Looking back, and looking ahead in the markets (a big week for the UK).

The UK economy grew 0.3% in November, reversing a decline of the same magnitude in October, thanks to strong gains in services and industrial businesses. This month-over-month uptick in gross domestic product came in above the consensus forecast for a 0.2% expansion.

The FTSE 100 closed higher on Friday after a jump in commodity-linked stocks offset losses in luxury group Burberry, but uncertainty around the outlook for interest rate cuts meant the main UK stock indexes logged weekly declines.

The blue-chip FTSE 100?climbed 0.6% on Friday, but the week's performance marked the second consecutive fall as investors unwound their bets on aggressive monetary policy easing this year.

The FTSE 350 precious metal miners index?rallied by 3.3% as safe-haven buying supported gold prices after the United States and Britain?launched?strikes against sites linked to the Houthi movement in Yemen.

Defence company BAE Systems' shares?climbed 2.2% to an all-time high following the escalation of geopolitical tensions. Shares of Rolls Royce?and Melrose?also gained.

In Europe

Shares of?Burberry?fell 5.5% to a three-year low after it blamed a worsening slowdown in demand for luxury goods for its profit downgrade, and warned of a challenge ahead as it launches a strategy to move upmarket.

"With U.S. demand also showing signs of significant weakness, it's been one-way traffic as far as share price declines are concerned, and today's trading update from Burberry has shown that the malaise around luxury remains in place," Michael Hewson, chief market analyst at CMC Markets, said.

The pan-European STOXX Europe 600 Index ended the week little changed, as traders assessed the prospect of interest rates staying higher for longer than previously expected.

Major stock indexes were mixed. Germany’s DAX added 0.66%, France’s CAC 40 Index gained 0.60%, and Italy’s FTSE MIB ticked modestly higher.

European government bond yields endured a volatile week as dovish comments by European Central Bank policymakers were offset by moderating market expectations for an interest rate cut in the near term.

ECB President Christine Lagarde said in an interview on French television that she thought “the worst part is behind us” in the battle to bring down inflation.She also asserted that interest rates had probably reached their peak.

"I think that rates, barring any further shocks or unexpected data, will not continue to go up,” she said. “And if we win our fight against inflation, and if we are certain that inflation will indeed be at 2%, at that point rates will start to go down." However, she declined to say when these rate cuts would occur.

In the US

US Stocks moved higher over the week, with large-cap growth stocks and the technology-heavy Nasdaq Composite Index outperforming the broader market. Several tech giants recorded solid gains once again, including Meta Platforms and chipmaker NVIDIA.

The week also brought the unofficial start of earnings season, with the nation’s four largest banks — JPMorgan Chase, Citigroup, Bank of America, and WellsFargo — reporting fourth-quarter results on Friday.

Bank earnings disappointed, but one-time charges at JPMorgan Chase, Citigroup, WellsFargo, and Bank of America obscured how the banks really performed during the fourth quarter.

JPMorganChase reported fourth-quarter earnings per share of $3.04 and revenue of $38.6billion,?missing consensus estimates.

Bank of America's results also?fell short?of analysts' expectations, sending the shares lower in premarket trading. Wells Fargo, meanwhile, saw a jump in?credit loss provisions.

Citigroup reported?a net loss?due to a litany of one-time charges.

The Labor Department’s release of consumer price inflation data. Headline prices rose 0.3% in December, a tick more than expected, but core (less food and energy) costs also rose 0.3%, in line with consensus. For 2023 as a whole, core prices rose 3.9%, marking the slowest 12-month pace since mid-2021.

Producer price data, released Friday morning, was somewhat more encouraging. Headline wholesale prices fell another 0.1% in December, marking the third consecutive monthly decline. For 2023 as a whole, prices rose 1.0%, while core prices increased 1.8%, less than expected and below the Federal Reserve’s overall inflation target of 2.0%.

Fixed income investors appeared unswayed by the modest upside surprises in the consumer inflation data, with the yield on the benchmark 10-year US Treasury note falling back below 4% over the week.

In Asia

Japan’s stock markets registered strong gains over a holiday-shortened week (they were closed on Monday), with the Nikkei 225 Index rising 6.6% and the broader TOPIX Index up 4.2%. The continuation of highly stimulative monetary policy and weakness in the yen, which boosted Japan’s exporters, helped the indexes rally to their highest levels in almost 34 years.

?Chinese equities retreated as data showed that China’s deflationary cycle persisted into December, raising expectations of increased government support in 2024. The Shanghai Composite Index declined 1.61%, while the blue chip CSI 300 gave up 1.35%. In Hong Kong, the benchmark Hang Seng Index fell 1.76%, according to FactSet.

The consumer price index fell 0.3% in December from the prior-year period, the third monthly decline, easing from November’s 0.5% drop as lower pork prices continued to weigh on food prices. The producer price index declined 2.7% from a year ago compared with November’s 3% drop, and marked the 15th monthly decline. The latest inflation data raised expectations for some analysts that China’s central bank would lower its key policy rate and inject more cash into the financial system at its next policy meeting amid worries that sustained deflation will increasingly weigh on the economy.

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The week ahead

The annual WEF meeting at Davos takes place between January 15th?– 19th. I doubt it will be a market-driving event, but it should still be on trader’s radars given the amount of world leaders and policymakers that will congregate at the event.

ECB President speaks twice, with her initial speech titled “How to Trust Economics” so unlikely to cover monetary policy.

But occasionally there can be headlines generated by side-meetings among world leaders which can set the stage for future relations or deals.

?The big data drops are?UK inflation data on Wednesday?and?Tuesday’s official jobs market stats?– although it’s worth noting that the ONS will still be using experimental methodology for this latest round of figures.

It’s an important week for gauging the overall health of the UK economy as we also kick off the week with Rightmove house prices, get a similar update from RICS on Thursday and retail sales data on Friday.

Trading updates continue at pace. In the UK Thursday’s the busiest on the corporate front, with Flutter, Currys and software company Sage all set to report. We’ll also get miner RioTinto and recruiter Page group on Monday, Ocado on Tuesday and publisher Pearson on Wednesday.

In the US the major reporters are Goldman Sachs, Morgan Stanley, Netflix, Microsoft, Tesla, Boeing, American Express, Visa,Chevron, Pfizer, McDonald’s, AMD, Exxon and GSK. As you can see, it’s a big week for earnings.