Markets Unsettled as Trump’s Tariffs Stir Trade Tensions, UK Inflation Ease:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went down around 0.13% on 04 February 2025.  

Macro Update:  British consumers experienced some financial relief in January as increased supermarket promotions helped bring grocery inflation down to 3.3% from 3.7%, marking a shift after four consecutive months of rising prices. Sales grew by 4.3% year-on-year, with promotions totaling £274 million, the highest level in January since 2021, accounting for 27.2% of sales. Meanwhile, global markets reacted to U.S. President Donald Trump’s proposed import tariffs, prompting investors to increase bets on Bank of England interest rate cuts. This led to a drop in short-term government bond yields to a three-month low, with interest rate futures indicating potential reductions of up to 81 basis points by December. In Australia, Rio Tinto initiated ship evacuations from two Western ports as Tropical Cyclones Taliah and Vince threatened infrastructure, further complicating recovery efforts from previous storm damage. Additionally, Thames Water sought court approval for a £3 billion debt lifeline, warning that without financial intervention, it could run out of cash by March, raising concerns about potential nationalization. 

Top Market Movers: Among top gainers on FTSE 100 index, Entain PLC (LSE: ENT) witnessed a rise of 7.94% followed by J Sainsbury PLC (LSE: SBRY) which gained around 1.74%. 

Commodity Update: The U.S. dollar and oil declined on Tuesday following President Donald Trump's decision to pause new tariffs on Mexico for a month. This decision came after Mexico agreed to send 10,000 National Guard members to its northern border to curb illegal drug flows. The U.S. and Mexico will use the next month to negotiate further. In commodities, gold fell 0.05% to $2,855.40, silver rose 0.05% to $32.54, and copper advanced 0.46% to $9,172.50. Brent crude dropped 0.50% to $75.55. Investors are awaiting U.S. Non-Farm Payroll data for clearer rate direction. 

Our Stance: Global markets remained volatile as investors reacted to U.S. President Donald Trump's tariff decisions, with major stock indexes closing lower on Monday before partly recovering. Trump’s initial announcement of 25% tariffs on imports from Mexico and Canada and 10% on China sparked a rush to safe-haven assets, but he later paused tariffs on Mexico for a month after the country agreed to deploy 10,000 National Guard troops to curb drug trafficking. European shares fell on Tuesday, driven by losses in the automobile and telecom sectors amid escalating trade war fears between the U.S. and China. The trade dispute between the U.S. and China further intensified as China launched an investigation into Google and imposed retaliatory tariffs on American goods following Trump’s latest levies. With Trump expected to hold talks with Chinese President Xi Jinping soon, uncertainty continues to weigh on global markets, keeping investors on edge over potential economic disruptions.. 

FTSE 100 

The FTSE 100 closed at 8,583.56 on Monday, down by 1.04%, forming a bearish candlestick pattern. However, the index remains above the 21-period Simple Moving Average (SMA), indicating a positive short-term outlook. With the 50-period SMA acting as strong support, the potential for upward momentum remains intact. The Relative Strength Index (RSI) is at 63.26, signalling healthy bullish momentum without entering overbought territory, leaving room for further gains. These technical factors suggest continued growth, making the FTSE 100 an attractive option for short-term investors. On the weekly chart, the FTSE 100 gained 2.02%, closing at 8,673.96. The index remains well above the 50-period SMA at 8,186.40, with support at 8,277. Resistance is at 8,700, and a breakout above this level could push the index toward 8,800. However, a drop below 8,020 could signal downside risk. Investors should monitor these levels for insight into future price movements. 

Data Source - Refinitiv