Market report: Footsie shows resilience amid tariff threats, while bitcoin races to a fresh high
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “A fresh tariff war of words erupted over the weekend and it’s blown a cloud of pessimism over European markets but London’s FTSE 100 remains resilient. Investors are lurching from hopes that Trump’s threats are just a big negotiating tactic, to fears that his impatience will turn more vengeful and big hikes will come into force in August. He has vowed to slap 30% tariffs on the EU and it’s sending a wave of apprehension through the DAX and the CAC 40.
There is speculation that a coalition of defiance could be forming, with nations facing the most onerous tariffs threats, ganging up against the US, which could intensify the trade turmoil. China has already been hard at work finding new trading friends and forging fresh partnerships. This strategy has helped its exports, which increased 5.8% year-on-year in June, above expectations. Even though exports to the US fell 16.1%, shipments to Japan increased by 6.6%, and the EU by 7.6%. China’s resilience in the face of tariff adversity is coming to the fore, helped by the big stimulus that authorities have injected into the economy.
The FTSE 10 is trading slightly higher, despite the more unpredictable chapter in the tariff story unfolding. The blue-chip index is still hovering close to its record highs, with more optimism about the London market sloshing around. The UK is one of the few nations with a trade deal with the US, and while still painful, the 10% tariff rate agreed, looks rosier through the spectacles of the current turmoil. There remain concerns that there could be more ‘wealth taxes’ imposed by the government to try to ease its painful fiscal predicament, and this could weigh on pockets of consumer spending ahead. However, its being offset by hopes for faster interest rate cuts this year. The Bank of England governor, Andrew Baily said policymakers were watching out for the effects on the labour market of the increase in employer National Insurance contributions. There is an indication it may be helping to stem hot wage increases, which have been a cause for concern for the Bank. A weakening labour market and a slowing economy could give decision makers the confidence to reduce borrowing costs more rapidly.
Bitcoin enthusiasts are benefitting from this upswing in uncertainty about tariffs, and shaky government finances, amid a fresh show of support for the sector. The crypto currency has raced to a new record, with enthusiasm at fever pitch. It’s heading towards $123,000, jumping more than 2% in a few hours and is up by more than 10% in a week. Trump has been a cheerleader for crypto, and his promises look set to be incorporated into law. Trump has been a cheerleader for crypto, and his promises look set to be incorporated into law. Legislation will be debated in Congress to provide a regulatory framework for the market. It could encourage more companies and financial institutions to hold bitcoin and other coins. One of the other triggers for the flood of money pumping into Bitcoin is Elon Musk’s pledge to set up an America Party. His public fight with the President over his so called ‘Big Beautiful Bill’ has shone a light onto the US debt mountain. Speculators are piling into crypto amid concerns about an unsustainable US fiscal position and the dented reputation of the dollar, which has fallen 11% against a basket of currencies this year.
Oil prices have climbed high, amid expectations that Russia could be hit with a raft of higher sanctions limiting its ability to sell on global markets. Brent Crude breached the $70 a barrel mark, as rumours did the rounds that fresh restrictions may be included in major statement on Russia that Trump is preparing to make later today. The European Union is also expected to agree on another package of sanctions on Moscow. Nevertheless, with trade concerns still front and centre, they are keeping a lid on prices to some extent, given concerns that tariffs will hit growth and energy demand around the world.’’