4th Mar 2025 16:57
(Alliance News) - Stocks fell sharply on Tuesday on concerns tit-for-tit moves on tariffs would spark a full-blown trade war.
Asian, European and US stock markets all suffered after US President Donald Trump went ahead with tariffs against China, Canada and Mexico, prompting retaliatory responses.
The FTSE 100 index ended down 112.31 points, 1.3%, at 8,759.00. The FTSE 250 slumped 431.79 points, 2.1%, at 19,950.50, and the AIM All-Share fell 14.93 points, 2.1%, at 686.87.
The Cboe UK 100 ended down 1.6% at 875.00, the Cboe UK 250 declined 2.3% at 17,299.38, and the Cboe Small Companies fell 0.2% at 15,526.13.
In Paris, the CAC 40 tumbled 2.1% lower, while the DAX 40 in Frankfurt plummeted 3.5%.
At the time of the London close, the Dow Jones Industrial Average and the S&P 500 were 1.7% lower while the Nasdaq Composite fell 1.5%.
China announced it will impose additional tariffs of up to 15% on imports of major US farm products, and also expanded controls on doing business with key US companies.
The tariffs announced by the Commerce Ministry are due to take effect from March 10, though goods already in transit will be exempt until April 12.
They follow Trump's order to raise tariffs on imports of Chinese products to 20% across the board. Those took effect on Tuesday.
In addition to the moves against China, Trump confirmed 25% tariffs would be imposed against Mexico and Canada.
"No room left for Mexico or for Canada," Trump said at the White House on Monday in response to a question from reporters. "The tariffs, you know, they're all set. They go into effect tomorrow."
Canadian Prime Minister Justin Trudeau said Monday that Canada will slap tariffs on US imports beginning Tuesday, adding "there is no justification" for Washington's actions.
Russ Mould, investment director at AJ Bell said: "Investors were desperately hoping that Trump would delay tariffs on Canada, Mexico and China at the eleventh hour, yet the US president has stuck to his guns and brought them into power. Naturally, the recipients have started to retaliate and that has raised the prospect of a full-blown trade war."
"Layered on top is Trump’s decision to pause US military aid to Ukraine showing you’ve got a political leader who is determined to show the world who’s boss," he added.
The pound was little changed at USD1.2712 late on Tuesday in London, compared to USD1.2710 at the equities close on Monday. The euro stood higher at USD1.0525, against USD1.0498. Against the yen, the dollar was trading lower at JPY148.56 compared to JPY150.20.
The single currency strengthened as European Commission President Ursula von der Leyen proposed a new fund that could mobilise close to EUR800 billion for defence investments in the EU, including for military aid for Ukraine.
"We're living in the most momentous and dangerous of times," von der Leyen told journalists in Brussels.
Pressure on the EU to significantly increase defence spending and aid to Ukraine intensified further after Trump's administration announced on Monday that it would temporarily suspend US military aid to Ukraine.
"We are in an era of rearmament, and Europe is ready to massively boost its defence spending," the commission president said.
On Tuesday, Ukrainian President Volodymyr Zelensky said he wanted to "make things right" with Trump and to work under the US President's "strong leadership" to secure a lasting peace in Ukraine.
In his first public comments since Trump halted US military aid to Ukraine, Zelensky called for a "truce" in the sea and sky as a first step to securing an end to the three-year-long war.
The trade and geopolitical uncertainty sparked a move to safe havens such as gold. The yellow metal was quoted higher at USD2,908.04 an ounce against USD2,888.92.
But airlines suffered on fears the situation in Ukraine could escalate. British Airways owner IAG fell 5.6%, easyJet fell 5.0%, Hungary-based Wizz Air slid 7.6%.
Elsewhere, Brent oil was quoted lower at USD70.29 a barrel on Tuesday from USD72.59 late Monday.
A surprise move by Opec+ to increase oil production is likely to keep downward pressure on oil prices, analysts said.
On Monday, Opec+ said it would proceed with a plan to increase oil production from April, an unexpected move by the cartel that sent crude prices tumbling.
The oil price slump saw prices of oil majors BP and Shell drop 5.7% and 3.9% respectively in London.
UBS believes market expectations were skewed towards another extension of the cuts and "we see the news as a clear negative for oil prices."
"We believe Brent could drop into the USD60s in the near-term," the broker added.
Joseph Dahrieh, managing principal at Tickmill said the decision to unwind previous production cuts raises concerns about potential oversupply.
"With increased output, global crude prices face downward pressure, particularly if demand growth fails to match the rise in supply," he added.
Back on the FTSE 100 defensive stocks such as utilities and pharmaceuticals rose. Severn Trent advanced 2.9%, GSK rose 2.0% and National Grid 1.6%.
But the fresh falls in the Nasdaq hit tech investor Scottish Mortgage Investment Trust, down 6.2%.
Intertek rose 4.5% after raising margin guidance, launching a GBP350 million share buyback and raising its dividend.
The London-based assurance, inspection, product testing and certification company said pretax profit rose 8.0% to GBP547.8 million in 2024 from GBP507.2 million a year prior, or by 15% at constant currency.
Revenue increased 1.9% to GBP3.39 billion in 2024 from GBP3.33 billion in 2023, with like-for-like growth of 6.3% at constant currency.
RBC Capital Markets saw the buyback and dividend hike as a "clear statement of intent".
But Ashtead fell 6.6% as analysts highlighted slowing growth in the US and uncertainty over near-term earnings as tariffs muddy global economic prospects.
AJ Bell's Mould said Ashtead noted third quarter revenue and profit went into reverse as local construction markets felt the pain of interest rates staying higher for longer.
"It is staring into the unknown with major uncertainties over near-term earnings. Tariffs create uncertainties over inflation, business sentiment and the economy, and that means Ashtead faces an uphill battle to reenergise earnings growth," he explained.
Greggs fell 13% as it reported a slow start to 2025, upcoming inflationary headwinds and a margin dent from investment plans.
"Looking ahead to 2025, the macroeconomic landscape remains tough. Inflation remains elevated, and many of our customers continue to worry about the cost of living. After years of financial anxiety, they are still facing concerns about energy prices and increased mortgage and rent costs," the company said in a statement.
Like-for-like growth slowed to just 1.7% year-on-year in the first nine weeks of 2025, Greggs said, compared to 5.5% for the whole of 2024.
"Challenging weather conditions in January followed by improved trading in February," the firm added.
The firm will also take a short-term margin hit, it said, reflecting investments in a new frozen manufacturing and logistics facility in Derby, due to open in 2026, and a new national distribution centre in Kettering, due to open in the first half of 2027.
Wednesday's economic calendar sees composite PMI readings in Europe, the UK and US and ADP private payroll data in the US at 1315 GMT.
In the local corporate calendar, Dowlais reports full-year results.
By Jeremy Cutler, Alliance News reporter
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