The FTSE 100 showed remarkable resilience yesterday in the initial reaction to Donald Trump’s trade tariffs, outperforming most European and US indices.
However, this resilience disappeared on Friday as FTSE 100 banking shares crumbled, sending the index sharply lower. Barclays, HSBC, Lloyds, Standard Chartered and NatWest all fell more than 5%.
Standard Chartered is the FTSE 100’s biggest casualty of the tariffs, losing around 17% of its value over the past week.
There were also losses for mining stocks and oil majors on Friday, which culminated in sending London’s leading index down by more than 3%.
Selling picked up after reports that China would implement 34% retaliatory tariffs on US goods and trade restrictions on rare earths. Investors will fear that more countries follow suit and take retaliatory measures. Some European leaders have been vocal in their support for hitting back at Trump.
Meanwhile, Donald Trump has said he’s open to negotiation. Equity bulls will hope the bookmaker-style charts of tariffs revealed on Wednesday were a PR stunt for his core voter base and an extreme negotiating tactic that will spur favourable trade deals.
Whatever the underlying motives are, markets are taking the tariffs on face value after a period of complacency, and the reaction in global equities has been cataclysmic.
Some economists are now predicting a US recession.
“With markets having suffered their worst week in five years, investors were hiding under their duvet on Friday hoping the pain would go away,” said Russ Mould, investment director at AJ Bell.
“Unfortunately, the relentless selling continued, with markets falling across Asia and Europe and futures prices implying the US will do the same when trading begins later on.
“There are so many moving parts that getting your head around the situation isn’t easy. With countless sectors set to be hit by tariffs, it’s difficult to know where to begin to comprehend the situation.”
US indices had their worst trading since the pandemic yesterday, and the selling showed little sign of easing. S&P 500 futures were 1% weaker in the premarket.
Legendary investor Bill Gross has warned against buying the dip. It appears, for today at least, investors are taking heed.