12th Mar 2025 17:00
(Alliance News) - The FTSE 100 snapped a six-day losing streak on Wednesday, despite tariff niggles, aided by cooler-than-expected US consumer price inflation figures.
The FTSE 100 index closed up 44.98 points, 0.5%, at 8,540.97. The FTSE 250 climbed 116.35 points, 0.6%, at 19,886.51, and the AIM All-Share advanced 2.43 points, 0.4%, at 680.92.
The Cboe UK 100 rose 0.6% at 852.76, the Cboe UK 250 closed up 0.6% at 17,305.31, and the Cboe Small Companies firmed 0.3% at 15,117.86.
In New York at the time of the London close, the Dow Jones Industrial Average was flat. The S&P 500 was up 0.9% and the Nasdaq Composite was 1.6% higher.
The tariff back-and-forth showed no signs of abating.
Major US trading partners announced countermeasures to President Donald Trump's blanket steel and aluminium tariffs on Wednesday, hours after the 25% levies took effect.
The European Commission swiftly unveiled retaliation starting in April, while Canada announced additional tariffs on US goods and China vowed "all necessary measures" in response.
The European Commission will implement a series of countermeasures from April 1 in response to Washington's "unjustified trade restrictions," with chief Ursula von der Leyen saying the retaliation was "strong but proportionate."
Canada, which is heavily exposed to the US steel and aluminium levies, announced additional tariffs of CAD29.8 billion, or USD20.7 billion, on US goods, with the levies coming into force Thursday.
Russ Mould at AJ Bell said the tariff uncertainty makes it "impossible" for markets to establish the lay of the land.
"Donald Trump keeps moving the goal post and investors are getting fed up," he added.
"Trump is essentially sticking with the same message: tariffs make goods imported into the US more expensive and that will drive Americans to buy more goods domestically. Critics says it's not that simple and that tariffs will ultimately raise prices for consumers and businesses in the US and hurt the economy."
Figures on Wednesday offered some encouragement on US inflation, although as always the devil was in the detail.
According to the Bureau of Labor Statistics, consumer prices rose 2.8% on-year in February, cooling from a 3.0% rise in January. The figure was shy of the FXStreet-cited consensus, which pencilled in a 2.9% yearly increase in consumer prices.
Consumer prices rose 0.2% in February from January, shy of the 0.3% hike forecast in by consensus. In January, prices rose 0.5% from December.
Annual core consumer price inflation, which excludes food and energy, eased to 3.1% in February from 3.3% in January. That measure was also shy of consensus, which had forecast a less steep deceleration to 3.2%.
The data comes a week before the next Federal Reserve decision, where the Fed is expected to leave the federal funds rate target range at 4.25%-4.50%.
But Bank of America explained that while headline and core CPI inflation came in softer than expected, the details of the report point to a firm core PCE reading, higher than previously forecast.
Core PCE is the Federal Reserve's preferred inflation measure.
"The data are further evidence that inflation has stalled, reinforcing our view that the Fed will remain on hold this year," it added.
Wells Fargo said the likely rise in core PCE presents a challenging situation for the Federal Open Market Committee.
"But we expect the Committee to respond with a gradual pace of monetary policy easing later this year amid slower growth and a somewhat softer labor market," it added.
In European equities on Wednesday, the CAC 40 in Paris rose 0.6%, while the DAX 40 in Frankfurt jumped 1.6%.
The pound was quoted higher at USD1.2978 late on Wednesday in London, compared to USD1.2943 at the equities close on Tuesday. The euro stood at USD1.0914, lower against USD1.0924. Against the yen, the dollar was trading higher at JPY148.32 compared to JPY147.45.
On the FTSE 100, British Airways owner IAG fell a further 4.5% after dropping 6.1% on Tuesday.
Barclays double-downgraded IAG to 'underweight' from 'overweight' amid fears soft trading updates from several US airlines this week could be a precursor for a weakening trading environment on European airlines' key North Atlantic routes.
Barclays also cut Germany's Deutsche Lufthansa to 'underweight' from 'overweight' and moved Paris-based Air France KLM to 'equal weight' from 'overweight'.
Lufthansa fell 2.4% in Frankfurt while Air France KLM dipped 3.5% in Paris.
The move by Barclays follows weak trading updates from US carriers American Airlines, Delta Air Lines and United Airlines this week.
While the US carriers only flagged domestic weakness, Barclays fears this may spread from the domestic market to international markets.
"We find it unlikely that the abruptly weaker domestic trading does not in time read across to international trading. We think both the US consumer and business confidence is vulnerable and we think the key issue is timing," Barclays said.
"We recognise this call may be early," Barclays said, adding "however, we still think a weakening trading environment on the North Atlantic will likely soon emerge."
Retailers struggled on the back of Zara owner Inditex reporting a slowdown in sales growth.
Inditex, down 8.0% in Madrid, reported sales and profit growth in the year to January 31.
So far in the new financial year, store and online sales have risen 4% at constant currency, when adjusted for the calendar effect of 2024 being a leap year. In the last week alone, sales are up 7%. Nonetheless, it still represents a slowdown from the 11% constant currency growth achieved in the year just ended.
Primark owner AB Foods was down 4.2% and Next lost 0.8%.
JD Sports fell 3.3% and Sports Direct owner Frasers Group gave back 0.2%, as sportswear retailers struggled on the back of a downbeat update from Frankfurt-listed Puma. Puma plunged 20%.
Puma predicted "ongoing geopolitical tensions and economic challenges in 2025, especially trade disputes and currency volatility".
Smith & Nephew fell 3.5% after UBS downgraded to 'neutral' from 'buy'.
"We think a pause for breath is warranted," the broker said.
Brent oil was quoted higher at USD70.87 a barrel in London on Wednesday, from USD69.91 late Tuesday. Gold was up at USD2,935.01 an ounce against USD2,916.72.
Thursday's economic calendar sees eurozone industrial production figures, US producer price inflation data and US weekly initial jobless claims numbers.
Thursday's UK corporate calendar has a trading statement from Halma and full-year results from Trainline and Deliveroo.
By Jeremy Cutler, Alliance News reporter
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