The FTSE 100 soared on Thursday after Donald Trump announced a 90-day tariff pause for all countries that didn’t retaliate against the US import tariffs announced last week.
London’s leading index surged by over 6% in the early minutes of trading, before falling back.
“The White House has finally seen some sense and given a whole host of countries a 90 day pause, with reciprocal tariffs immediately lowered to 10%, while isolating China in a tense battle,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Was this Trump caving to pressure or his master plan all along? Who knows, but markets ripped on the news with the S&P 500 posting its 9th best day in history.”
The S&P 500 closed 9.5% higher – its best one-day performance since the financial crisis.
Analysts have pointed out that while yesterday’s US equity market rally was more than welcome, the catalyst behind it further underlines the disconnect between what Donald Trump says and what he does. This will be a cause for concern long after markets close this evening.
“It seems that, contrary to many public protestations that he doesn’t pay attention to equity markets, he does. Despite multiple assertions that ‘reciprocal’ tariffs weren’t a negotiating measure, they were,” explained Michael Brown Senior Research Strategist at Pepperstone.
Although the equity markets would have played some part in Trump’s U-turn, it was the bond markets that probably forced his hand. Yesterday, risks of funding issues were starting to creep in as bond yields soared and the financial system showed signs of strain.
Nonetheless, anyone buying stocks earlier this week has been handsomely rewarded and will care little for Trump’s motivations to announce a 90-day pause on tariffs.
Those buying Barclays near 220p this week will be delighted to see the bank rebound 12% on Thursday, shooting to the top of the FTSE 100 leaderboard.
Melrose, St James’s Place and Intermedite Capital Group were not too far behind Barclays with gains in excess of 10%.
More than 40 FTSE 100 constituents were more than 5% higher on the day at the time of writing.
Tesco, Sainsbury’s and Marks & Spencer were the top fallers and the only stocks in negative territory.
Their declines can, in part, be attributed to the safe-haven status they earned during the recent sell-off and investors selling them down to focus on bargains elsewhere on Thursday. However, the leading reason for the sharp declines is concern about a profit warning Tesco issued on Thursday, pointing to increased competition that will impact the entire sector.
“Despite holding the largest share of the grocery market for over a decade, Tesco has issued guidance for lower profit next year than those just reported,” said Adam Vettese, market analyst at investment platform eToro.
“This reflects how seriously they are taking the threat of a supermarket price war following Asda’s move to sacrifice profits for a discounting campaign.”
Tesco shares were down 7% dragging Sainsbury’s 5% lower.