Category: Economoney

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Trump and his tariff agenda

Trade tariffs

The United States has intensified its tariff policies, marking a significant shift in global trade dynamics

On 4th March 2025, President Donald Trump announced a sweeping increase in tariffs on steel and aluminum imports, raising them to 25% across the board. This move, aimed at bolstering domestic industries, has sparked widespread reactions both domestically and internationally.

The tariffs, which now include a broader range of products such as nuts, bolts, and soda cans, have drawn sharp criticism from key U.S. allies, including Canada, the United Kingdom, and Australia.

U.S and the EU

The European Union has responded with countermeasures, imposing tariffs on $28 billion worth of American goods, set to take effect on 1st April 2025. European Commission President Ursula von der Leyen expressed regret over the U.S. decision but emphasised the need to protect European consumers and businesses.

Domestically, the tariffs have been met with mixed reactions. While U.S. steel and aluminum producers have welcomed the measures, citing potential job creation and increased investment, downstream manufacturers that rely on these metals are bracing for higher costs.

Economists warn that the tariffs could lead to increased prices for consumers and potential disruptions in supply chains. Trump has indicated many times that the tariffs levelled at the U.S. are unfair and unequal.

The Trump administration has justified the tariffs as a means to encourage foreign companies to establish manufacturing facilities in the United States. However, critics argue that the policy could backfire, leading to retaliatory measures from trading partners and a potential slowdown in global economic growth.

As the global trade landscape continues to evolve, the long-term impact of these tariffs remains uncertain. Businesses and policymakers alike are closely monitoring the situation, weighing the potential benefits of protecting domestic industries against the risks of escalating trade tensions.

The coming weeks and months will be crucial in determining the effectiveness of this bold and possibly misguided economic strategy.

U.S. and Canada

The trade relationship between the U.S. and Canada has recently faced significant strain due to escalating tariff policies.

President Donald Trump announced a sharp increase in tariffs on Canadian steel and aluminum, raising them from 25% to 50%. This decision was reportedly in response to Ontario’s provincial government imposing higher electricity prices on U.S. customers.

However, after discussions between Ontario Premier Doug Ford and U.S. Commerce Secretary Howard Lutnick, Ontario agreed to pause the electricity surcharge.

As a result, the U.S. decided to maintain the original 25% tariff rate instead of doubling it. Despite this temporary resolution, tensions remain high, with Canada preparing to implement retaliatory tariffs on $30 billion worth of American goods.

These developments highlight the ongoing challenges in U.S. – Canada trade relations, with both nations navigating the complexities of economic and political interests.

U.S. and China

The U.S. – China trade tensions have escalated significantly in recent months. President Donald Trump recently imposed a 20% tariff on all imports from China, reportedly citing concerns over China’s role in the flow of fentanyl into the U.S.

This move has reignited the trade war that began during Trump’s first term.

In response, China has implemented retaliatory measures, including a 15% tariff on U.S. liquefied natural gas (LNG) and coal, as well as a 10% tariff on crude oil, agricultural machinery, and large-engine cars.

Additionally, China has restricted the export of rare earth minerals and metals, which are critical for U.S. tech and green energy industries.

Both nations have expressed a willingness to engage in dialogue, but the situation remains tense. The economic impact of these tariffs is being closely monitored, as they have the potential to disrupt global supply chains and affect industries worldwide.

U.S. and Mexico

The U.S. – Mexico trade conflict has intensified with the U.S. imposing a 25% tariff on Mexican imports, excluding oil and energy products, which face a 10% tariff.

This decision, aimed at addressing trade deficits and border concerns, prompted Mexico to announce retaliatory tariffs targeting $20 billion worth of U.S. goods. Critics argue these measures undermine the United States-Mexico-Canada Agreement (USMCA) and could disrupt supply chains.

Both nations are bracing for the economic impact, with businesses and consumers facing potential cost increases. This trade dispute highlights the challenges of balancing domestic priorities while maintaining strong international partnerships in a connected global economy.

