FTSE 100 edges higher as Wall Street licks its wounds

​​​UK markets look to steady the ship

​United Kingdom (UK) equity futures point to a modestly firmer open this morning, though the mood remains cautious after a bruising session on Wall Street. The British pound has softened ahead of the cash session, offering a modest tailwind for the internationally-focused FTSE 100.

​Overnight losses in the US have set a nervous tone, but domestic earnings news is providing some distraction. Traders using spread betting or CFD trading will want to watch the open closely for direction.

​The FTSE 100's heavy international earnings mix means sterling weakness can act as a buffer when global sentiment deteriorates. That dynamic is playing out again this morning, even if conviction is thin.

​With US inflation data due later today, the risk is that any early gains in London prove fragile. Markets are unlikely to commit strongly in either direction until the consumer price index (CPI) numbers land.

NatWest beats estimates and signals confidence

​The big domestic story is NatWest, which delivered pre-tax profit ahead of estimates on the back of strength in its private banking arm. A £750 million share buyback for the first half of 2026 underlines management's confidence in the outlook.

​Guidance for structural hedge income to rise by around £1.5 billion this year and a further £1 billion in 2027 suggests the bank sees plenty of runway even as interest rates come down. A reiterated target of above 17% return on tangible equity should keep income-focused traders interested.

​The results reinforce NatWest's shift from crisis-era repair to sustained capital distribution. For those looking to trade shares, the UK banking sector continues to offer attractive yields backed by improving fundamentals.

​Elsewhere, AstraZeneca offers a more mixed picture. Positive trial data for its asthma treatment Breztri is encouraging, but a downgrade to hold at Shore Capital on near-term earnings concerns is a reminder that even strong pipeline stories need to deliver on the numbers.

​Cisco sparks a tech rout on Wall Street

​The real damage overnight came from the United States (US), where the artificial intelligence (AI) disruption trade claimed fresh victims. Cisco's 12.3% plunge after missing on adjusted gross margin dragged on the wider technology complex, pulling Apple, NVIDIA, Broadcom and Amazon lower.

​The sell-off reignited worries about the returns on heavy AI-related capital spending. The Dow Jones shed 1.34%, the S&P 500 lost 1.57% and the Nasdaq 100 dropped 2.04%, with the latter posting its worst session in weeks.

​The contagion spread beyond pure technology plays. Trucking and logistics stocks fell sharply after the launch of a new AI freight tool, extending the so-called AI disruption trade that has recently hit multiple sectors. The Dow transports index dropped 4%.

​HP and Dell were also caught in the crossfire after Lenovo warned of shipment pressure linked to memory-chip shortages. It was a broad-based risk-off session, with few places to hide in growth-sensitive areas of the market.

​Defensive rotation and bond rally gather pace

​Investors moved decisively into defensive sectors, with utilities, consumer staples and real estate all outperforming. It's a familiar pattern when technology leadership falters, and suggests positioning is shifting rather than simply de-risking.

​US Treasury yields fell sharply, with the 10-year yield dropping 7 basis points on the session. Strong demand at a 30-year auction reinforced the bid for safe-haven assets and pointed to genuine concern about the growth outlook.

​Asia follows Wall Street lower

​Asian markets tracked the US sell-off overnight, with the MSCI Asia-Pacific index falling 1.1%. Japan's Nikkei 225 lost 1.3% and Hong Kong's Hang Seng dropped 2.1%, with technology and growth names bearing the brunt of the selling.

​US futures edged lower in the Asian session, suggesting the selling pressure has not fully run its course. European traders will want to see whether the FTSE 100 can decouple from the weaker tone, given its lower technology weighting.

​The Asian losses add to a growing sense that the AI trade is entering a more discerning phase. Markets are no longer content to reward spending on artificial intelligence without evidence of returns, and that shift in sentiment is filtering across regions.

​All eyes on US inflation data

​The main event today is January CPI out of the US. Core prices are expected to rise 0.3% month-on-month (MoM), with the annual rate seen easing to 2.5%. Weekly jobless claims came in slightly above expectations, offering a small offset.

​Markets are currently pricing around 60 basis points of Federal Reserve (Fed) rate cuts this year. A hot inflation print could quickly force a rethink of that view, while a softer reading would reinforce the case for easing in the second half.

​The inflation data matters for UK markets too. A hawkish repricing in US rate expectations would likely lift Treasury yields and the US dollar, weighing on risk assets globally. The FTSE 100's sensitivity to the dollar cuts both ways in this environment.