The FTSE 100 was firmly higher on Tuesday as investors buckled up for Donald Trump’s ‘Liberation Day’ of economically damaging trade tariffs set to come into force tomorrow.
London’s leading index was 0.6% higher at the time of writing.
US indices reversed early losses yesterday to finish the session overnight in positive territory, which boosted European equities on Tuesday as bargain hunters stepped into beaten-down names across European indices.
“The fact the S&P 500 ended ahead on Monday, and chunks of Asia and Europe were in positive territory on Tuesday, goes to show that investors have indeed taken time to reflect on the state of events and moved out of panic mood,” said Russ Mould, investment director at AJ Bell.
“The FTSE 100 bounced back with aplomb, rising 0.6% thanks to broad-based strength in the index. While pharma, banks and miners led the way, the fact only four FTSE 100 stocks were in negative territory in early trading suggests investors were fired up and ready to go.”
How equities will react to the confirmation of tariffs on some of America’s closest trading partners tomorrow is anyone’s guess.
There is a school of thought that the recent sell-off in global equities has priced in the impact of tariffs. On the other hand, there’s the complacency argument that the market is properly pricing the impact of tariffs because it still believes tariffs are being used as a negotiating tactic and won’t be around for long.
Housebuilding shares rose on the latest house price data showing the average UK house price rose 3.9% over the past year, despite remaining unchanged on a month-on-month basis.
“UK house prices rose nearly 4% from last year, according to the Nationwide House Price Index, though growth paused month-to-month and there could be softness to come as buyers accelerated purchases to sidestep expected tax hikes,” explained Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Despite this short-term slowdown, conditions look promising for a rebound as the year progresses, driven by a strong job market, increasing take-home pay, and the potential for cheaper loans if interest rates come down.”
Persimmon rose 1.3% and Taylor Wimpey added 0.6%.
Banks were higher as investors awaited the next step in the legalities related to the motor financing scandal. Should the courts rule against the banks, they could be on the hook for billions in redress.
Lloyds shares were 0.7% higher despite it being one of the banks most heavily exposed to potential redress.
“It’s crunch time for UK banks as the supreme court starts hearings this week, looking into motor finance mis-selling and whether car dealers and lenders unlawfully hid commissions from consumers,” Matt Britzman said.
“There’s a lot on the line, especially Lloyds which was the most exposed of the major UK banks. It’ll likely be a few months before the outcome is known, but some estimates suggest it could cost Lloyds around £6bn if it’s forced to refund all motor finance commissions.”
Kingfisher was the top riser, continuing its recovery from a recent selloff. Shares were 2.9% higher.