Market report: Caution ahead of Bank of England decision as trade worries continue
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There’s caution in the air as speculation swirls about the path of interest rates ahead, and the global outlook remains cloudy with US tariffs obscuring global prospects. The FTSE 100 has opened lower as investors assess a mixed bag of corporate results and try make sense of the reshuffling world trade order. The unpredictable nature of tariffs policy makes the map hard to follow. On the face of it, China is showing resilience, with its latest data indicating exports rose 7.2% in July the fastest pace since April. But this may be partly due to orders being rushed through before various deal deadlines. However, China has been hard at work finding new trading friends and forging fresh partnerships which will have helped its position. Imports also grew by 4.1% with bolstered by the big stimulus that authorities have injected into the economy.
A combination of trade threats and the incoming wave of AI technology is drenching WPP with problems. Shares lost further ground after its results showed profits tumbled as customers grew increasingly wary about spending and signing new deals. These results were largely in line with expectations, but more disappointment has been prompted by the cut in the interim dividend and the gloomy outlook for 2025 staying intact. Although the company says it’s ‘well positioned’ to create advanced next gen AI-enhanced solutions for clients the proof will be in the pudding and investors aren’t showing much patience. There’s going to be a lot of expectation piled on the plate of Cindy Rose, the new CEO who will start next month.
Investors Stateside are largely looking on the bright side with stocks expected to build on gains later. Apple’s announcement of a $100 billion investment into its US manufacturing bases lifted sentiment around the tech giant amid hopes that it will help it avoid onerous duties, which given its huge might helped Wall Street make gains. There is also some hope that geopolitical tensions could begin to ease, given positive noises surrounding the meeting of Trump’s envoy and Vladimir Putin over Ukraine.
More broadly, investors are grasping for silver linings to the tariff turmoil and there’s an expectation that that weaker growth will lead to lower borrowing costs. Investors are primed for an interest rate cut from the Bank of England later today, given the highly sluggish nature of the economy, and the rising unemployment rate. There will be hopes that if loans become cheaper, it will help boost consumer and business confidence but there’s a long way to go. In the meantime, speculation over potential tax rises in the Autumn Budget may keep households and companies cautious, given the uncertainty over where extra burdens may land. There will be a lot of focus on the voting split on the Monetary Policy Committee, given that the views are highly unlikely to be unanimous, and the leaning of members could help indicate the speed of future rate cuts.
Recent volatility in energy prices and the repercussions of US trade policy are partly why Bank of England policymakers are set to stay so cautious. Trump’s tariffs are a blunt tool, being used to hammer out concessions the President is seeking across domestic and foreign policy. First it was to limit the flow of narcotics, and illegal immigration across borders, now they are being used as bargaining chips to force a ceasefire in Ukraine. India for now is bearing the brunt of these threats and is facing tariffs of up to 50% if it continues to buy Russian oil. The US considers the purchases to be fuelling Moscow’s war machine. Even though this strategy could lead to a mini crunch in supplies if Delhi draws on other crude sources instead, there are expectations that OPEC+ member nations will up production to meet the higher demand. There are also fresh glimmers of hope that a ceasefire could be reached after Trump described Wednesday’s meeting between his envoy and Vladimir Putin as ’very good talks.’ Nevertheless, there’s still a long way to go and very faint hope that a meaningful agreement will be reached by Friday’s deadline. Concerns over the global economic damage the ongoing trade wars the US is pursuing with nations are acting as a drag on oil prices, with Brent Crude rising slightly but still trading near five-week lows.
The UK restaurant sector is still finding it super-tough right now, but it’s not necessarily because people have newfound passion for home cooking. Consumers are showing more appetite to dine in on take out, with Deliveroo’s results showing a surge in sales and customer orders. First half numbers showed gross transactional value in the UK and Ireland at the delivery company rose 9% compared to the same period a year ago. Consumers are still showing resilience and want to treat themselves, and it’s not just in the UK. The total number of orders across its global markets was 8% higher than last year. This growing demand is what US giant DoorDash is hoping to cater to, as it prepares to take over Deliveroo. But its delivery strategy could hit a bump in the road in the UK, given a looming government consultation in the Autumn is expected to review the legal definition of workers, which could put Deliveroo’s low-cost contractor model at risk.’’