3rd Feb 2025 07:46
(Alliance News) - European equities are set to tumble at the start of the week, while the dollar powered higher after US President Donald Trump imposed tariffs on some of the nation's major trading partners.
There are worries the European Union could be among the nation's next to be slapped with tariffs by Trump.
"At one point, it looked as if there would be no tariffs at all, as if they were only a threatening gesture and not intended to be actually implemented. During this phase, the dollar weakened. Now that a significant portion of the tariff threats are actually being implemented, this view is no longer on the table. The USD weakness of the last few days has rightly disappeared. Its basis is gone," Commerzbank analyst Ulrich Leuchtmann commented.
"It seems more likely again that other threats (eg against Europe) will be implemented. Only the announced 60% tariffs on imports from China still seem unlikely. If he had intended to do so, the US president could have introduced them right away."
The developments boosted the dollar. Away from tariff headlines, a Bank of England interest rate decision and a US jobs report will be in focus this week.
XTB analyst Kathleen Brooks commented: "The Bank of England is expected to cut interest rates, and the US NFP report for January is expected to report a sharp slowdown in job creation."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 1.3% at 8,563.26
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Hang Seng: down 0.4% at 20,149.19
Nikkei 225: down 2.7% at 38,520.09
S&P/ASX 200: down 1.8% at 8,379.40
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DJIA: closed down 337.47 points, 0.8%, at 44,544.66
S&P 500: closed down 0.5% at 6,040.53
Nasdaq Composite: closed down 0.3% at 19,627.44
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EUR: lower at USD1.0233 (USD1.0393)
GBP: lower at USD1.2290 (USD1.2429)
USD: higher at JPY155.52 (JPY154.85)
GOLD: lower at USD2,786.71 per ounce (USD2,806.64)
(Brent): higher at USD76.63 a barrel (USD75.92)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
09:00 GMT eurozone manufacturing PMI
10:00 GMT eurozone CPI
08:55 GMT Germany manufacturing PMI
09:30 GMT UK manufacturing PMI
14:45 GMT US manufacturing PMI
15:00 GMT US ISM manufacturing PMI
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US President Donald Trump indicated Sunday that he would not immediately impose tariffs on Britain, as he suggested that the EU could be in line for levies like those imposed on Canada, Mexico and China. Trump has already launched a full-fledged trade war on the grounds that he wants the countries targeted, Washington's three leading trading partners, to do more to stem the flow of migrants and illicit drugs into the country. But the Republican president, who only returned to the White House less than a fortnight ago, has indicated he also wants to punish trade partners for running deficits with the US. "We're going to see what happens. It might happen [with Britain]... but it will definitely happen with the EU. I can tell you that, because they've really taken advantage of us – you know, we have [an] over USD300 billion deficit," he said. "They don't take our cars, they don't take our farm products. They take almost nothing, and we take everything from the millions of cars, tremendous amounts of food and farm products. So the UK is way out of line, and we'll see with the UK, but the EU is really out of line." But Trump held out the prospect of a settlement with London, saying that "I think that one can be worked out." "Prime Minister [Keir] Starmer has been very nice. We've had a couple of meetings, we've had numerous phone calls, we're getting along very well, and we'll see whether or not we can balance out our [trade]," Trump said.
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Trump risks having a "really damaging impact" on the global economy as he pursues tariffs against the US's nearest neighbours, a senior UK Cabinet minister has suggested. Home Secretary Yvette Cooper, the first senior British government figure to respond to the announcement, said the UK wanted to break down trade barriers, not put them up. Asked about Trump's announcement, she told the BBC's Sunday with Laura Kuenssberg: "Tariff increases really right across the world can have a really damaging impact on global growth and trade, so I don't think it's what anybody wants to see." Cooper also told the BBC that the UK's focus was "on building trade links and better trading relationships, and removing barriers to trade, with the US, and also with other European countries and with countries right across the world". "We want to reduce the barriers to trade, make it easier for businesses," she added. The government's opponents have called for widely differing approaches to the potential threat that tariffs could also be placed on UK goods.
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Starmer's meeting with EU chiefs threatens to be overshadowed by the threat of an international trade war as countries hit by Trump's tariffs vow retaliation. The UK prime minister will urge Europe to bear down on Vladimir Putin's Russia when he meets the heads of the 27 EU governments on Monday, as he continues efforts to reset Britain's relationship with the trade bloc. But the gathering, meant to focus on defence co-operation, is likely to be preoccupied with news from across the Atlantic. Starmer will urge EU countries to shoulder more of the burden of aid for Ukraine at the meeting in Belgium. He will call on them to follow UK and US sanctions on Russia's faltering economy and praise Trump's threat of further restrictions, which he will claim has "rattled" President Putin. The prime minister will also meet Nato Secretary General Mark Rutte at the alliance's headquarters in Brussels. "I'm here to work with our European partners on keeping up the pressure, targeting the energy revenues and the companies supplying his missile factories to crush Putin's war machine," Starmer said. "Because ultimately, alongside our military support, that is what will bring peace closer."
