Trump's Tariff Hike Sparks Trade Tensions, Boosts Steel Stocks Amid Market Optimism:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.02% on 11 February 2025.  

Macro Update:  British employers have emerged as the most transparent in Europe regarding salary disclosures, with 71% of job advertisements including pay details, a significant rise from 48% in 2019, and far ahead of Germany’s 16%, according to Indeed's latest research. BP reported a $1.17 billion quarterly profit, the lowest in four years and below expectations, as energy prices stabilized and global oil demand weakened. This follows a trend among oil majors experiencing declining earnings after two years of record profits. Meanwhile, Bank of England policymaker Catherine Mann cautioned that companies may struggle to raise prices in 2025 due to job losses and weakened consumer spending. Inflation remains nearly double the 2% target, posing ongoing economic challenges. British retailers started the year on a positive note, with January retail spending rising 2.6% year-over-year, significantly higher than the 12-month average of 0.8%. Separately, Barclays reported a 1.9% increase in consumer spending, the highest since March, but noted a decline in consumer sentiment, signaling caution among households despite increased expenditure. 

Top Market Movers: Among top gainers on FTSE 100 index, Intertek Group PLC (LSE: ITRK) witnessed a rise of 3.04% followed by Diploma PLC (LSE: DPLM) which gained around 1.87%. 

Commodity Update: Gold prices surged to a record high of $2,949.30, gaining 0.47% as investors reacted to U.S. President Donald Trump's decision to raise tariffs on metal imports. The dollar remained firm, bolstered by this move, contributing to market unease over escalating trade tensions. Trump increased steel and aluminium tariffs to 25%, positively impacting U.S. steelmaker stocks. A 10% tariff on Chinese imports took effect earlier, and China retaliated with duties on U.S. energy and goods. Meanwhile, commodities saw mixed results: silver dropped 0.43% to $32.35, copper fell 0.66% to $9,405.20, and Brent oil climbed 0.40% to $76.14. 

Our Stance: U.S. President Donald Trump’s decision to raise tariffs on steel and aluminum imports to a flat 25% without exemptions marks a significant shift in trade policy, aiming to bolster domestic industries but potentially igniting broader trade tensions. The move, set to take effect on March 4, removes prior carve-outs for key trading partners like Canada, Mexico, Brazil, and South Korea, potentially straining diplomatic and economic relations. Meanwhile, a U.S. judge has maintained a block on Trump’s federal employee buyout plan, granting a temporary victory to labor unions opposing the measure. This legal uncertainty adds to the growing challenges faced by the administration in pushing forward workforce restructuring initiatives. On Wall Street, markets responded positively, with AI-related stocks, particularly Nvidia, driving gains, while steelmakers surged in response to the tariff news. While the tariff hike may offer short-term relief to U.S. metal producers, it raises concerns about retaliatory measures from affected nations, which could disrupt supply chains and escalate global trade disputes. 

FTSE 100 

The FTSE 100 finished at 8,767.80 on Monday, gain by 0.77%, and formed a bullish candlestick pattern, signalling positive market sentiment. The index remains above its 21-period Simple Moving Average (SMA), suggesting a favourable short-term outlook. Furthermore, the 50-period SMA provides solid support, reinforcing the potential for continued upward momentum. With the Relative Strength Index (RSI) at 71.08, the index shows healthy bullish strength without reaching overbought levels, indicating there is still room for further gains. These technical indicators indicate a positive trend, suggesting that the FTSE 100 is poised for further growth. As such, the index remains an appealing option for short-term investors seeking potential opportunities. On the weekly chart, the FTSE 100 gained 0.31%, closing at 8,700.53. The index remains well above the 50-period SMA at 8,186.40, with support at 8,206.78. Resistance is at 8,800, and a breakout above this level could push the index toward 8,900. However, a drop below 8,020 could signal downside risk. Investors should monitor these levels for insight into future price movements. 

Data Source - Refinitiv