And there’s more…

Russia and Ukraine peace deal according to Trump. Taking rare earth and other minerals from Ukraine in a ‘deal’. The potential reshaping of Gaza to become the riviera of the middle east. Talk of taking over Greenland. Making Canada the 51st state. etc. etc.

And this is just what we already know after 8 weeks of Trump in power!

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U.S. markets tumble as Trump and his administration dismiss stock slump and economic concern

U.S. stocks fall

The Elon Musk-led Department of Government Efficiency claims to be streamlining the federal government’s spending

But it has so far sown confusion, with the Trump administration attempting to rehire employees it had previously fired.

DOGE presents a distorted reflection of the current state of the U.S. economy. U.S. President Trump has implemented a series of policies to try to stimulate effect, frequently modifying them mid-course, resulting in collateral damage within the country’s own borders.

U.S. markets have been on a downward trend and were significantly impacted on. Tesla shares have lost some 50% since Trump’s election. Consumers are also boycotting Tesla vehicles.

Tariffs, according to Trump, are meant to protect U.S. businesses and punish trade partners. But so far, it seems that the world’s biggest economy is the one suffering.

Dismal day in the markets

U.S. stocks experienced a rout Monday 10th March 2025 as fears of a recession gripped investors. The S&P 500 dropped 2.7%, the Dow Jones Industrial Average lost 2.08% and the Nasdaq Composite sank 4% in its worst session since September 2022.

The White House downplayed the market slump, saying it’s not as ‘meaningful’ as business activity (what does that mean exactly)? 

Asia markets also retreated Tuesday 11th March 2025. Japan’s Nikkei 225 fell around 1% amid a weaker-than-expected showing for its fourth-quarter gross domestic product (GDP).

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China’s exports miss forecasts as U.S. tariffs bite -imports record sharp decline

China exports drop

China’s exports in the January 2025 to February 2025 period rose 2.3% in U.S. dollar terms from a year earlier, significantly undershooting expectations of a 5% increase

That marked the slowest growth since April 2024 last year when exports increased by just 1.5% on the year, according to recently released data.

Imports surprised markets by declining 8.4% year-on-year in the first two months of 2025, the sharpest fall since July 2023.

Trump’s first round of 10% tariff hikes on Chinese goods took effect on 4th February 2025, followed by another 10% tariff increase just one month later, taking the cumulative levies to 20%.

China retaliated in kind.

* Data from the customs authority

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EU cuts interest rates again down to 2.5%

ECB interest rate cut

The European Central Bank (ECB) on 6th March 2025 reduced its interest rates to 2.5%, marking the sixth reduction since June 2024

The bank stuck to its plan in the face of economic challenges, including threats of U.S. tariffs and plans to boost European military spending.

This move reflects a shift in focus from combating inflation to supporting economic growth in the Eurozone.

Inflation has eased to 2.4% in February, and the ECB expects it to stabilise around its 2% target.

Economic growth forecasts for 2025 and 2026 have been lowered to 0.9% and 1.2%, respectively.

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Trump’s U.S. Bitcoin reserve plan falls short of expectations

National U.S. crypto reserve

The cryptocurrency market faced a significant downturn following the announcement of President Donald Trump’s U.S. Bitcoin reserve plan

The initiative aimed to position the United States as a global digital asset leader fell short of market expectations, triggering a wave of selloffs.

Bitcoin, the flagship cryptocurrency, experienced a 3% drop, trading at $87,586.86 before dipping further to $84,688.13. Other major cryptocurrencies, including Ethereum, XRP, and Solana, also saw declines, with Cardano’s ADA token suffering a sharp 13% drop.

The market’s reaction underscores the gap between investor hopes and the plan’s immediate implications.

The executive order established a strategic bitcoin reserve funded exclusively by assets seized in criminal and civil proceedings. While this approach ensures no taxpayer burden, it disappointed investors who anticipated direct government purchases to bolster Bitcoin’s value.

White House Crypto and AI Czar David Sacks emphasised the reserve’s role as a ‘digital Fort Knox’, but the lack of immediate buy pressure dampened market sentiment.

