Stock indices in London ended Tuesday’s session in the red as US President-elect Donald Trump exacerbated investor concerns with threats of tariffs on China, Canada and Mexico.
The FTSE 100 index fell 33.07 points, 0.4%, at 8,258.61. The FTSE 250 slid 180.61 points, 0.9%, at 20,568.65, and the AIM All-Share declined 2.94 points, 0.4%, at 730.59.
The Cboe UK 100 slipped 0.4% at 830.71, the Cboe UK 250 gave back 1.0% at 18,052.73, and the Cboe Small Companies eased 0.1% to 15,663.40.
In Europe, the CAC 40 in Paris ended down 0.9%, while the DAX 40 in Frankfurt lost 0.6%.
In New York, markets were mixed. The Dow Jones Industrial Average was down 0.3% at the time of the closing bell in London. The S&P 500 was 0.3% higher, and the Nasdaq Composite climbed 0.5%.
‘The week started on a calm note with the nomination of Scott Bessent as US Treasury secretary, a hedge fund manager seen as a safe pair of hands and someone who might rein in Donald Trump‘s more aggressive ideas, such as toning down tariffs,’ AJ Bell analyst Dan Coatsworth commented.
‘Trump was clearly having none of that, given he immediately took to social media to promise bigger than expected 25% tariffs on all products supplied from Mexico and Canada into the US, and a further 10% for Chinese goods, all on day one of his new presidency. That took the market by surprise.’
Kathleen Brooks at XTB said this was ‘Trump’s most direct assertion about his tariffs plan since winning the election.’
‘It suggests that China, Canada and Mexico are in his sights. The omission of Europe from his attacks may suggest that Europe is not a top priority, however, it is early days, and there are plenty of opportunities for Trump to direct his attention to Europe down the line.’
The renewed tariff rhetoric sent car makers into reverse across the globe. Stellantis fell 5.1%, as did General Motors by 6.7%, Ford by 2.0%, Volkswagen by 2.3% and BMW by 1.2%.
After initial volatility currency markets regained their poise with modest losses for sterling and the euro.
The pound was quoted at $1.2548 late on Tuesday afternoon in London, down from $1.2559 at the time of the European equities close on Monday.
The euro stood at $1.0475, down from $1.0488. Against the yen, the dollar was trading at JP¥153.52, fading from JP¥154.37.
There was mixed news on the US economy on Tuesday with consumer confidence improving in November, albeit by slightly less than the market had hoped, while sales of new homes plunged.
The Conference Board Consumer Confidence Index increased in November to 111.7, up 2.1 points from 109.6 in October. It had been expected to rise to 112.0.
Both the Present Situation Index and the Expectations Index picked up, while average 12-month inflation expectations declined to 4.9% in November from 5.3% last month, the lowest since March 2020.
‘Consumer confidence continued to improve in November and reached the top of the range that has prevailed over the past two years,’ said Dana Peterson, chief economist at the Conference Board.
Samuel Tombs at Pantheon Macroeconomics thinks the increase in the headline likely was driven by ‘euphoria among Republicans’.
‘The index also jumped in late 2016, when Trump was elected for the first time, suggesting that the sample of households in the Conference Board survey leans more Republican than the population at large,’ he noted.
Wells Fargo said: ‘An upward monthly move on its own is encouraging, but what makes this more impressive is that it’s coming off a high base in October. That is, confidence leaped over ten points in October, and when you combine that with the November gain, confidence is now sitting at the highest level in nearly three years.’
Elsewhere, figures showed sales of new single-family houses plummeted in October.
According to the US Census Bureau, sales were at a seasonally adjusted annual rate of 610,000, 17% below the revised September rate of 738,000. A slight rise to 743,000 had been expected by economists.
Oliver Allen at Pantheon Macroeconomic said the drop should be treated with a degree of caution due to the likely impact from Hurricanes Helene and Milton.
On London’s FTSE 100 Melrose led the way, rising 7.2% after positive comments by JPMorgan.
The broker thinks the Birmingham, England-based aerospace technology firm is ‘significantly undervalued’, and sees the years up to 2030 as something of a ‘golden age’ for aero engine companies.
In a note entitled ‘The rose is ready to bloom’, JPMorgan reiterated a ’buy’ rating on Melrose and raised its share price target to 850 pence from 650p before.
Intertek gained 4.0% after a reassuring trading update.
The consumer product testing and certification services provider said it is on track to deliver a strong 2024 with improved prospects for its Consumer Products unit.
The firm said like-for-like revenue rose 6.6% on-year at constant currency between July and October, picking up speed from a 6.1% climb in the first-half of 2024.
Intertek hailed strong margin progression driven by divisional mix, pricing, operating leverage, cost controls and productivity improvements. Daily cash management discipline resulted in excellent free cash flow, it added.
Elsewhere in London, Compass Group reversed early weakness to close 1.5% higher.
In the year to September 30, pretax profit amounted to $2.06 billion, a decline of 3.8% from $2.14 billion. Revenue, however, rose 11% to $42.00 billion from $37.91 billion.
Organic revenue rose 11%, beating the company-compiled consensus prediction of 10% growth.
Barclays said the outlook ‘tone’ from Compass was positive.
‘Overall underlying performance encouraging and we see good potential for positive surprises through the year,’ analysts at the bank said.
Halfords rose 15%. The cycling and motoring products retailer said pretax profit from continuing operations in the first half to September 27 fell 23% to £17.8 million from £23.2 million a year prior. Revenue from continuing operations slipped 0.1% to £864.8 million from £865.3 million. However, Halfords said it remains ‘comfortable with consensus estimates for FY25’.
AJ Bell’s Coatsworth stressed: ‘Make no mistake, the jump in its share price does not reflect a business in perfect health. This is simply a relief rally that full-year earnings guidance hasn‘t changed.’
Severfield slumped 36%. The structural steel maker expects annual profit to be below previous expectations as a ‘recovery in some sectors has been slower than expected’.
It also noted ‘tighter prices are continuing to impact our profitability in the short-term’. In addition, some potential ‘large project’ work for the current year and the next have been delayed or cancelled.
The York, England-based structural steel maker said it swung to a pretax loss of £5.8 million during the six months that ended September 28, from a profit of £11.0 million the year before.
This was primarily due to a £20.4 million cost during the six-month period, related to a bridge remedial works programme. The firm is currently assessing further remedial costs.
Peel Hunt said this is a ‘tough update’. ‘The core dynamics remain strong, but the short-term squeeze in the UK, not helped by a further £2 million headwind from the national insurance changes; added India investment at a time when profit is frustratingly flat; and then the exceptional on top, are all likely to take their toll on the share price.’
Brent oil was quoted at $73.42 a barrel late Tuesday afternoon, little changed from $73.43 at the time of the London equities close on Monday. Gold eased to $2,629.43 an ounce from $2,634.92.
Wednesday’s global economic diary sees US GDP, durable goods orders and personal consumption expenditure figures. Australian consumer price inflation data is also due.
The local corporate calendar has half-year results from Pennon and Johnson Matthey plus full-year numbers from easyJet and Mitchells & Butlers.
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