FTSE 100 up 2% as rally gathers speed
Europe’s stock market rebound is gathering pace!
In the City, the FTSE 100 index of the largest companies listed in London is now up 2%, or 153 points, at 7852.
That lifts the FTSE 100 away from its lowest level in over a year.
But, as this chart shows, it makes little headway in the heavy losses suffered since Donald Trump announced his new tariffs last week.
The pan-European Stoxx 600 index is now up 1.75%, following gains in many Asia-Pacific markets overnight (Reminder: Japan’s Nikkei jumped 6% after Japan became the first major economy to secure priority tariff negotiations with Donald Trump.)
Joshua Mahony, analyst at Scope Markets, says:
With Trump rebuffing claims that he will delay tomorrows targeted tariffs by 90-days, traders should prepare for fresh volatility as we move through the week.
Nonetheless, US plans for a $1 trillion defence spending bill have helped lift European defence contractors and manufacturers such as Rolls-Royce and Rheinmetall.
Trump’s rejection of the EU’s offer of a zero-tariff deal on cars and some industrial products does highlight that we are likely moving towards some form of free-trade agreement.
Key events
Analysts at investment bank Jefferies have warned that “tariff turmoil” will hit Europe’s semiconductor industry this year.
Jefferies have cut their price targets on companies across the sector, explaining:
The disruption and uncertainty from tariffs is expected to push the semiconductor sector into sharper downcycle, with weaker demand across segments including the AI supply chain and semicap equipment.
Ind./auto chip suppliers should meet Q1 estimates, but their Q2 and FY25 outlooks are likely to be impacted.
US is starting to look like an emerging market after tariff shock, Euronext CEO says
The United States is starting to resemble an emerging market more than a developed country.
That’s the magisterial verdict from the head of pan-European stock exchange operator Euronext today, following the last week of market mayhem.
Euronext CEO Stephane Boujnah told France Inter radio the “Fear exists all over”, Reuters reports, adding:
“The country (United States) is unrecognisable and we are living in a transition period.
There is a certain form of mourning, because the United States that we had known for the most part as a dominant nation resembled the values and institutions of Europe and now resembles more an emerging market.”
FTSE 100 up 2% as rally gathers speed
Europe’s stock market rebound is gathering pace!
In the City, the FTSE 100 index of the largest companies listed in London is now up 2%, or 153 points, at 7852.
That lifts the FTSE 100 away from its lowest level in over a year.
But, as this chart shows, it makes little headway in the heavy losses suffered since Donald Trump announced his new tariffs last week.
The pan-European Stoxx 600 index is now up 1.75%, following gains in many Asia-Pacific markets overnight (Reminder: Japan’s Nikkei jumped 6% after Japan became the first major economy to secure priority tariff negotiations with Donald Trump.)
Joshua Mahony, analyst at Scope Markets, says:
With Trump rebuffing claims that he will delay tomorrows targeted tariffs by 90-days, traders should prepare for fresh volatility as we move through the week.
Nonetheless, US plans for a $1 trillion defence spending bill have helped lift European defence contractors and manufacturers such as Rolls-Royce and Rheinmetall.
Trump’s rejection of the EU’s offer of a zero-tariff deal on cars and some industrial products does highlight that we are likely moving towards some form of free-trade agreement.
EU urges China to help resolve tariff crisis
The head of the European Commission has called on China to help negotiate a solution to the trade war gripping the global economy.
Ursula von der Leyen spoke to China’s premier Li Qiang by phone, to discuss the state of EU-China relations.
According to the EC, von der Leyen underscored the vital importance of stability and predictability for the global economy (something the recent market crash has also highlighted).
And she said Europe and China both have a responsibility to support a strong reformed trading system, that is “free, fair and founded on a level playing field”.
A readout of the call says:
The President called for a negotiated resolution to the current situation, emphasising the need to avoid further escalation.
Von der Leyen also emphasised “China’s critical role in addressing possible trade diversion caused by tariffs”, a nod to concerns that good initially meant for the US market could be sold in Europe instead, to avoid Trump’s tariffs.
Fall in oil prices poses risk to Russian economy: central bank chief
Oil has fallen by 14% over the last week, as Donald Trump’s trade war has spooked the energy markets.
And this is causing anxiety in Moscow.
Reuters reports:
A sharp drop in global oil prices triggered by U.S. President Donald Trump’s tariffs poses a risk to the Russian economy, the state TASS news agency cited Elvira Nabiullina, the governor of Russia’s central bank, as saying on Tuesday.
She was quoted as saying that the central bank was analysing the fallout, but as saying that a technical budget rule would smooth out the consequences for the budget.
Goldman says global slowdown could drive oil below $40 per barrel
Goldman Sachs has predicted that oil prices could fall below $40 per barrel by the end of next year, if Donald Trump’s trade war hammers the global economy and suppliers keep increasing production.