The broader economic context also played a role. Weakness in equities and ongoing tariff concerns added to the uncertainty, compounding the market’s reaction.

Analysts noted that while the reserve plan is a step toward legitimising cryptocurrencies, its short-term impact on prices was underwhelming.

Despite the initial disappointment, the strategic reserve could have long-term benefits. By centralising and securing digital assets, the U.S. government aims to strengthen its position in the global financial system.

However, for now, the market remains volatile, reflecting the challenges of balancing innovation with investor expectations.

As the crypto landscape evolves, the success of such initiatives will depend on their ability to deliver tangible value to both the market and the broader economy.

Will the U.S. government create a strategic crypto reserve by directly buying the digital asset and holding it as a national reserve?

At this moment in time, only Trump has that ‘key’.

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China announces 7.2% increase in defence spending and targets around 5% growth for 2025

China has unveiled plans for 2025, announcing a 7.2% increase in defence spending alongside a GDP growth target of around 5%

These decisions, revealed during the annual National People’s Congress in Beijing, reflect the nation’s strategic priorities amid a challenging and fast changing global landscape.

The 7.2% rise in defence spending mirrors last year’s increase, underscoring China’s commitment to modernizing its military capabilities. With a defence budget of approximately 1.78 trillion yuan ($245.7 billion), China maintains the world’s second-largest military budget, though it remains significantly smaller than that of the United States.

The funds are expected to support advancements in high-tech military technologies, including stealth fighters, aircraft carriers, and nuclear capabilities. This move comes as China navigates heightened tensions with the U.S., territorial disputes in the South China Sea, and concerns over Taiwan.

On the economic front, the target of around 5% GDP growth signals a cautious yet determined approach to sustaining economic momentum.

This figure aligns with last year’s target and reflects the government’s focus on addressing domestic challenges, such as a sluggish property market and subdued consumer spending, while countering external pressures like trade tensions with the U.S.

Premier Li Qiang emphasized the importance of boosting domestic consumption and fostering innovation to achieve this goal.

China’s dual focus on defence and economic growth highlights its efforts to balance national security with economic stability.

However, the path forward is fraught with uncertainties, including geopolitical tensions and the need for structural economic reforms.

As the world watches, China’s ability to navigate these challenges will shape its trajectory in the years to come.

China says

‘Tariff war, a trade war or any other type of war’ – China says it’s ready to fight U.S. until the end.

Ominous!

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Federal Reserve’s preferred recession indicator is flashing red again!

U.S. inverted yield curve

The Federal Reserve’s favourite recession indicator, the inverted yield curve, is flashing a danger sign once again.

This occurs when the U.S. yield on the 10-year Treasury note falls below that of the 3-month note. Historically, this has been a reliable predictor of economic downturns, with a strong track record over a 12-18-month timeframe.

The New York Fed closely monitors this indicator and provides monthly updates on the probability of a recession occurring within the next 12 months.

As of January 2025, the probability was just 23%, but this is expected to change significantly due to the recent inversion in the coming months.

The inversion suggests that investors are becoming more risk-averse and are anticipating a slowdown in economic activity.

While the yield curve inversion has a strong forecasting history, it is not perfect, and there is no certainty that growth will turn negative this time around

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UK Government finances in surplus but…

UK finances

The UK government has announced a significant budget surplus for January 2025, marking a notable achievement in its fiscal management

The surplus, which is the difference between what the government spends and the tax it takes in, amounted to £15.4 billion. This figure represents the highest level for the month of January since records began over three decades ago.

However, despite this impressive surplus, the figure fell short of the Office for Budget Responsibility’s (OBR) forecast of £20.5 billion. The shortfall has increased pressure on Chancellor Rachel Reeves to meet her self-imposed fiscal rules.

The OBR, which monitors the government’s spending plans and performance, will release its latest outlook for the UK economy and public finances on 26 March 2025.

The surplus was driven by a surge in tax receipts, particularly from self-assessed taxes, which are typically higher in January compared to other months. However, the lower-than-expected tax receipts suggest underlying weaknesses in the UK economy.

