Market report: Investors eye tariff ruling and US jobs report on Friday

Global markets are on edge ahead of today’s US jobs report and a Supreme Court ruling on Trump’s tariffs, with US futures softer after a defence-led rally, Rio and Glencore in talks over a $260bn mega-merger, and Sainsbury’s posting 3.4% like-for-like sales growth — with Emma Wall at Hargreaves Lansdown warning of heightened volatility.

Emma Wall, Chief Investment Strategist, Hargreaves Lansdown:

“All eyes are on the US today as global markets await two key events in the US later today which could significantly impact volatility. We’ve got a key macro data point in the US jobs report – the first potentially clean read following the record-long government shutdown which impacted the validity of both jobs and inflation data for October and November. The jobs report is expected to show stability, which will in turn lead to stability in rates – with expectations that the Fed will hold when they meet later this month. Our house view is that both the Federal Reserve in the US and the Bank of England here in the UK will cut just twice apiece through 2026.

The tariff ruling has more potential for upset – if the Supreme Court rules against Trump, then expect significant impact on both stocks and bonds, with mixed impact. Some may read it as an effective cut to inflation which would be good news for equities, but it also means a cut to government revenues – bad news for bonds.

Ahead of this news, US futures look soft, with open calls down on yesterday’s close. The S&P 500 had a strong trading day yesterday, buoyed by the defence sector. It has been a rollercoaster week for defence stocks – jumping high following Monday’s US operation in Venezuela before profit taking on Tuesday. Then yesterday they were climbing again as President Donald Trump announced that the US military budget should be a whopping $1.5trn this year – $600bn more than has been approved.

Whether or not this comes off it has been sufficient tailwind to inflate already stretched valuations in the sector, which have delivered strong returns to shareholders since the invasion of Ukraine in 2022. Stock pickers will find few bargains today and while BAE is our analyst team’s preferred stock in the sector due to its portfolio and diversified revenues, it is fully valued.

Derren Nathan, head of equity research, on the Rio-Glencore mega merger:

“Last year’s theme of consolidation in the natural resources sector has shown no sign of let up in the early part of 2026. In the same week we’ve seen Chevron make a swoop for Lukoil’s non-Russian fossil fuel assets, Rio Tinto and Glencore have confirmed that the mother of all mining deals could be back on the table.

Details are thin on the ground, but a deal could see Rio scoop up some or all of Glencore’s assets. A full combination would create a global leader in multiple industrial metals including iron ore and transition metals such as copper, cobalt and lithium. But M&A isn’t an automatic path to extracting value for investors, with Rio’s Australian shares down 6% and Glencore ending Thursday in negative territory. Under the UK’s takeover code, the management teams now have until 5^th February to outline a compelling case for both sets of shareholders.

 The diverse asset base and likely synergies have the potential to provide further protection against commodity price fluctuations, but just how Glencore’s coal and trading arms fit in with Rio’s business model, and push for improved sustainability credentials, are key questions to answer.”

Aarin Chiekrie, equity analyst, on Sainsbury’s bumper Christmas quarter

“Sainsbury’s festive results showed just why it’s put on serious weight to become the UK’s second-largest supermarket. The business is hungry for more business, and thanks to its ongoing drive to improve its quality, value and service, it’s managed to gobble up market share from the competition for the sixth consecutive festive season. Its Taste the Difference range has also found a winning formula, becoming the fastest-growing premium own-label brand in the market, with sales up 15%.

Keep in mind that Sainsbury’s is more exposed to general merchandise than its peers, owing to its ownership of Argos. General merchandise is the most cyclical area of the supermarket economy to be in, so being overweight in this arena can really slow sales down when things get tough. Recent initiatives are helping to drive higher sales volumes at Argos, but consumers remain cautious and are steering clear of big-ticket items. The net effect is lower average sales prices and a 1% decline in Argos’ sales over the festive period. All in, it was a solid third-quarter performance from Sainsbury’s, and full-year operating profit guidance of more than £1.0bn remains on track.”