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Stagnant growth late last year means the UK economy will improve slower than previously predicted in 2025, according to new forecasts. The EY Item Club economic forecaster has become the latest influential group to cut its predictions amid continued pressure on businesses, which face further tax and wage rises in April. It represents another blow to Chancellor Rachel Reeves' hopes to rapidly grow the UK economy in order to help support the Labour government's spending plans. UK gross domestic product is expected to grow by 1% in 2025, according to EY's winter forecasts. It had previously predicted 1.5% growth for the year. The forecasts also pointed to 0.8% growth across the economy last year, suggesting only a slight acceleration in economic growth. It comes after a weaker second half of 2024, with a worse-than-expected 0.1% rise in GDP in November and a 0.1% monthly decline in October. The economy had flatlined over the third quarter of the year. Nevertheless, the UK is expected to see stronger growth next year, with the forecasts indicating it could see a 1.6% rise in 2026.
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BROKER RATING CHANGES
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HSBC raises British Land to 'buy' - price target 450 pence
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HSBC raises Hammerson to 'buy' - price target 373 pence
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COMPANIES - FTSE 100
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AstraZeneca reported its Imfinzi treatment has been recommended for approval in the European Union by a medicinal committee to treat some adults with limited-stage small cell lung cancer. The Committee for Medicinal Products for Human Use of the European Medicines Agency based its on promising phase III trial results, which showed Imfinzi reduced the risk of death by 27% versus placebo. "Today's positive recommendation from the CHMP means that our patients in Europe are one step closer to gaining access to this practice-changing treatment regimen," said Suresh Senan, the principal investigator in the trial. The CHMP recommended Imfinzi for adults with limited-stage small cell lung cancer whose disease has not progressed following platinum-based chemoradiation therapy.
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Barclays has apologised to customers after technical problems caused disruption to services and payments over the weekend. The bank said the issue had been resolved on Sunday morning and delayed payments processed. Barclays had previously said affected customers could see an outdated balance with payments made or received not showing. On Sunday morning, a Barclays spokesperson said: "The technical issue impacting our customers on Friday and Saturday has been resolved and delayed payments processed. "Customers can use our app, bank online, call us, use their cards and withdraw cash. We are working on bringing balances up to date for some of our customers and addressing any outstanding issues. "We are very sorry for any disruption and will ensure that no impacted customer is left out of pocket."
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COMPANIES - FTSE 250
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3i Infrastructure said its portfolio is "performing well" and the investor said it is on track to meet its dividend target. There is "good earnings momentum in the portfolio" and the firm also hailed the "value creation potential" highlighted by recent realisation. The infrastructure investor said it sealed the sale of its 33% stake in Valorem, netting EUR309 million. 3i Infrastructure said total income and non-income cash in the three months to December 31 was 18% higher on-year at GBP58 million. "Transactions in the private markets demonstrate continued demand for high-quality infrastructure companies, such as those held by 3iN, and the potential latent value within our portfolio. During the period, we completed the sale of our stake in Valorem at a 31% premium to the pre-transaction valuation, providing further evidence of this dynamic. We are on track to deliver our dividend target for the year, which is expected to be fully covered by income," said Scott Moseley and Bernardo Sottomayor, co-heads of European Infrastructure at 3i Investments. 3i Investments is 3i Infrastructure's investment manager. 3i Infrastructure's dividend target is 12.65 pence per share for the financial year, up 6.3% from what it paid in the year ended March 2024.
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OTHER COMPANIES
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SigmaRoc expects profit to top consensus, despite the lime and industrial limestone firm grappling with tough market conditions. SigmaRoc expects underlying earnings per share to be around 8.3 pence per share for 2024, around 10% ahead of consensus and 3% ahead of what it achieved in 2023. Revenue is expected to be 72% higher year-on-year at GBP998 million from GBP580 million, on the contribution from acqusitions. Underlying earnings before interest, tax, depreciation and amortisation are to surge 90% to GBP222 million from GBP116.7 million. The firm, whose offering is used in construction, agriculture, environmental and industrial markets, said 2024 was characterised by the "transformational acquisition of lime and limestone businesses from CRH". SigmaRoc Chief Executive Officer Max Vermorken said: "2024 was a transformational year for SigmaRoc. We completed the acquisition of CRH's lime assets, securing our position as one of Europe's leading lime and limestone businesses and I would like to thank all our colleagues for their positive attitude and commitment at the start of a new journey. We have delivered good results despite the challenging backdrop, and we are well positioned for 2025. We have made the first steps on our divestment programme of non-core assets with the disposal of the Belgian ready-mix plants, with completion of the smaller French plants and earnout to follow."
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Speedy Hire said annual profit will be lower than expected, as its final quarter has got off to a slow start. In a trading update for the 10 months to January 31, the tools and equipment hire services provider said positive momentum ahead of its fourth-quarter was sapped by "the widely reported economic downturn". "This has resulted in a slower post December shutdown recovery across the majority of our customer base. Further, the delay in [control period 7] rail works has also had an impact on trading in the final quarter but remains a significant opportunity for the group into FY2026," Speedy Hire said. CP7 is Network Rail's slate of planned activities for the renewal and mainline railway infrastructure in the UK between April of last year and March 31, 2029. Speedy Hire added: "During the third quarter we continued to develop our Trade & Retail proposition, securing new major trading relationships, although it is taking longer to achieve the expected levels of hire revenue which we now anticipate achieving during first quarter FY2026. Our joint venture in Kazakhstan has experienced a significant downturn in performance due to the early shutdown of major contracts. We anticipate this having an ongoing impact into FY2026, however, there are significant opportunities which give confidence for future growth." Speedy Hire said it has a "promising pipeline of growth opportunities with new and existing customers", but the tricky start to the final quarter means its predicts "lower than anticipated profitability for the full year".
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By Eric Cunha, Alliance News news editor
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