The Office for National Statistics (ONS) reported that borrowing in the financial year to January 2025 was £118.2 billion, which is £11.6 billion more than at the same point last year.

The government now faces the challenge of balancing its fiscal rules with the need to support economic growth. Weak economic growth and higher borrowing costs have reduced the headroom available to the Chancellor, making it more difficult to meet her fiscal targets.

Economists have suggested that Reeves may need to consider raising taxes or cutting public spending to stay within her fiscal rules.

As the UK economy continues to navigate these challenges, the government’s ability to manage its finances effectively will be crucial in maintaining credibility with financial markets and ensuring long-term economic stability.

The upcoming Spring Forecast will be a critical moment for the UK Chancellor to outline her plans and address the fiscal challenges ahead

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UK inflation higher-than-expected at 3% in January 2025

UK Inflation up

UK inflation rose sharply in January 2025 after airfares failed to fall by as much as usual and private school fees jumped.

The higher-than-expected inflation increase to 3% in the year to January 2025, from 2.5% in December 2024, means that consumer prices rose at the fastest rate for 10 months.

Why?

The U.K.’s inflation rate rose sharply to 3% in January, coming in above analyst expectations of a 2.8% reading, according to data released by the Office for National Statistics (ONS) on Wednesday 19th February 2025.

Core inflation, which excludes more volatile items such as energy, food, alcohol and tobacco prices, rose by 3.7% in the 12 months to January 2025, which was up from 3.2% in the previous month.

The ONS reported Wednesday 19th February 2025 that the largest upward contribution to the monthly change in the CPI came from transport and food and non-alcoholic beverages.

Interest rate reductions will likely pause on this news.

I wonder what spin the UK chancellor add.

Not good!

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Japan ekes out economic growth of 0.7% in 2024

Japan growth

Japan’s economy showed modest growth in 2024

The economy expanded by 0.7% in the fourth quarter, which was higher than market expectations of 0.3%. However, for the full year, Japan’s GDP growth was just 0.1%, a significant slowdown from the 1.5% growth seen in 2023.

Exports played a key role in boosting economic growth during the fourth quarter, while domestic demand remained relatively weak.

The Bank of Japan has been gradually raising interest rates, signalling a move away from the long-standing policies aimed at combating deflation.

It’s a mixed picture, but there are some positive signs, especially with the increase in business spending and a rebound in inbound consumption

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EEK! Only 0.1% growth for the UK

Tepid UK GDP

The U.K. economy grew by just 0.1% in the fourth quarter according to a preliminary estimate from the U.K.’s Office for National Statistics (ONS) released Thursday 13th February 2025.

Economists had expected the country’s GDP to contract by 0.1% over the period.

The services and construction sectors contributed to the better-than-expected performance in the economy, up 0.2% and 0.5% respectively, but production fell by 0.8%, according to the ONS.

Sluggish growth

The UK economy recorded zero growth in the third quarter, accompanied by lacklustre monthly GDP. There was a 0.1% contraction in October 2024 followed by a 0.1% expansion in November 2024.

On Thursday 13th February 2025, the ONS that growth had picked up in December, with an estimated 0.4% month-on-month expansion attributed to growth in and production.

Sluggish and a recent decline in inflation prompted the Bank of England to implement its interest rate cut of the year last week, reducing the benchmark rate to 4.5%.

The central bank indicated that additional rate cuts are anticipated as inflationary pressures diminish. However, it noted that higher energy costs and regulated price changes are projected to increase headline inflation to 3.7% in the third quarter of 2025.

Pressure

The expectation is that UK underlying inflationary pressures will continue to decline. The Bank of England expects the inflation rate to return to its 2% target by 2027.

The bank also halved the U.K.’s economic growth forecast from 1.5% to 0.75% this year.

Poor economic performance will add additional pressure on U.K. Chancellor Rachel Reeves, whose fiscal plans have been criticised for increasing the tax burden on businesses.

Critics say the plans, which increase the amount that employers pay out in National Insurance (NI) contributions as well as a hike to the national minimum wage, could harm investment, jobs and growth. This appears to be coming to fruition.

