The FTSE 100 fell back from record highs on Tuesday as 25% tariffs on Canada and Mexico came into force, and Donald Trump announced that military aid for Ukraine would be paused.
- FTSE 100 retreats from record highs
- Canada and Mexico hit by 25% tariffs
- China tariffs doubled to 20%
- Ashtead profit falls
London’s leading index was down 0.4% at the time of writing after hitting record highs yesterday. On Monday, the rally was fueled by defence-related stocks, which didn’t provide the same level of support on Tuesday.
“The FTSE 100 has retreated from record highs this morning, taking direction from Wall Street where stocks had their worst day of the year so far,” said Derren Nathan, head of equity research, Hargreaves Lansdown
“The time for talking on tariffs is up for now with Donald Trump imposing a blanket 25% border tax on all imports from neighbouring Canada and Mexico. Canada’s hit back already with a 25% charge on $30bn of US imports with more wide-ranging reciprocal action planned for the end of the month.”
In addition to tariffs on Canada and Mexico, Trump doubled tariffs on China to 20%.
There were hopes that Donald Trump was using tariffs as a negotiating tactic, and the market reaction in the US overnight reflects the realisation that the US President is prepared to implement globally damaging trade policies to stop countries ‘stealing’ their money, as Trump puts it.
“Investors were desperately hoping that Trump would delay tariffs on Canada, Mexico and China at the eleventh hour, yet the US president has stuck to his guns and brought them into power. Naturally, the recipients have started to retaliate and that has raised the prospect of a full-blown trade war,” said Russ Mould, investment director at AJ Bell.
“Investors knew there was a real chance this would happen but quietly hoped it would all go away and simply be Trump having a bark worse than his bite. Not this time around.”
The FTSE 100’s weighting towards defence stocks helped the index outperform yesterday, but general pessimism around global trade dragged the index lower on Tuesday. Natural resource companies were hit, with BP falling over 3% and Glencore taking a 2.5% knock.
Ashtead was the top faller after announcing profit fell 7.5% in the three months to January 31st.
“If Ashtead is a barometer for the health of the US economy, its results imply that the country is coming down with a cold. Third quarter revenue and profit went into reverse as local construction markets felt the pain of interest rates staying higher for longer,” Russ Mould said.
“Ashtead has historically navigated downturns by cutting back on investments in new equipment and making sure its operations are running smoothly so it can go into attack mode when market conditions recover.
“Investors are more concerned about the here and now, hence why the shares continued to fall.”
Fresnillo was among the top risers after announcing a special dividend on the back of a doubling of EBITDA.