Today's markets: The tariff trade starts to appear

Things are only just getting started on tariffs. President Donald Trump said he would “rather not” impose new tariffs on China. But it’s hard to see things going any other way. Asian markets fell as Trump briefly slapped 25 per cent tariffs on Colombia and the European stock markets are down early doors Monday. The FTSE 100 shed 0.2 per cent and the Cac 0.8 per cent, but the export-heavy Dax is down 1.3 per cent 

At home, S&P notes that many firms suggested that the forthcoming hike in employers’ national insurance had resulted in cutbacks to recruitment plans, while others cited the impact of a post-Budget slump in business confidence. The S&P Global flash purchasing managers’ survey on Friday showed the net share of businesses axing staff in January and December was the highest since the global financial crisis in 2009 if you ignore the pandemic. It’s hard to be very bullish on the UK right now. To underline it, Sainsbury’s axed 3,000 jobs last week and it’s not going to be the last retailer to make cuts. The job cuts came as the latest consumer confidence index from GfK fell five points from December to -22, three points lower than January 2023.  

Expectations for personal finances in the coming year are back into negative territory, while respondents seemed just as gloomy about prospects for the wider economy, with the sub-index sliding eight points to -34. Consumers are tightening their belts as the major purchase index lost four points to -20 while the savings index rose by nine to 30. 

But when it comes to the US, traders have largely got what they wanted – a pro-business, pro-Wall Street, pro-crypto president. Stock markets saw their best start to a president’s term since 1985, and Bitcoin hit a record high above $109,000 before Trump’s inauguration and had a busy, volatile week. 

Investors like Trump 2.0. Thursday saw the S&P 500 rally 0.5 per cent to a new all-time closing high of 6,118.71 points, its first record close since 6 December. It pared gains on Friday however, shedding 0.3 per cent, but still ended up 1.7 per cent for the week, as did the Nasdaq. US stocks had been in a kind of sideways funk since the election jump – ending the year lower than they had been at the start of December, for instance. But that’s changing and the mood must be catching – even in London the FTSE 100 shrugged off all the bad news about the UK economy to post a record high. The Vanguard Total World Stock Exchange-Traded Fund, which tracks a basket of stocks around the world, rose for nine straight days, its best winning run since it began trading in 2008.  

But now we see if the plans survive contact with the enemy; central banks. The Federal Reserve will be the enemy of President Trump lest they cut rates fast. However, the Fed is expected to keep interest rates on hold this week. Chair Jerome Powell is not going to be bullied by Trump.

So the real story is not so much about policy per se, but around how the US central bank contends with the rapidly changing situation in Washington, its impact on the economy and a president demanding policymakers cut rates “immediately”. He also said he would ask Saudi Arabia and OPEC “to bring down the cost of oil.”

The data points to better inflation and continued growth but the first executive orders from the president targeting immigration could see the jobs market tighten and force up wages.

In the US, Four of the Magnificent Seven companies are due to report this week: Microsoft (MSFT), Facebook’s Meta Platforms (META) and Tesla (TSLA) on Wednesday, then Apple (AAPL) on Thursday. You can find more of our dedicated US results coverage here.

For everything else you need to know this week, click here.

By Neil Wilson, an analyst at TipRanks