Chancellor Reeves defended her ‘dire’ Autumn Budget reportedly saying the £40 billion of tax rises were needed to fund public spending and that she is prioritising economic growth.

A poor start – 0.1% is an anaemic growth percentage!

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First interest rate cut for India since 2020

India interest rate

The Reserve Bank of India (RBI) has cut its benchmark interest rate by 25 basis points to 6.25%, marking the first rate cut since May 2020

This decision comes amid concerns over a slowdown in the world’s fifth-largest economy.

The central bank forecast real GDP growth for next fiscal year at 6.7%, and inflation rate at 4.2%.

The RBI’s Monetary Policy Committee (MPC) cited the need to support economic activity as the primary reason for the rate cut. The Indian economy has been experiencing sluggish growth, with GDP expanding at a slower pace than expected.

Data driven

The latest data shows that the economy grew by just 5.4% in the September quarter, the slowest rate in seven quarters. This slowdown has been attributed to tepid urban consumption and sluggish manufacturing.

Inflation, which had been a major concern for the RBI, has shown signs of easing. Retail inflation dropped to a four-month low of 5.22% in December 2024, providing the central bank with some room to focus on growth rather than solely on price stability.

RBI Governor Sanjay Malhotra, in his first monetary policy review, reportedly stated that inflation is expected to further moderate in 2025-26.

Benefits

The rate cut is expected to benefit borrowers, including homeowners and small businesses, by making borrowing cheaper. However, it may also lead to lower returns on fixed deposits, posing a challenge for savers, especially senior citizens who rely on interest income.

The government’s recent budget, which included sweeping income tax cuts, is also aimed at putting more money in the hands of consumers and boosting spending.

Together with the rate cut, these measures are expected to provide a much-needed stimulus to the economy.

While the rate cut is a positive step towards reviving growth, it also underscores the challenges facing the Indian economy.

The RBI will need to carefully monitor inflation and other economic indicators to ensure that the measures taken do not lead to unintended consequences such as higher inflation.

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Bank of England cuts interest rate to 4.50% and cuts growth forecast for 2025

BoE

The Bank of England has halved its growth forecast for 2025 as it cut interest rates to 4.50% – the lowest for around 18 months

The economy is now expected to grow by 0.75% in 2025, the Bank of England reportedly said, down from its previous estimate of 1.5%.

Not good news for the chancellor, Rachel Reeves.

Bank of England cuts interest rates to 4.5% amid economic slowdown

The Bank of England announced a reduction in its benchmark interest rate from 4.75% to 4.5%, marking the third cut since August 2024.

This decision comes as a response to the ongoing economic challenges facing the UK, including sluggish growth and concerns about the potential effect of Trump’s tariffs.

The primary reason behind this rate cut is the Bank’s effort to stimulate economic activity by making borrowing cheaper.

With the cost of borrowing now at its lowest level since June 2023, homeowners with variable rate or tracker mortgages will see immediate relief, with monthly repayments expected to decrease by approximately £29 per month on an average mortgage.

Small businesses, which have been struggling under heavy borrowing burdens, are also expected to benefit from this move.

Growth concerns linger

The Bank’s decision follows a series of disappointing economic indicators. The latest GDP figures showed that the economy only grew by 0.1% in November 2024, falling short of economists’ forecasts.

This sluggish growth, coupled with two months of falling output, has led the Bank to revise its growth forecast for 2025 downward.

The Bank now anticipates no growth during the fourth quarter of the year, and some economists are predicting as many as six rate cuts this year, potentially bringing the rate down to 3.25%.

While the rate cut is expected to provide some relief to borrowers, it also raises concerns about the long-term impact on savings and investment. With interest rates at historic lows, savers may find it challenging to earn meaningful returns on their deposits.

Additionally, the low-interest rate environment could encourage excessive borrowing and lead to asset bubbles, posing risks to financial stability. Has inflation finished?

The Bank of England’s decision to cut interest rates to 4.50% is a strategic move aimed at boosting economic activity and providing relief to businesses and homeowners.

