The FTSE 100 jumped again on Tuesday on optimism that the UK would be in the running to strike a favourable trade deal with the United States.
London’s leading index was 0.9% higher at 8,210 at the time of writing and is now over 2% higher on the year compared to a 8% decline for the S&P 500. The German DAX is 6% higher for the year.
Investors tiptoed back into the market after a relatively benign Monday for global equities. There were no major fresh developments in the global trade war yesterday, and traders were happy to mull over electronics exemptions announced over the weekend.
However, analysts cautioned that the lull should be treated with caution, with the next development in the trade likely to be just around the corner.
“The eye of a hurricane is said to be unnaturally still, characterised by calmer conditions, and bright skies. The eye is also the most dangerous part of a storm, often lulling people into a false sense of security, only to then be caught off guard by violent winds, and tempestuous conditions, once the eye passes,” said Michael Brown, Senior Research Strategist at Pepperstone.
“Don’t worry, this isn’t a weather report, though I feel the analogy is a rather apt summation of where markets stood as the new, holiday-shortened, trading week got underway. News on the tariff front was eerily lacking, despite an hour or so of idle waffling from President Trump in the Oval Office.”
Despite ongoing uncertainty resulting from Trump’s tariffs, UK investors were happy to focus on UK-centric news flow and stepped back in to pick up FTSE 100 bargains on Tuesday.
“The FTSE 100 made a strong start to proceedings on Tuesday after comments from US Vice President JD Vance that there’s a ‘good chance’ of a UK-US trade deal,” said AJ Bell investment director Russ Mould.
“Suggestions there might also be a softening of tariffs on the motoring sector also helped lift the mood – with names which have sold off most heavily on US trade policy like Rolls-Royce bouncing back. Housebuilders were in demand as slowing UK wage growth raised hopes for a cut to interest rates, which would in turn boost the affordability of mortgages.”
Taylor Wimpey and Barratt Redrow were both over 2% higher at the time of writing.
3i Group was the top riser after analysts at Citigroup bumped up its price target to 4,850p from 4,670p. 3i shares were 4% higher at 4,060p at the time of writing.
Silver miner Fresnillo was among the gainers as investors bought into the stock ahead of the ex-dividend date for an ordinary dividend of 26.1c per share and a one-off special dividend of 41.8c per share. The combined dividend would yield investors around 6%.
At the time of writing, 95 of the FTSE 100’s constituents were gaining, with just 5 in the red.