Daily market update: markets lower with Greenland in focus, Kraken, GSK

Despite a difficult start to the week it feels like the market is still in wait-and-see mode over whether there will be a full-blown trade war between the US and Europe.

Since the market close last Friday, the French and German flagship indices are down 2.5% and 2.3%, partly thanks to French luxury goods firms’ and German carmakers’ substantial exposure to the American market. The FTSE 100 is down a little more than 1%, with its own luxury brand Burberry also on the back foot.

On the market Richter scale this is little more than a mild tremor – for now. However, the stakes feel high as world leaders, including Donald Trump, prepare to meet at the World Economic Forum in Davos.

Investors will be hoping for some sort of de-escalation deal on Greenland which removes the risk of a break-up or at least serious rupture in the Nato alliance. If the crisis deepens it is unlikely to spell good news for global equities.

US futures were pointing to losses when Wall Street resumes trading after Martin Luther King Day. Nasdaq looks set to chalk up the biggest declines amid concern about possible retaliatory action from Europe against America’s big tech contingent.

Heightened tensions continue to push precious metals prices higher and gold bugs will be eyeing the $5,000 per ounce mark after it moved through $4,720.

BHP

Shares in mining giant BHP were on the back foot as the company revealed an increase in the cost of a major potash project in Canada and acknowledged pricing pressure linked to iron ore contract negotiations in China.

After a spendthrift 2000s, miners have gradually earned a reputation for financial discipline so there will be sensitivity to any sign BHP is struggling to keep the costs associated with its development pipeline in check.

GSK

GSK is betting big on a potential breakthrough to help people with food allergies. It is buying RAPT Therapeutics to access a treatment currently going through drug trials that could make life a lot easier for food allergy sufferers with less frequent dosing than current treatments.

There are still hurdles to clear in the testing process and no guarantee of success, yet these sorts of initiatives are exactly the risks that big pharma like GSK must take.

Food allergies are a major concern, and they’re being taken very seriously as anyone who goes to a restaurant will know. It has now become standard practice for a waiter to ask diners if they have a food allergy.

In the UK alone, around 6% of the adult population have a food allergy, according to the Food Standards Agency. If GSK can crack the formula for a more convenient treatment, it stands to potentially make big bucks.

DFS

No-one is suggesting DFS management can sit back and put their feet up, but the sofa seller’s management can certainly feel satisfied based on the latest update from the company.

Lifting full-year guidance yet again in what remains a difficult consumer backdrop in the UK is a serious win and hints at DFS’s increasingly tight grip on the upholstery space. Improving margins show this hasn’t been achieved through heavy discounting.

Crucially, the big increase in profit is being matched by a jump in cash flow which is enabling the company to pay down debt at pace.

Many companies hit by the pandemic are still lumbered with onerous borrowings, but DFS is well on the way to wiping out its debts and investors may now be looking to the restoration of a dividend last paid in 2024.

Having navigated its way through tough conditions, DFS will also hope the signs of life in the UK property market seen at the start of 2026 continue. A higher number of transactions should stoke demand as people look to spruce up their new homes with a sofa of their choice.

For the time being, DFS’s focus on what it can control in terms of cost discipline and the basics of ensuring the right products are available to customers at the right price points and in the right places should stand the business in good stead.

Kraken

Dan Coatsworth, Head of Markets at AJ Bell, comments:

Technology is the one area that’s significantly under-represented on the UK stock market compared to the US, despite Britain being home to many smart, innovative businesses.

The government is keen to attract more companies to the UK stock market to drive investment and boost the economy, and luring decent sized tech businesses would be a major win.

Given this context, it’s no surprise to see the government’s British Business Bank commit to investing £25 million in Kraken, a British tech business going places.

In doing so, the government gives Kraken funding to help support its growth and it sweetens the appeal of the UK being a long-term home for the company’s capital needs.

Kraken is being spun out of Octopus Energy, itself one of the UK’s biggest business success stories over the past decade.

Potentially derailing longer-term plans to convince Kraken to float in the UK is the presence of new foreign investors putting money into the business.

Fidelity International, Durable Capital Partners and Ontario Teachers' Pension Plan Board are also taking stakes in Kraken, and all three are North American entities. They will be fully aware of the valuation differential between the UK and US stock markets. Tech stocks typically receive higher valuations in the US, and IPOs provide an exit route for existing investors who will naturally want to get the highest price possible.