The FTSE 100 went into reverse on Tuesday as Donald Trump trounced any hopes of softer tariffs by targeting China, Mexico and Canada with threats of tariffs on social media.
The mild optimism created by Trump’s selection of hedge fund manager Scott Bessent as his Treasury secretary pick yesterday was removed from markets on Tuesday following Trump’s social media posts, and the FTSE 100 dipped 0.2% as a result.
London’s leading index had started the session deep in the red but recovered as the session progressed.
Signs that Trump could be easing back on his election campaign rhetoric went a long way to lifting the mood in European stocks earlier this week, only for them to be dashed by Trump singling out Mexico and Canada for tariffs and reigniting fears of damaging trade wars. There will be concerns that Trump’s approach to Europe and the UK may be detrimental to the continent as a whole.
“Talk about swinging from one extreme to the other. The week started on a calm note with the nomination of Scott Bessent as US Treasury secretary, a hedge fund manager seen as a safe pair of hands and someone who might rein in Donald Trump’s more aggressive ideas, such as toning down tariffs,” said Dan Coatsworth, investment analyst at AJ Bell.
“Trump was clearly having none of that, given he immediately took to social media to promise bigger than expected 25% tariffs on all products supplied from Mexico and Canada into the US, and a further 10% for Chinese goods, all on day one of his new presidency. That took the market by surprise, driving up the dollar and prompting a sell-off in the Mexican peso and Canadian dollar. The US dollar index rose by 0.2% to 107.06.”
Despite London’s flagship index giving up ground on Tuesday, several positive corporate stores helped offset the broader selling.
Compass Group share rose 2.5% on Tuesday after the group announced stellar full-year results driven by 16% underlying revenue growth and a focus on core markets.
“Contract caterer Compass Group has dished out results in line with twice upgraded guidance. Organic growth of 10.6% came from the existing customer base and a 4.3% uplift in new business, which encouragingly picked up over the second half. Compass feeds hungry mouths in global venues, from offices to student digs and football stadiums, and across these demand for outsourcing is growing, as customers seek to manage cost inflation and a labyrinth of red tape and regulation,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“That’s creating the growth opportunity, and Compass isn’t wasting it, translating the top line uplift into additional free cash flow which was up 18.7% to $2.6bn and improved operating margins. That’s providing the ingredients to snap up acquisition opportunities where it trebled expenditure to $1.3bn and a step up in dividend payments. “
After being added to JP Morgan’s ‘Positive Catalyst Watch,’ Melrose was the top gainer, with a 6% increase.
Threats of inflationary pressure from tariffs hit consumer-facing stocks heavily. Marks & Spencer fell 3%, while Kingfisher lost another 2.5%.