S&P 500 Hits Record High, BOJ Hikes Rates

The S&P 500 reached a record closing high as investors reacted to mixed earnings and President Trump's softened stance on tariffs during his second term's first week. The dollar index fell 1.5% amid a weaker dollar against the euro, sterling, and China's yuan, which hit a six-week high. Meanwhile, Japan's central bank raised interest rates to 0.5%, the highest level in 17 years.

Equities

The FTSE 100 rose by 0.2% to 8,565 points on Thursday, just shy of its all-time high of 8,584 points reached earlier in the week. Investors focused on US President Donald Trump's trade policies and his announcements regarding artificial intelligence infrastructure, which supported gains in global technology shares.

However, not all companies fared well. Inchcape slipped 13.3% following a downgrade by J.P. Morgan, and Associated British Foods shed 3% as its Primark division reported weak UK trading during the Christmas quarter, leading to a cut in its annual sales forecast.

In the US, the S&P 500 rose 0.53% to close at a record high of 6,118.71, driven by a combination of mixed earnings reports and President Trump’s comments at the World Economic Forum. Trump called for reductions in oil prices and interest rates, which was well-received by some investors, though concerns over potential inflation pressures from tariffs persisted.

The S&P 500 banks index hit a record high, closing 0.73% higher, while technology edged up by 0.12% after a larger rally earlier in the week.

GE Aerospace gained 6.6% after issuing an upbeat 2025 profit forecast, while Elevance added 2.7% following better-than-expected fourth-quarter earnings. American Airlines dropped 8.7% after issuing a disappointing 2025 profit forecast, and Electronic Arts fell 16.7% after cutting its annual bookings outlook.

Companies linked to energy demand for AI operations gained, with Constellation Energy up 4.1%, AES Corp rising 3.6%, and Vistra Corp climbing 2.7%.

Forex & Commodities

The US dollar index fell 1.5% this week, hitting a one-month low of 107.71 following comments from President Trump calling for lower interest rates. The yen strengthened to 154.86 per dollar after the Bank of Japan raised interest rates to 0.5%, their highest level since 2008. Investors are now awaiting further guidance from BOJ Governor Kazuo Ueda on the potential pace of additional hikes.

Gold prices rose 0.7% to $2,773.57 per ounce, nearing a three-month high and marking a weekly gain of over 2%. The weaker dollar and uncertainty around US trade policies pushed investors toward safe-haven assets, with some analysts projecting gold could reach $3,000 this year. Silver, palladium, and platinum also gained, rising 1.1%, 0.9%, and 1%, respectively, with all three metals on track for weekly increases.

Oil prices remained subdued, with Brent crude flat at $78.35 per barrel and WTI edging up to $74.66. Both benchmarks were set for weekly losses, with Brent down 3.07% and WTI off by 4.17%. Trump's calls for increased US energy production and lower crude prices from OPEC weighed on the market. Meanwhile, US crude inventories fell by 1 million barrels last week to their lowest levels since March 2022, according to the EIA, providing some temporary support to prices.