4th Feb 2025 08:56
(Alliance News) - Stock prices in London got off to a tepid start on Tuesday, as updates from Diageo and Vodafone failed to impress, while trade worries continued to knock investor confidence.
The FTSE 100 index fell 57.72 points, 0.7%, at 8,525.84. The FTSE 250 shed 142.70 points, 0.7%, at 20,569.06. The AIM All-Share fell 1.40 points, 0.2%, at 710.73.
The Cboe UK 100 was down 0.6% at 853.75, the Cboe UK 250 fell 0.7% at 17,968.56, and the Cboe Small Companies was down slightly at 15,500.30.
In Frankfurt, the DAX 40 was slightly lower, while the CAC 40 lost 0.4%.
The pound was flat at USD1.2413 early Tuesday from USD1.2414 late Monday. The euro rose to USD1.0324 from USD1.0307. Against the yen, the dollar rose to JPY155.19 from JPY154.61.
Trump delayed the start of tariffs on Mexico and Canada for a month Monday after the US neighbours struck last-minute deals to tighten border measures against the flow of migrants and the drug fentanyl.
After calls with Trump just hours before the US tariffs were due to take effect, both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum struck deals for a postponement.
Trump said that after "very friendly" talks with Sheinbaum he'd "immediately pause" the tariffs on Mexico, and that his counterpart had agreed to send 10,000 troops to the US-Mexico frontier.
Tensions appeared higher between the US and Canada, but after two separate calls Trump later said he was "very pleased" and was announcing a 30-day halt in the tariffs.
But China said Tuesday it would impose tariffs of 15% on imports of coal and liquefied natural gas from the US, in retaliation for Washington's 10% levies on Chinese goods.
Beijing's finance ministry also unveiled 10% tariffs on imports from the US of crude oil, agricultural machinery, large-displacement vehicles and pickup trucks.
"I get a sense that traders are feeling a touch of tariff fatigue and hoping to move back to the old regime of data dependency, trading relative growth and central bank pricing – but here we are, with the showdown that was always the most likely to have played out of the three immediate tariff target nations – US vs China – with China looking to win hearts and minds from foreign parties, while Trump plays it hardball in a bid to maintain credibility for his ongoing weaponization of tariffs – with the EU the next to be put on the chopping block," Pepperstone analyst Chris Weston commented.
A barrel of Brent fell to USD75.04 early Tuesday, from USD75.65 at the time of the London equities close on Monday. Gold traded at USD2,812.83 an ounce, falling from USD2,819.29. The precious metal spiked above the USD2,830 mark on Monday, its best ever level, boosted by tariff uncertainty.
Keir Starmer has said the UK will "stay resolute" in its commitment to working with both the US and the EU as he insisted that Britain is "not choosing between" them.
The UK prime minister also said he has been clear that both relationships "are important to us", when asked if he would be willing to water down the UK's reset with the European bloc to keep Washington on side.
The prospect of a trade war with the US has loomed over the prime minister's trip to Brussels, after comments overnight from President Donald Trump that he is poised to expand his tariff regime to both the UK and the EU, but added that he thinks a deal can be done with Britain.
The economic calendar for Tuesday has US factory order data at 1500 GMT.
In London, Diageo shares declined 2.8% in early trade. It reported a decline in half-year earnings, hurt by "unfavourable" foreign exchange developments, and the brewer and distiller also said the speed of a recovery in some key markets has been slower than expected.
The firm also reported it has made "considerable contingency planning" in recent months in regard to potential US tariffs, which it said will may affect its tequila portfolio and Canadian whisky.
"Given our extensive supply chain and broad and advantaged portfolio, there are a number of possible actions to help mitigate the potential impact including pricing and promotion management, inventory management, supply chain optimisation and re-allocation of investments. Some of these actions can be implemented rapidly and others will take time. We will continue to be agile and respond with speed as key details are confirmed," Diageo added.
Diageo reported pretax profit of USD2.77 billion in the six months to December 31, a fall of 9.9% from USD3.08 billion. The Guinness owner said 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.
It put the net sales fall down to "unfavourable foreign exchange", but noted net sales rose on an organic basis.
Wealth Club analyst Charlie Huggins commented: "Diageo returned to growth in the first half of its fiscal year, with strong performances in Guinness and Tequila offsetting weakness in other spirits. This is a solid performance given industry headwinds. However, Trump's 25% tariffs on Canadian and Mexican imports have the potential to stop this recovery in its tracks. The US is Diageo's largest market. To compound matters, the biggest impact of tariffs would be felt on Tequila, which is the fastest growing part of Diageo's portfolio.
"The scale and breadth of Diageo's portfolio means it is capable of meeting this challenge head on. It also has scope to accelerate productivity initiatives, which will now become even more important. However, with Diageo's CEO, Debra Crew, under mounting pressure to turn things around, the last thing she needed was more uncertainty. Trump's tariffs cloud the outlook and are a major kick in the teeth for shareholders."
Vodafone shares slumped 6.0% as the telecommunications firm continued to struggle in Germany.
Total revenue in the third-quarter to December 31 increased 5.0% to EUR9.81 billion from EUR9.35 billion a year prior. Service revenue alone advanced 5.2% on-year on an organic basis, picking up speed from a 4.2% advance in the second-quarter.
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.
Elsewhere in London, recruiter Staffline jumped 32%. It expects to report annual profit that topped market expectations.
In 2024, underlying operating profit rose 7.8% to GBP11.1 million from GBP10.3 million, "exceeding market expectations" of GBP10.1 million. The trading statement also said revenue rose 13% to GBP1.06 billion from GBP938.2 million.
By Eric Cunha, Alliance News news editor
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