The FTSE 100 started Tuesday’s session on the back foot despite a delay to Trump’s tariffs on Mexico and Canada.

The UK’s flagship index fell over 0.5% in early trade but recovered as the session progressed to trade down by 0.1% at the time of writing.

Last-minute delays to tariffs on Canada and Mexico will be a minor relief for markets, but Trump’s actions over the past three days will leave traders wary of his unpredictability, which will ultimately weigh on risk assets.

Trump’s approach may just be viewed as unconventional negotiating tactics, but the disruption and fear they cause have the potential to be inflationary and cause long-term bitterness among close allies. 

The S&P 500 had rallied off the lows steadily during yesterday’s session. However, the news of retaliation by China resulted in a softening of futures in the European session. 

“There are more twists and turns to the tariff situation than a theme park rollercoaster,” said Russ Mould, investment director at AJ Bell. 

“One minute we’ve got eleventh-hour deals to temporarily halt tariffs on Mexico and Canada, and the next we’ve got China flexing its muscles and showing it isn’t a pushover.

“China has hit back at tariffs imposed on its goods imported into the US by saying it would retaliate with its own tariffs. It’s like two cats screaming at each other in the street, tails puffed up and fangs on display.”

Yesterday, the FTSE 100 fell in a broad sell-off, impacting most companies. However, on Tuesday, there was more targeted selling of UK-listed companies directly impacted by the escalating trade war.

BP and Shell both dropped after China retaliated against Trump with a 10% tariff on US crude oil, which sent prices down and knocked the FTSE 100 oil majors.

Diageo was lower despite reporting reasonable half-year results. Organic net sales grew 1% in the half-year period, which will be welcome news to investors after a string of disappointing earnings releases.

The threat of tariffs was the major factor weighing on Diageo shares on Tuesday. Alcohol has become a leading battleground between the US, Canada and Mexico, threatening the sales of Diaego’s leading brands in the US, a major contributor to the group’s revenues.

“Diageo returned to growth in the first half of its fiscal year, with strong performances in Guinness and Tequila offsetting weakness in other spirits. This is a solid performance given industry headwinds,” said Charlie Huggins, Fund Manager at Wealth Club.

However, Trump’s 25% tariffs on Canadian and Mexican imports have the potential to stop this recovery in its tracks.

The US is Diageo’s largest market. To compound matters, the biggest impact of tariffs would be felt on Tequila, which is the fastest growing part of Diageo’s portfolio.”

The Lloyds share price has enjoyed a sharp rally from January’s lows around 53p to trade above the key 60p level, where it has since remained trading in a tight range.

The catalyst for the rally in January was a shift in expectations around interest rates amid concerns about stagflation in the UK and positive news around motor insurance litigation and potential redress that could cost Lloyds billions.

Chancellor Rachel Reeves intervened in the motor financing litigation process to prevent any “considerable economic harm” through higher motor financing costs in the future and impact on banking capitalisation. This was a major win for Lloyds and its investors, who now await further developments with a semblance of optimism.

The other major factor at play for Lloyds’s share price is the expectations of the number of interest rate cuts in 2025.

Interest rate traders rolled back pricing on the number of interest rate cuts they saw in January 2025, with the Bank of England appearing to have their hand tied by stubbornly high inflation, and potential stagflation.

This is a double-edged sword for Lloyds.

The prospect of interest rates staying higher for long is a major positive for Lloyds and other banks as it provides the opportunity for higher net interest margins and greater profitability.

However, in recent days, the number of interest rates predicted by interest rate markets has grown, suggesting the Bank of England will indeed have to act on interest rates to stem the UK economy’s decline caused by the Labour government’s economic policies.

There is an argument this hasn’t been properly priced into Lloyds shares yet.

That said, traders have a balancing act to contend with. While interest rates may fall later in the year, underlying demand for mortgages and other products remains robust. With underlying demand remaining strong, the volume of products sold will offset any impact on earnings from lower interest rates. This is reflected in the sideways nature of trade in Lloyds in recent days.

