The FTSE 100 fell on Monday following a dramatic weekend for global trade as Donald Trump made outlandish tariff threats against countries, including the UK, that opposed the US takeover of Greenland.
London’s leading index was down 0.5% at at 10,181 at the time of writing, having found support around 10,170.
“UK and European markets are tracking Asian markets downwards this morning after an extraordinary weekend of economic sabre-rattling over Greenland. Donald Trump’s given eight countries, including three of the World’s largest economies, until 1 February to clear the path for the US acquisition of Greenland, or face a 10% tariff, which could rise to 25% in time,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“The European Union has hit back with a proposed €93 billion tariff package and has dusted off its never-before-used ACI (anti-coercion instrument), which would further limit US companies’ access to major contracts across the single market.”
Although the FTSE 100 was lower on Monday, it still outperformed its European peers, as gold miners surged, helping offset losses elsewhere.
The German DAX fell 1.4%, while the French CAC fell 1.5%. These are big losses, but look contained compared to Trump’s Liberation Day tariffs.
Investors have become conditioned to Trump’s outbursts and know that he doesn’t always follow through on his social media posts. Today’s selling may prove to be a knee-jerk reaction that is quickly bought into.
‘Trump’s playbook over numerous issues is to drop a shocking opening gambit, only to de-escalate, which has led critics to coin the “TACO” – Trump Always Chickens Out – put-down,” said Jason Hollands, managing director of Bestinvest.
“While a pull back from the brink cannot be relied upon, it remains to be seen whether the use of tariffs in this way is even legal under US law, or indeed whether such a position will carry the support of Republicans in Congress.”
The FTSE 100’s outperformance of Europe can be attributed to its weighting towards defensive names that tend to perform better when the rest of the market is in panic mode.
“Gold has hit a new record high of $4,689 per ounce as investors hide in an asset with supposed haven qualities,” explained Dan Coatsworth, head of markets at AJ Bell.
“Defence stocks continue to be in vogue as investors take the view heightened geopolitical tensions create a stronger earnings backdrop for military and security specialists. Utility stocks were in demand as investors sought to park some of their money in a sector that should tick over whether everything is good or bad in the world.”
Precious metals miners Fresnillo and Endeavour Mining surged higher, with Fresnillo adding 5%.
BAE Systems rose 1.2%, and Babcock ticked 1% higher as investors sought out exposure to higher defence spending by global governments.
Traditional ‘safer’ sectors such as telecoms, consumer staples and utilities also had a decent session. Severn Trent rose 1.8%.
Diploma was the FTSE 100’s top loser, falling 2.9%, as other names exposed to global trade such as Diageo, Burberry, and Spirax Group all lost more than 2%.