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Trumps tariffs impact – what a difference a day makes!

U.S. tariff war

Trump pauses tariffs on Mexico and Canada amid China’s retaliatory measures

In a surprising turn of events, President Donald Trump announced a 30-day pause on tariffs targeting Mexico and Canada, just as China introduced retaliatory tariffs on a range of U.S. goods. This move comes amidst escalating trade tensions and a looming threat of a global trade war.

The decision to pause tariffs on Mexico and Canada was announced following discussions with the leaders of both countries.

Border security

Trump cited the need to address border security and drug trafficking concerns, particularly the flow of fentanyl into the United States. In response, Mexico committed to deploying 10,000 National Guard officers to the U.S. border, while Canada agreed to appoint a ‘Fentanyl Czar’ and launch a joint strike force to combat organised crime

However, while Trump’s administration has temporarily halted tariffs on Mexico and Canada, the situation with China remains tense. China swiftly introduced retaliatory tariffs on U.S. imports, including a 15% levy on coal and liquefied natural gas (LNG), and a 10% tariff on crude oil and farm equipment.

These measures are seen as a direct response to the U.S.’s 10% tariff on Chinese goods, which took effect earlier this week.

Global impact

The global economic impact of these trade disputes is significant. Analysts warn that prolonged trade tensions could lead to higher prices, disrupted supply chains, and slower economic growth.

Businesses and consumers alike are bracing for the potential fallout, with many expressing concerns about the uncertainty and instability these tariffs bring.

Despite the temporary 30-day reprieve for Mexico and Canada, Trump has indicated that tariffs could be reinstated if the countries do not meet his demands for increased border security and drug control measures.

The administration is also considering imposing tariffs on imports from the European Union, further complicating the global trade landscape.

As negotiations continue, the world watches closely to see if a resolution can be reached or if Trumps self-imposed trade war will escalate further.

The coming weeks will be crucial in determining the future of international trade relations and the economic stability of nations involved.

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Tariff Man – Trumps tariffs take affect – markets fall!

U.S. Tariffs

U.S. President Donald Trump’s tariffs have moved from threat to reality.

U.S. President Donald Trump launched a series of tariffs on Saturday. U.S. imports from Mexico and Canada will face a 25% duty, while those from China will be subject to a 10% tariff. Energy resources from Canada will face a lower 10% tariff.

Canada’s Prime Minister Justin Trudeau announced on the same day retaliatory tariffs of 25% against $155 billion in U.S. goods. Industry leaders in the U.S. have expressed concern over those tariffs.

They cap off a wild start to the new year during which a new U.S. president entered the White House and a new Chinese artificial intelligence player, DeepSeek upended the industry.

Indices at new highs

Something else that was new in January: the highest-ever closing level for the S&P 500, Dow Jones and new FTSE 100 highs were enjoyed too.

With tariffs now in effect and the possibility of a trade war looming markets may struggle to new heights in the short term.

Even Big Tech earnings and the jobs numbers coming out this week, typically market-moving reports, are likely to play second fiddle to policy developments.

Markets react

Markets are already responding to the news. Prices of oil and gold, which typically rise during periods of volatility, have increased, but Bitcoin is trading lower. It remains uncertain whether these will be a temporary shock or a sustained trend.

China’s factory activity experienced slower growth in January 2025 compared to December 2024 and is expected to be adversely affected as U.S. companies seek to reduce their dependence on Chinese imports.

Trump’s current tariffs may be targeted, but it’s hard to see any country or sector escaping the tariff turmoil.

The EU is also in line for a tariff attack and maybe the UK after.

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FTSE 100 hits new all-time high in boost for London

FTSE 100

The FTSE 100, London’s premier stock index, has recently achieved a new all-time high, closing at 8,646.88 on 30th January 2025.

This milestone marks a significant boost for the City of London, reflecting strong corporate performance, investor confidence, and favourable economic conditions.