In a new research note, Goldman estimate that Brent would fall just under $40 per barrel in late 2026, if there is a US recession leading to a global GDP slowdown, and if the OPEC+ group unwind all their existing production cuts regardless.
That would be the lowest price for oil since November 2020, (just before the first analysis showing the Covid-19 vaccines were effective triggered a market rally).
Goldman says:
Oil prices are unlikely to fall well below $40/bbl on a sustained basis for two reasons.
First, US shale offers an increasingly firmer floor at lower prices.
Second, a potential 2025 US recession is unlikely to be very deep, in part given a lack of major financial imbalances in the private sector.
Brent crude is trading around $64 per barrel today..
Goldman’s baseline forecast is that oil will dip to $62/barrel by December, and to $55/barrel by the end of 2026. That is based on there being a “large reduction in tariffs”, allowing the US economy avoiding a recession, and only moderate supply increases from OPEC+.
This is seen as more likely than the “more extreme and less likely scenario” of a global slowdown and a full unwind of OPEC+ cuts that would send oil below $40.
Ford: Customer confidence is a challenge in trade war
The chair of Ford UK has flagged the risks that Donald Trump’s trade war hurts consumer confidence, denting demand for new cars.
Speaking to Radio 4’s Today Programme, Lisa Brankin said that “everyone in business” is concerned by the impact of new US tariffs.
Brankin says most of what Ford sells in Europe is made in the region, so there is very little exposure to tariffs.
But “one of the challenges ahead is customer confidence”, Brankin says, adding:
What we really want to make sure is that customer demand remains strong.
“After multiple punishing sessions, stock markets appear to have started their road to recovery,” says Russ Mould, investment director at brokerage AJ Bell.
Mould explains:
“Asia led the way, including a 6% advance from the Nikkei after Japan effectively jumped to the front of the queue for tariff negotiations with Donald Trump. Reports that Japan would get priority status for talks fired up markets in hope of a resolution.
“Trump has the same end-goal for the countries on which he has imposed new tariffs. He wants to make it easier for US companies to do business overseas, for the partnering countries to buy more US goods, and for the US to get its hands on strategically important assets such as natural resources.
Investors will be pondering whether a breakthrough in tariffs could unleash “the mother of all rebound rallies”, Mould reports, before cautioning:
“Markets could stay fragile for days and weeks to come. It would only take a new sign of aggression from Trump or a trading partner fighting back hard to cause upset again. Market recoveries can quickly lose momentum if investors lose faith in a remedy to the situation that caused the original sell-off.”
The stock market rally appears to be holding firm in London.
The FTSE 100 share index is now up 103 points, or +1.35%, at 7805 points, after 30 minutes trading.
Rolls-Royce, the engineering firm that makes and services jet engines, is now the top riser in London, up 4.7%, followed by British Airways parent company, IAG.
Richard Hunter, head of markets at interactive investor, says it isn’t clear, yet, whether this is a significant “inflection point” or merely a “dead cat bounce”.
It is far too early to say whether the reduced market falls represent an inflection point, or whether they are simply a classic “dead cat bounce”.
The volatility within the US trading session in particular suggest that either is possible, especially since further tariff announcements will follow which could move sentiment in either direction.
Indeed, many investors have noted – with some exasperation – that unlike previous crises where a confluence of factors came together to cause extreme market weakness, this set of events is largely due to the actions of just one person. To some extent, global indices are at the mercy of the President, and the growing backlash which the US is beginning to experience in terms of retaliatory tariffs and increasingly aggressive rhetoric are not even near the end of the beginning.
UK medical device maker and investment firm warn of tariff impact
Worryingly, some UK companies are reporting that the new US tariffs could hurt their businesses.
Belluscura, a UK medical device company which develops oxygen enrichment technology, has this morning withdrawn its financial guidance for this year.
Belluscura, which is listed on the AIM stock market, told shareholders:
The Company is currently assessing the potential financial implications, risks and opportunities of the imposition of tariffs, in particular the 54% tariff (previously 20%) for goods imported from China, in which a significant proportion of the Company’s Portable Oxygen Concentrators, raw materials and component parts are currently manufactured.
AIM-listed specialist investor Impax has also flagged the threat of tariffs this morning, as it warned the City it expects its full year profits will be below market expectations.
Citing “the impact on global markets of an escalating trade war”, Impax told investors:
“Market conditions in the second half of FY25 remain highly uncertain.
The pan-European Stoxx 600 index has jumped by 1.4% in early trading.
Investors are waking up to a positive sight for once, says Matt Britzman, senior equity analyst at Hargreaves Lansdown, with stock indices higher across Europe.
But, he cautions:
However, this should hardly be seen as the end of the trouble, especially with President Trump showing no signs of easing his stance on perceived trade imbalances, having doubled down on China. Still, there is a glimmer of hope, as Japanese markets are up nearly 6% following news that trade talks will begin in a few days.
The sooner deals are reached, the quicker companies and investors can gain some clarity on the lay of the land.
