The FTSE 100 joined the global equity market rally in very early trade on Monday, but the gains faded as investors looked to the start of earnings season and the return of trade-tariff concerns.
London’s leading index was fighting to keep its head above water at the time of writing as early gains evaporated.
Investors cheered a social media post by Trump over the weekend that suggested threats of 100% tariffs on China were just another negotiating tactic. However, concerns set back in as the session progressed and traders banked short-term gains.
“Just as it looked as if the US and China were making baby steps to repair their relationship, Donald Trump throws a spanner in the works,” said Russ Mould, investment director at AJ Bell.
“A new threat of high tariffs on Chinese goods coming into the US spooked investors in the East, with Asian markets showing a sea of red, following a similarly bad session for Wall Street last Friday.”
Although the FTSE 100 struggled to stay positive on the session, there were bumper gains for precious metals miner Fresnillo and Endeavour as gold and silver hit all-time highs.
“This new-found nervousness pushed investors back into gold, putting the shine back on the precious metal and reigniting the rally in gold miners,” Mould said.
“Fresnillo and Endeavour Mining topped the FTSE 100’s list of risers, representing a rapid U-turn from last week’s bout of profit taking.”
Fresnillion soared 7% as Endeavour rose 6%.
The S&P 500 cash market was set to open over 1% as the TACO trade looked to play out once more with traders betting 100% tariffs on China will never materialise.
Analysts noted that while attention was on Trump’s tariffs on Monday, the imminent catalyst of earnings season is likely to set the market narrative this week.
“With volatility back in the market, the initial flurry of third quarter earnings will be watched more closely than ever,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“First up, it’s the US banks, with Goldman Sachs, Citigroup, JP morgan and Wells Fargo all reporting tomorrow. A resilient economy and surge in investment banking activities bodes well, but valuations are riding high. Given the nervy backdrop, markets are likely to be sensitive to surprises in either direction.”
In London, UK banks were headline news again on Monday as Lloyds confirmed it would set aside another £800m to address the motor finance scandal. Lloyds shares rose 1% suggesting this was a win in investors’ eyes.
“A rising share price represents two things: one, some clarity on Lloyds’ potential exposure; and two, hope that Lloyds might successfully get the regulator to tweak its proposal in its favour,” Russ Mould said.
Babcock was the top faller with a 2% loss as the geopolitical outlook improved significantly with the return of hostages from Gaza and Trump’s declaration that the war is now over.
BAE Systems and Rolls-Royce were also weaker.