4th Feb 2025 16:53
(Alliance News) - The FTSE 100 closed lower on Tuesday, while sterling rose, as investors assessed the latest fall-out from the ongoing tariff saga.
The FTSE 100 index closed down 12.79 points, 0.2%, at 8,570.77. The FTSE 250 ended down 58.50 points, 0.3%, at 20,653.26, but the AIM All-Share closed up 0.24 of a point at 712.37.
The Cboe UK 100 ended down 0.1% at 858.39, the Cboe UK 250 closed down 0.1% at 18,067.84, and the Cboe Small Companies ended down 0.1% at 15,495.94.
In European equities on Tuesday, the CAC 40 in Paris ended up 0.7%, while the DAX 40 in Frankfurt ended 0.4% higher.
Stocks in New York were higher at the London equities close, with the DJIA up 0.2%, the S&P 500 index 0.7% higher, and the Nasdaq Composite 1.3% better off.
On Monday, US President Donald Trump halted sweeping tariffs on Mexico and Canada just hours before they were due to come into force.
Delays by a month were announced following calls between Trump and Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau.
A 10% tariff on China is set to ahead, with Beijing retaliating with tariffs on a swath of US imports plus an antitrust probe into Google.
"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."
The dollar fell against European currencies on the news but held firm against the yen.
The pound was quoted higher at USD1.2481 at the London equities close Tuesday, compared to USD1.2414 at the close on Monday.
The euro stood at USD1.0376 at the European equities close Tuesday, higher against USD1.0307 at the same time on Monday.
Against the yen, the dollar was trading lower at JPY154.58 compared to JPY154.61 late on Monday.
"Markets are readjusting after Trump's last-minute deals with Mexico and Canada which delayed tariffs by a month. From now on, markets may well handle tariff threats even more cautiously, but a new layer of unpredictability argues against big dollar depreciation for now. Meanwhile, sterling is enjoying a rare haven status," analysts at ING commented.
The dollar eased further after figures showed US job openings fell in December by more than forecast.
Available positions decreased to 7.60 million from a revised 8.16 million reading in November, the Bureau of Labor Statistics Job Openings and Labor Turnover Survey, showed. November's figure was revised up by 58,000.
The figure was below the market consensus for a drop to 8.00 million.
The plunge in the Jolts measure of job openings demonstrates that monetary policy remains tight enough, and uncertainty over future government policy is elevated enough, to stifle businesses' expansion plans, remarked Sam Tombs at Pantheon Macroeconomics.
At the margin, the data support our below-consensus forecast of a 125,000 increase in January nonfarm payrolls, he added.
The US jobs report, containing the closely watched nonfarm payrolls will be released Friday.
Back in London and Entain shot up 6.2% after it said its US betting joint venture, BetMGM LLC, should break-even this year after sales accelerated in the second half of 2024.
BetMGM, is jointly owned by Entain and MGM Resorts International.
Entain said BetMGM's iGaming offering, strengthened sports product and enhanced player engagement had delivered accelerating growth and performance metrics through 2024.
As a result, it expects to be earnings before interest, tax, depreciation and amortisation positive in 2025 with net revenue of USD2.4 billion to USD2.5 billion.
In 2024, BetMGM reported net revenue of USD2.10 billion, up 7.1% from USD1.96 billion a year prior.
Elsewhere in London, Vodafone shares slumped 7.8%. The telecommunications firm continued to struggle in Germany.
Organic service revenue in the UK rose 3.3% in the third-quarter, after a 1.2% rise in second. In Germany, however, it fell 6.4%, "primarily due to the impact of the TV law change". A law change in Germany last year saw the end of bulk TV contracting in multi dwelling units.
Diageo eased 1.6% after removing medium-term guidance of 5% to 7% organic net sales growth, bemoaning weak demand in key markets and tariff uncertainty.
Threatened US tariffs on Mexico and Canada could "very well impact" Diageo's momentum, especially its tequila and Canadian whisky brands, said Chief Executive Officer Debra Crew.
But Chief Financial Officer Nik Jhangiani said the business will "find ways" of navigating the tariff uncertainty."
He observed it is a "fluid" situation with 45% of US sales made in Canada and Mexico.
If tariffs are enforced, Jhangiani said Diageo anticipates a gross impact on operating profit for the remainder of its financial year, running to June 30, of around USD200 million, with around 85% of that on tequila. However, he added that Diageo has a "good line of sight" to mitigate 40% of that through inventory management before considering pricing.
CEO Crew observed that when tariffs were last imposed Diageo mitigated them 100% through higher prices.
The news came as the London-based owner of Johnnie Walker whisky and Guinness stout reported a decline in half-year earnings, hurt by "unfavourable" foreign exchange developments.
Diageo reported pretax profit of USD2.77 billion in the six months to December 31, a fall of 9.9% from USD3.08 billion. Sales were largely flat at USD15.18 billion, while net sales fell 0.6% to USD10.90 billion from USD10.96 billion. Net sales exclude excise duties.
Brent oil was quoted at USD76.19 a barrel at the London equities close Tuesday, up from USD75.65 late Monday.
Gold was quoted higher at USD2,840.78 an ounce at the London equities close Tuesday against USD2,819.29 at the close on Monday.
Wednesday's UK corporate calendar sees full-year results from pharmaceuticals firm GSK plus a trading statement from electricity generator SSE.
The economic calendar for Wednesday has a raft of composite PMI readings, ADP private payrolls figures and eurozone PPI numbers.
By Jeremy Cutler, Alliance News reporter
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