On a Tuesday afternoon, the FTSE 100 (^FTSE) seemed uncertain, contrasting with declining European and American stocks. This occurred simultaneously with the declaration of a new trade agreement between the United Kingdom and India. The agreement eliminates a large proportion of export levies on vehicles and whisky and lessens taxes on sectors such as aerospace, electronics and various food items.
This adjustment comes at an interesting time, just as earning season begins and important central bank gatherings are on the horizon. The two-day rate-setting session initiated by the U.S. Federal Reserve takes place today, while the Bank of England’s rate architects are due to convene on Thursday. In addition to this, U.S. president Trump’s erratic approach to trade tariffs is drawing attention.
President Trump announced recently his intention to introduce a 100% tariff on movies originating outside the U.S. An unexpected pronouncement that has many speculating about his broader tariff strategy. Amidst these global adjustments, London’s supreme index demonstrated growth by the time trading closed in the city.
Elsewhere, Germany’s DAX (^GDAXI) lost 0.5% of its value following Monday’s rally. This reduction occurred in the wake of Friedrich Merz’s two-round struggle to secure his position as chancellor. The first round of votes yielded inadequate support for Merz, however, a second round offered him the bare minimum required to seize power.
Similar trends could be observed in France, as the CAC 40 (^FCHI) experienced a 0.4% decrease. Broader European trends are represented in the pan-European STOXX 600 (^STOXX), which saw a drop of 0.2% in its value. U.S. open stock also saw a decline, a shift many are attributing to anticipation vis-a-vis the Federal Reserve’s upcoming decisions.
Among American indexes, the S&P 500 (^GSPC) declined roughly 0.4%, while the Dow Jones Industrial Average (^DJI) followed suit. The Nasdaq Composite (^IXIC), dense with technology stocks, saw a more significant fall of around 0.6%. While the central bank is assumed to maintain the current rates, financial experts will watch Jerome Powell, Chair of the Federal Reserve, closely for any nuanced comments on the economic climate.
Meanwhile, the Bank of England has postponed its resolution on interest rates due to the commemoration of the 80th anniversary of VE Day. The decision will be unveiled two minutes past noon, straying from their standard practice of a noon announcement. A significant development from Germany is the victory of Friedrich Merz in the chancellor election after a unexpectedly close voting process.
Despite his initial shortfall, Merz managed to secure sufficient votes in the second round of voting. As voting is conducted confidentially in the German parliament, it remains unclear as to why he lacked support in the first round. In the UK, a potential interest rate cut by the Bank of England is highly anticipated.
This week, there’s a forecasted quarter-point reduction down to 4.25%. Following this, further cuts may be hinted at due to escalating concerns regarding the effects of U.S. President Trump’s worldwide trade war on the UK economy, particularly in relation to job stability and economic growth.
Also, in recent UK news, a trade agreement with India, a rapidly expanding economy of 1.4 billion, has been confirmed. The agreement is expected to mitigate the economic impact caused by Trump’s prolonged trade war, providing a significant relief to industries most affected by the imposed tariffs.
Brent crude futures followed a positive trend, rising by 2.7% to settle at $61.85 a barrel. West Texas Intermediate also went up by 2.7%, reaching $58.71 per barrel. Meanwhile, Barclays updated its forecast for Brent crude, bringing down its 2025 estimate by $4 to $70 per barrel, and cutting its 2026 estimate to $62 per barrel.
Goldman Sachs also revised its oil price forecast, reducing its predictions by $2 to $3 per barrel. Not all news in the economic world was positive, however, as Ford (F) announced potential losses in its operating profits. In its Q1 results, released on Monday, the company anticipated a $1.5 billion deduction owing to Trump’s tariffs.
Elsewhere in the oil industry, BP (BP.L) is said to be under the analytical eye of Shell (SHEL.L) for a potential acquisition. These considerations are at a very early stage, but if a successful bid emerges, Shell could capitalize on BP’s reduced share value, which has plunged more than 30% in the past year.
Finally, there was positive news for Gold (GC=F), as its prices climbed to a two-week peak on Tuesday. The metal, considered a safe investment amid market volatility, saw increased interest due to renewed apprehensions about President Trump’s ever-changing tariff plans.
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