The positive macro factors seem to be priced into Lloyds, leaving the stock needing additional developments to break higher.

From a technical perspective, Lloyds formed a number of small gaps higher during the run higher, leaving the stock vulnerable to a pullback to close these gaps.

The first small gap was around the 54p level in mid-January, and the second more material gap occurred from 59p to 61p in late January. In the grand scheme of things, these gaps are relatively small. That said, technical traders will be eyeing the close of these gaps if the stock retreats.

In addition, Lloyds has become horribly rangebound, and the wider range of 63p – 53p will take some breaking. With shares near the top end of this range, the weight of historical price action favours a decline in Lloyds shares in the absence of any majorly positive macro developments.

Results due for release later in February could prove to be the next major catalyst.

Vodafone is becoming a perpetual disappointment. A rally in the middle of last year proved short-lived, and now the company is really struggling in its key German market. 

VOD shares were down 5% at the time of writing after releasing Q3 results.

Vodafone has posted a 5.0% increase in total revenue to €9.8 billion for its third quarter, driven by organic service revenue growth, though partially offset by unfavourable foreign exchange movements. 

The telecommunications giant saw its group service revenue climb 5.6% to €7.9 billion, with organic growth of 5.2%, marking an improvement from the previous quarter’s 4.2%.

Group Adjusted EBITDAaL rose by 2.2% on an organic basis to €2.8 billion, although the adjusted EBITDAaL margin contracted by 0.5 percentage points year-on-year to 28.8%. 

However, for all the positivity around the top line and EBITDAaL, Q3 operating profit saw a significant decline of 18.4% to €1.0 billion.

The company’s financial performance was strong in some markets, with particular momentum in the UK and Africa. It was the slowdown in the key German market – accounting for 34% of Vodafone’s group service revenue – that was the major disappointment for investors.

German Market Headwinds Persist

The German operation continues to face significant challenges, with revenue declining by 7.6% to €3.1 billion in Q3. Service revenue in Germany contracted by 6.4%, slightly worse than the previous quarter’s 6.2% decline. 

This downturn was largely attributed to the impact of recent TV legislation changes affecting Multi Dwelling Units (MDU), which came into full effect in July 2024.

The German fixed service revenue experienced a particularly sharp decline of 10.7%, while mobile service revenue decreased by 1.0%. 

The implementation of a national roaming agreement with 1&1 has seen slower-than-anticipated customer migration, though this is expected to accelerate in coming quarters.

“After enduring their fair share of disappointment, Vodafone investors were treated to an upbeat trading update this morning as the telecoms giant looks to break free of the “one step forward two steps back” performance that has plagued the business in recent years,” said Mark Crouch, market analyst at investment platform eToro.

“Internal cost cutting coupled with sales of underperforming assets mean Vodafone has boosted revenues while maintaining generous shareholder returns. However the mammoth task facing the company is by no means complete. With so much being pinned on a merger with Three UK, which has at last been given the green light, it is perhaps not surprising that investors haven’t poured in to invest, underlining the issues still facing the company. 

“Whether or not the deal goes through. Challenges remain for Vodafone. Unable to simply raise prices to prop up the balance sheet – something they’ve learned the hard way in Germany with declining customer numbers – Vodafone will need to come up with something other than asset sales and price hikes if they are ever to recapture their former glory.”

The FTSE 100 tracked global equities to the downside after Donald Trump imposed tariffs on Canada, Mexico and China, threatening a far-reaching global trade war.

London’s leading index was down 1.2% at the time of writing as traders assessed the implications for individual companies and sectors.

“Investors are rattled at the prospects of a full-blown trade war breaking out after the US slapped punishing tariffs on Canada, Mexico and China, prompting retaliation,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Investors are buckling up for a rollercoaster ride for the global economy, with the European Union expected to be next in line for punitive duties.”

