ramp up in AI‑related capital expenditure – potentially as high as $185 billion – which raised concerns that heavy investment could squeeze near term returns. Crypto prices also fell hard this week. Bitcoin dropped by up to 9% in a single day as investors pulled back from risk, leading to one of the biggest crypto selloffs since 2022.
- Precious metals selloff rocks markets – Gold has remained volatile since last Friday, when futures closed near $4,745/oz, retracing sharply after hitting record highs above $5,500 earlier in the month. The initial pullback, which wiped out $7trn of value across precious metals, was driven by profit taking following January’s extraordinary rally. Weaker than expected US jobs data and investors reducing their risky positions put even more downward pressure on prices. Silver has followed a similar pattern – having surged more than 70% mid‑month before enduring one of its sharpest single day drops in decades at the end of January. Silver has continued to fall, dropping over 13% yesterday as investors sold off crowded trades, just like what happened with gold.
- US labour market weakness – US layoff announcements for January surged to 108,435, the highest reading for the month since 2009, as large employers across transport, technology, and logistics accelerated restructuring plans. The rise marks a 118% jump from a year earlier, signalling that many firms entered 2026 with a more cautious hiring stance. Job openings also fell sharply in December to 6.54 million, their lowest level since September 2020.
- No change in UK interest rates – The Bank of England struck a deliberately cautious note at its first policy meeting of the year, opting to hold interest rates at 3.75%. While the majority favoured staying on hold, four members pushed for an immediate 0.25% cut. This more cautious stance than expected made markets think rate cuts could come sooner.
- European inflation cools, rates held – headline inflation across the Eurozone fell to 1.7% in January, down from 2% in December, marking its lowest level since late 2024 and dipping below the ECB’s 2% target for the first time in over a year. Core inflation also moved lower to 2.2%, helped by a sharp decline in energy prices and a moderation in services inflation. Against this backdrop, the European Central Bank held interest rates steady, keeping the deposit rate at 2%.
What this means for financial advisers and clients
A $7trn selloff over the course of a day or two is the largest loss in financial history, exceeding the $6trn COVID crash over several days in March 2020. However, this is largely due to the enormous size of the gold market, estimated to be a $60trn global asset when measured by above ground stock. And given gold’s minimal role in the financial system and investor portfolios, the fall was far less impactful than the equity market turbulence experienced at the onset of the COVID pandemic. What it does highlight is the dangers that can build up in a hot and crowded trade, with the potential for a fall of significant magnitude when it unwinds.
Gold has partially recovered since, but another part of the market has unwound a little. AI and related tech have been another crowded trade, and despite earnings holding up, sentiment is fearful that valuations and expectations have become too stretched. Other parts of the market, such as UK large caps and Japanese equities, are finding favour on firmer valuations having been relatively unloved over previous years.
As we’ve seen over the last week, rotations can be swift and severe, highlighting the importance of both diversification and valuation discipline to protect investor capital against the winds of changing sentiment.
Chart of the week - tech takes a backseat
Source: Parmenion, FE Analytics
Why this matters
The chart shows the 12-month performance of the different sectors in the FTSE All World index, to 5th February 2026. While the tech sector (highlighted in red) has been dominant in markets and our lives for many years – and constitutes almost a third of global indices – it's lagged other parts of the market over the last year despite the growth and optimism around AI.
Against this backdrop, the UK’s headline FTSE 100 index has outperformed all other regions over this period. Even more stark is the FTSE UK Equity Income index, long seen as representative of the “old economy” with large exposures to financials, materials, and energy, up over 34% over the last year in comparison to the tech-heavy S&P 500 which has delivered less than 5% returns for UK investors.
While tech and the US dominates headlines, and may in times like these paint a picture of troubled markets, that doesn’t necessarily mean that the same applies everywhere – other parts of the market are doing very well.
The Markets
US tech rout
The Nasdaq fell sharply this week as investors stepped back from expensive technology names following mixed earnings updates. Sentiment weakened after Alphabet signalled a substantial lift in AI‑related capital spending, unsettling markets already sensitive to lofty valuations. Qualcomm added further pressure with an 8% drop after issuing a softer than expected outlook linked to global memory shortages, weighing on the semiconductor sector. Broader tech weakness persisted, with Tesla and Nvidia both declining as investors continued rotating out of the “Magnificent Seven,” while software names came under strain amid rising concerns around AI‑driven disruption. AMD’s 17% slide – despite beating expectations – underlined the more cautious tone emerging across the sector.
UK benefits from diversification
The FTSE 100 pushed to a record high this week despite the turbulence elsewhere. Renewed international flows into the UK market have helped the FTSE 100 outperform, benefitting from an investor rotation into defensive sectors and lower valuation markets. Recent sessions have shown broad based participation rather than reliance on a single mega‑cap, however, the sharp drop in oil prices boosted the returns of travel and leisure stocks.
Japanese strength
While the Yen continues to struggle, Japan has been the leading equity market in 2026 so far. Japanese equities moved higher again this week, led by a strong rebound in the Nikkei 225, which climbed nearly 4% to a new record high as investors responded positively to robust earnings across Japan’s technology and financial sectors. The broader TOPIX index also advanced more than 3%, marking its strongest daily gain in months and reinforcing the sense of renewed confidence in Japan’s equity market. Solid corporate performance and improved market conditions across Asia helped sustain the upswing through the week.
Pound hit by political uncertainty
Sterling weakened to a two‑week low against the dollar, becoming the worst‑performing major currency as traders digested reports that Prime Minister Keir Starmer’s leadership was under pressure. Consequently, returns in overseas markets for UK investors were boosted over the week, aside from Japanese equities as the Yen also weakened to a similar extent. Long‑dated borrowing costs also jumped sharply, with 10‑year yields touching 4.59% and 30‑year yields reaching 5.38%.
Oil concerns fade
Brent crude prices moved lower this week as geopolitical tensions eased and markets reassessed the near‑term supply outlook. The clearest catalyst came from news that the US and Iran had agreed to resume talks, a development that reduced fears of supply disruption in the Strait of Hormuz and triggered a wave of profit taking across the energy complex. Traders also noted growing evidence of oversupply, reinforced by reports of heavier Venezuelan flows to the US Gulf Coast and China demanding deeper discounts on Russian barrels.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.84% | 3.85% |
| FTSE 250 | -0.61% | 3.05% |
| S&P 500 | -0.60% | -1.18% |
| NASDAQ | -2.41% | -3.28% |
| FTSE Developed Europe Ex-UK | 0.66% | 3.02% |
| FTSE Emerging Markets | 0.67% | 4.30% |
| FTSE Japan | 2.15% | 6.48% |
| Brent Crude | -2.53% | 9.84% |
| Gold Spot | -0.64% | 9.78% |
| UK 10yr Gilt yield | +5bp | +10bps |
| US 10yr Treasury yield | -3bps | +6bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 5th February 2026.
2026 Let's Talk Markets webinars
The next Let's Talk Markets webinar takes place on Thursday, 5th March 2026, continuing our series of insights for the year ahead.
Our team is already shaping a programme based on what you’ve told us you value most: sharper market insight, practical takeaways, and topics timed to be most relevant for you.
A quick housekeeping note: you’ll need to register again. Each year’s series is brand new, and previous sign-ups don’t carry over.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
