2nd Apr 2025 17:00
(Alliance News) - European stocks closed lower on Wednesday amid uncertainty and concern ahead of Donald Trump's statement on tariffs.
In London, the picture was more mixed with a late rally pushing mid-caps into positive territory at the close, while the blue-chip FTSE 100 ended in the red, but well above early lows.
The FTSE 100 index ended down 26.32 points, 0.3%, at 8,608.48. It had traded as low as 8,548.32.
The FTSE 250 climbed 58.77 points, 0.3%, at 19,649.63, and the AIM All-Share declined 2.61 points, 0.4%, at 685.77.
The Cboe UK 100 fell 0.3% at 858.12 on Wednesday, the Cboe UK 250 edged up 0.1% at 17,097.42, and the Cboe Small Companies ended 0.4% lower at 15,161.47.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.2%, while the DAX 40 in Frankfurt fell 0.7%.
The mood was brighter in New York with stocks in the green. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all 0.4% to the good.
The US president is expected to unveil reciprocal tariffs whereby the US will tax imports at the same rates that a country uses for imports from the US, but investors remain uncertain about their scope and scale.
The announcement is due at 2100 BST just as Wall Street closes for the day.
White House press secretary Karoline Leavitt said on Tuesday that the tariffs would be "effective immediately".
She said Trump was "with his trade and tariff team right now, perfecting it to make sure this is a perfect deal for the American people and the American worker."
Since retaking office, Trump already has announced steep tariffs on Canada and Mexico, before partially backtracking on those plans.
The tariffs are likely to focus on the "dirty 15", as described by Treasury Secretary Scott Bessent, those countries that account for most of total goods trade with the US.
However, reports have said that Trump's advisers are also pitching a 20% across-the-board tariff on all imports, something closer to what Trump promised on the campaign trail.
While some hope the tariff announcement might bring an end to the uncertainty, others aren't so sure.
SPI's Innes said tariffs are Trump's ultimate bargaining chip, so "this playbook isn't closing anytime soon".
He thinks the key will be the "tone and delivery".
"If the matrix of tariff criteria remains vague or sprawling, don't be surprised if market volatility finds a second gear," he added.
Lloyds Bank analysts said: "In reality, those hoping for the ambiguity to be resolved fully with today's announcements should brace for disappointment. As a hint of this, Trump's press secretary said he is 'always up for a good negotiation', indicating the potential for a series of bilateral engagements to barter rates down over the coming days, weeks and probably months."
While Capital Economics commented: "Even if the tariffs are much larger than expected, unless Trump makes clear that they are intended to be permanent, investors may conclude that they are also likely to be rolled back at least in part. In that case, much of any big initial reaction in equity prices might be swiftly unwound before the stock market settled down again."
Citi expects a tariff rate of 20% to 25% to be applied to imports from the UK.
The broker noted the latter account for about 2% of UK GDP and, assuming no reciprocation, would likely take off about 0.2% to 0.3% of GDP.
"Indirect effects, such as the drag on global growth, could however exacerbate the impact. One of the most important consequences is that this could significantly reduce, or possibly wipe out, the fiscal headroom the chancellor created last week," Citi added.
The UK chancellor Rachel Reeves told MPs that the government is discussing with other countries and the EU about the appropriate response to tariffs and will see how other countries and trading blocs respond.
"We’re going to approach this in a clear headed way and always represent the national interest," she said, adding "we don’t want to be posturing here."
"The prize on offer is a good economic agreement between us and the United States. We won’t do anything to put that in jeopardy," she added.
US data on Wednesday provided some encouragement for the jobs market ahead of Friday's nonfarm payrolls.
Payroll processor ADP said private sector employment increased by 155,000 during March, up from a revised 84,000 in February. February's figure was previously reported at 77,000.
The March reading came in well above the FXStreet-cited consensus of 105,000.
However, Oliver Allen at Pantheon Macroeconomics played down the significance of the report, noting "its poor track record in recent years."
In March, the US economy is expected to have added 140,000 jobs, according to FXStreet consensus, slowing from 151,000 in February. In January, nonfarm payrolls were revised down to 125,000 from 143,000.
The dollar was mixed ahead of the tariff news.
Against the yen, the dollar was trading higher at JPY150.00 at the London close Wednesday compared to JPY149.33 on Tuesday.
The pound was quoted at USD1.2967 on Wednesday in London, up from USD1.2920 on Tuesday. The euro stood at USD1.0855, higher against USD1.0826.
Back in London, Diageo rose 1.3% on the FTSE 100 as Berenberg started coverage with a 'buy' rating.
The broker thinks the sector is getting closer to a cyclical low and suggested investors need to revisit the sector.
Berenberg accepted tariffs are a "serious concern", but thinks the large spirits companies are in a strong position to manage through this trade war crisis.
On the FTSE 250, Bakkavor jumped 7.5% after stating it would be minded to accept a new GBP1.2 billion bid approach from Greencore.
Greencore, a Dublin-based manufacturer of convenience foods, has had two previous attempts turned down. It closed 0.9% higher.
The new terms value each Bakkavor share at 200 pence each, a level it "would be minded to unanimously recommend" to shareholders.
Russ Mould at AJ Bell said there is "strategic merit" in parking the two companies together.
"They are big names in the UK food market, offering a range of products from ready meals and soups to pizzas and salads. Greencore wants a bigger slice of the pie and devouring Bakkavor would take the business to the next level," he added.
Raspberry Pi climbed 1.5% as it set out a positive outlook, predicting rising demand this year after a 2024 "dominated" by inventory correction.
The provider of "cost‑effective, high‑performance computing" reported a decline in annual earnings, but expects a "steady build-up in demand".
Pretax profit fell 57% to USD16.3 million in 2024 from USD38.2 million in 2023, as revenue declined 2.4% to USD259.5 million from USD265.8 million.
Jefferies lifted Raspberry Pi to 'buy' from 'hold' on Wednesday, in the wake of the results.
Jefferies said: "The inventory correction, which was a headwind for Raspberry Pi's 2024 revenues and earnings, has now largely ended. As a result orders are showing a gradual improvement."
Brent oil was quoted lower at USD74.66 a barrel late on Wednesday afternoon in London from USD74.74 at the time of the London equities close on Tuesday.
Gold traded at USD3,126.39 an ounce, little changed against USD3,126.52 on Tuesday.
Thursday's economic calendar has a slew of composite PMI readings across the globe, plus US weekly jobless claims data.
Thursday's local corporate calendar has a trading statement from online greetings card and gifts company Moonpig.
By Jeremy Cutler, Alliance News reporter
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