UK braces for economic strain as global trade tensions escalate amid sweeping tariffs:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went down around 0.67% on 27 March 2025.  

Macro Update:  The UK economy is navigating a complex landscape marked by cautious fiscal adjustments and political reforms. Prime Minister Keir Starmer is spotlighting modern healthcare investments like the nuclear medicine department at University College Hospital to revive the NHS and curb the rise of Reform UK. Meanwhile, Finance Minister Rachel Reeves has reduced spending plans to reassure investors amid downgraded 2025 growth forecasts and higher public debt and inflation projections. The UK plans to issue £299 billion in bonds, reflecting rising borrowing costs and shifting debt strategies. The auto sector remains under pressure, with vehicle production down nearly 12% in February, while EnQuest posted an annual profit and announced its first-ever dividend, aided by stronger oil prices and debt reduction. 

Top Market Movers: Among top gainers on FTSE 100 index, Next PLC (LSE: NXT) witnessed a rise of 6.45% followed by Compass Group PLC (LSE: CPG) which gained around 1.21%. 

Commodity Update: The dollar remained near a three-week high on Thursday following U.S. President Donald Trump's announcement of new 25% tariffs on all auto imports, set to take effect on April 2. The move escalates the global trade war, raising concerns over potential inflationary pressures. Despite this, Trump stated that reciprocal tariffs on other countries will be "lenient." In commodities, gold rose 0.41% to $3,064.60, silver increased 0.29% to $34.32, and copper climbed 0.40% to $9,973.30. Brent crude saw a slight gain of 0.10%, reaching $73.84 per barrel, following a previous session’s strong surge. 

Our Stance: President Donald Trump's announcement of a 25% tariff on all imported vehicles and auto parts, effective April 3, has led to a significant downturn in global automaker stocks and heightened fears of an escalating trade war. Major manufacturers, including Volkswagen, BMW, Mercedes-Benz, Porsche, and Continental, experienced a combined market value loss of €4.5 billion ($4.84 billion) as investors reacted to the anticipated increase in costs and operational complexities. International leaders have condemned the tariffs, with European Commission President Ursula von der Leyen and Canadian Prime Minister Mark Carney criticizing the decision and considering retaliatory measures. Given the interconnected nature of global supply chains, this policy risks not only destabilizing international trade relations but also imposing substantial economic burdens on consumers and manufacturers worldwide. 

FTSE 100 

The FTSE 100 is trading at 8,627.11 on Thursday, showing signs of bearish momentum with a bearish candlestick pattern. The index remains below both the 21-period and 50-period Simple Moving Averages (SMAs), suggesting potential short-term downward pressure. The convergence of these SMAs signals a cautious outlook, with future price movements being key to understanding the market's direction. However, the index is still holding above a significant horizontal support level, hinting at some positive sentiment after recent declines. The Relative Strength Index (RSI) stands at 47.02, indicating moderate bearishness with room for further weakness. Short-term traders should monitor key support levels closely, as momentum shifts in the coming sessions will be critical to determining whether the rally continues or a pullback occurs. 

Data Source - EODHD/Others