The sharp reaction in stocks on Monday reflects an element of complacency in markets after Trump’s inauguration. Donald Trump had held off some of the most dramatic measures in the early days of his presidency, which cultivated a sense of relief that the worst of his campaign rhetoric would not be acted on.

Anyone positioning for this school of thought was humbled on Monday as US futures sank and Europe followed. That said, while the delines were pronounced, they were relatively contained, suggesting markets were pricing for some of the most damaging tariffs to be short-lived.

“Financial markets had assumed that Trump would talk tough on tariffs and back off when he got a deal, so the US president’s plan to act first and then (perhaps) talk has come as a nasty surprise to share prices around the world, especially as Canada and Mexico have already threatened retaliation,” says AJ Bell investment director Russ Mould.

“Trump’s launch of tariffs in 2018 did raise revenues for America but US corporate profits took a hit that year and America’s S&P 500 index fell by a fifth, so markets have understandably taken fright this time around.”

European and US car manufacturers were among the most heavily hit on Monday. The interconnectedness of the auto industry in North America means components move backwards and forwards across the border on many occasions.

Unsurprisingly, there were few gainers in London, with 90% of the FTSE 100 trading in negative territory.

The Scottish Mortgage Investment Trust was the top faller as traders reacted to a drop in the NASDAQ and the technology shares held in the trust’s portfolio. Copper miner Antofagasta was sharply lower as copper prices fell amid additional tariffs on China.

Elsewhere, there were broad declines in retailers, financials, miners, property stocks and engineering firms.

It appears the market is taking a ‘sell first, ask questions later’ to tariffs, with the impact on UK stocks not immediately obvious and uncertainty about whether Trump will strike closer to home in the coming weeks.

MicroSalt shares surged in early trade on Monday after the low-sodium salt technology announced forecasts for 2025 alongside an oversubscribed fundraise at current market prices.

The Tekcapital portfolio raised £2.3 million in an oversubscribed subscription to fund the development of a recently launched ‘Quick Service restaurant’ product, which the company sees as a ‘tremendous opportunity for growth’.

However, the most exciting takeaway from today’s RNS is that MicroSalt forecasts 2025 B2B volumes to increase more than 10 times the amount of low sodium salt manufactured in 2024. This represents a step-change in customer demand and suggests MicroSalt salt will be used in the production of millions, if not tens of millions, of individual food products.

MicroSalt said it had received orders for an additional 290 metric tonnes of low-sodium salt for 2025 already and expects this to increase.

Investors will also be delighted to hear the company has received positive feedback subsequent to the launch of the Quick Service restaurant and MicroSalt will target the massive french fry market. This development, should it result in the commercial reformulation of products, would open the doors to a market of billions of people globally that consume fast food products.

MicroSalt shares were 20% higher at the time of writing.

Investor confidence in MicroSalt was further demonstrated by the £2.3 million fundraising being completed at current market prices, with investors prepared to commit substantial levels of cash without demanding a discount to the recent share price.

“We are pleased to close this oversubscribed fundraising at the current market price, at a time when many other fundraisings are consummated at substantial discounts,” said Rick Guiney, CEO of MicroSalt.

“This additional capital will enable us to further scale our B2B sales to snack manufactures and help us meet anticipated customer demand in the QSR segment since our January 2025 product launch.

“I am very optimistic on the upside potential for anticipated rapid growth in 2025, particularly at a time when governments are increasingly focused on initiatives to reduce Sodium consumption in manufactured foods. Indeed, only last month the US FDA proposed new short form nutritional labels to be applied to the front of packaged foods where the levels of (i) Saturated Fat; (ii) Sugars; and (iii) Sodium are to clearly labelled as Low, Medium or High. For MicroSalt, this is potentially game-changing and we already have food companies engaging with us to actively address the need to lower Sodium levels in their products.”