Blue chips rally on trade deal hopes – and sterling hits six-month high against weak dollar

Importance Score: 45 / 100 🔵

London Markets Rally on Trade Deal Optimism and Weaker Dollar

London’s stock market marked its fourth consecutive day of gains while the pound sterling strengthened following optimistic remarks from a key advisor to Donald Trump regarding a potential UK-US trade agreement. This positive development offered respite to investors concerned about the impact of ongoing trade disputes initiated by the US President. The FTSE 100 index surged by 1.4%, gaining 114.78 points to close at 8249.12.

Market Performance and Economic Concerns

This recent upswing represents a recovery of over 7% since Thursday, yet the blue-chip index remains more than 4% lower for the month. Lingering anxieties persist that escalating protectionist measures could trigger a global economic downturn.

The pound also experienced a significant rise, reaching $1.3252, a high point not seen since early October before the announcement of significant tax increases.

Analyst Perspectives

Danni Hewson, a financial analyst at AJ Bell, commented on the market’s positive trajectory, noting, “It’s been another robust day for London markets. Whether the White House’s apparent shift in tariff policy is strategic or a reactive measure, investors in the UK are exhibiting cautious optimism.”

The positive market sentiment extended across Europe. Germany’s Dax index increased by 1.4% in Frankfurt, and France’s Cac 40 rose by 0.9% in Paris.

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Trade War Volatility and Investor Sentiment

This rally follows a sharp decline in equity markets the previous week, triggered by heightened trade tensions between the United States and China. The trade war escalation sent tremors through global markets.

Markets partially recovered later in the week when President Trump announced a temporary pause on the most drastic ‘reciprocal’ tariffs for a 90-day period. However, a base tariff of 10% remains in effect, along with other tariffs on sectors including steel and automobiles.

US-UK Trade Deal Hopes

Market sentiment in London was further bolstered by remarks from US Vice-President JD Vance, who indicated that the US administration is actively collaborating with the UK government, led by Prime Minister Keir Starmer, to achieve a trade deal.

“I believe there’s a strong possibility we will reach a substantial agreement,” Vance stated.

Recessionary Concerns

Despite the optimism, uncertainties persist. Leaders on Wall Street have recently cautioned President Trump about the risk of triggering a recession in the US and potentially worldwide.

Recent reports underscore the detrimental impact of the trade war on investor confidence.

Bleak Economic Outlook

A Bank of America survey of fund managers revealed that 82% anticipate a weakening global economy, marking the most pessimistic outlook in thirty years.

Investment service Hargreaves Lansdown reported a significant drop in investor confidence this month, with North American markets experiencing a 35% decrease and the UK market a 28% decline.

Victoria Hasler, head of fund research at Hargreaves Lansdown, stated, “The magnitude and scope of imposed tariffs have shaken markets, and our survey demonstrates a widespread loss of investor confidence.”

German Economic Sentiment

Investor morale in Germany has also deteriorated, according to the Zew institute.

Achim Wambach, president of Zew, noted, “The unpredictable shifts in US trade policy are significantly impacting expectations in Germany.”

Job Market Impact

Recruitment firm Robert Walters cautioned that increased protectionism could lead to job losses as companies postpone hiring plans.

Toby Fowlston, CEO of Robert Walters, explained, “Elevated uncertainty surrounding global trade flows due to tariffs is expected to further hinder client and candidate confidence in the near future.”

This warning follows a recent announcement from competitor Page Group, which withheld its financial forecast and outlined cost-cutting measures due to ‘increasingly unpredictable’ conditions stemming from tariffs imposed by the US.

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