FTSE Continues Helter Skelter Ride as Tariffs Remain the Concern
Stocks head south again as tariffs weigh more than better than forecast economic data.
- GDP Growth MoM 0.5%
- Manufacturing production MoM 2.2%
- BoE says tariff effects on rates are not clear
The FTSE opened down this morning and attempted a rally in pre-market trading. The bullish mood was quickly wiped out sending the FTSE down 0.91%.
Economic Data Better than Forecast
GDP Growth came in higher than forecast, MoM printed at 0.5% compared to 0.1% predictions, and last month’s 0% growth. Other data also outperformed expectations:
- GDP Growth YoY: 4%, expected at 0.9%
- Industrial Production: 5%, expected at 0%
- Manufacturing Production: 2%, expected at 0.2%
The FTSE rallied initially on the back of some bullish data, but concerns about the effects of tariffs remain the main driver.
Investors are still cautious about the possibility of a full-blown trade war, and the 90-day pause for most countries isn’t seen as a solution.
What remains to be seen is how negotiation proceed globally and for the UK in particular. The UK was hit with lower tariffs than the EU, and there is likely a simple way out of this situation, eliminating tariffs on US goods.
FTSE Live Chart
BoE Deputy Governor Tariff Implications Uncertain
The deputy governor Sarah Breeden said that the impact from tariffs on UK inflation was uncertain, and therefore also the implications for interest rates.
Stating that “Expenditure switching by US consumers away from UK goods, combined with weaker global demand due to potential counter tariffs and supply chain disruptions would be expected to weigh on UK activity,”
She believes that overall, tariffs are likely to lower UK growth, and that it’s also too early to estimate the impact on UK inflation.
“I think it’s too early to call the overall impact on inflation for the UK and hence the appropriate monetary policy response at this stage.”
Breeden also added that there had been a large global shift since the last MPC meeting in March, when it kept interest rates on hold.
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