Factors driving the surge

Several key factors have contributed to the FTSE 100’s impressive rise

  1. Strong Corporate Updates – Companies like St James’s Place and Airtel Africa have reported robust financial results, attracting investor interest. St James’s Place, for instance, saw its shares rise by over 10% after announcing it had attracted £4.3 billion in assets last year.
  2. Value Seeking – With extreme valuations of some American companies, international investors are looking for better value in London. The FTSE 100’s relatively lower price-to-earnings (P/E) ratio and high dividend yield make it an attractive option.
  3. Return of ‘Animal Instincts‘ – The market has seen a resurgence of mergers and acquisitions, driven by investor optimism and confidence in the economic outlook.
  4. Interest Rate Expectations: Hopes for further interest rate cuts by the Bank of England have also played a role in lifting the index. The European Central Bank’s recent decision to cut interest rates has further fueled investor optimism.
  5. Weaker Pound – The pound’s weakness against the U.S. dollar has benefited many FTSE 100 companies that earn a significant portion of their revenues overseas. This has boosted the relative value of their foreign earnings when converted back to sterling.

Implications for the City of London

The new high represents a significant boost for the City of London, especially amid concerns that the market was losing ground to American exchanges.

The FTSE 100’s performance highlights the resilience and attractiveness of London’s financial markets, even in the face of global economic uncertainties.

FTSE 100 new high reached 30th January 2025

FTSE 100 new high reached 30th January 2025

The return of ‘animal instincts’ had prompted more mergers and acquisitions in London, while the extreme valuations of some American companies had sent investors looking for better value elsewhere. This shift in investor sentiment underscores the importance of London’s financial markets in the global economy.

Looking Ahead

While the FTSE 100’s recent performance is encouraging, it is essential to remain cautious. Market volatility and global economic uncertainties, such as the outlook for artificial intelligence-related growth stocks and the potential impact of a Trump presidency, could influence future market movements.

Nevertheless, the FTSE 100’s new all-time high is a testament to the strength and resilience of London’s financial markets. As investors continue to seek value and stability, the FTSE 100 is well-positioned to remain a key player in the global financial landscape.

A list of the companies in the FTSE 100 as of January 2025

No.Company NameNo.Company Name
13i Group PLC51Intertek Group PLC
2Admiral Group PLC52International Consolidated Airlines Group SA
3Airtel Africa PLC53JD Sports Fashion PLC
4Alliance Witan PLC54Kingfisher PLC
5Anglo American PLC55Land Securities Group PLC
6Antofagasta PLC56Legal & General Group PLC
7Ashtead Group PLC57Lloyds Banking Group PLC
8Associated British Foods PLC58London Stock Exchange Group PLC
9AstraZeneca PLC59LondonMetric Property PLC
10Auto Trader Group PLC60M&G PLC
11Aviva PLC61Marks & Spencer Group PLC
12BAE Systems PLC62Melrose Industries PLC
13Barclays PLC63Mondi PLC
14Barratt Redrow PLC64National Grid PLC
15Beazley PLC65NatWest Group PLC
16Berkeley Group Holdings PLC66Next PLC
17BP PLC67Pearson PLC
18British American Tobacco PLC68Pershing Square Holdings Ltd
19British Land Co PLC69Persimmon PLC
20BT Group PLC70Phoenix Group Holdings PLC
21Bunzl PLC71Prudential PLC
22Centrica PLC72Reckitt Benckiser Group PLC
23Coca-Cola HBC AG73RELX PLC
24Compass Group PLC74Rentokil Initial PLC
25Convatec Group PLC75Rightmove PLC
26Croda International PLC76Rio Tinto PLC
27DCC PLC77Rolls-Royce Holdings PLC
28Diageo PLC78Sage Group PLC
29Diploma PLC79Sainsbury (J) PLC
30Easyjet PLC80Schroders PLC
31Endeavour Mining PLC81Scottish Mortgage Investment Trust PLC
32Entain PLC82Segro PLC
33Experian PLC83Severn Trent PLC
34F&C Investment Trust PLC84Shell PLC
35Fresnillo PLC85Smith & Nephew PLC
36Games Workshop Group PLC86Smith (DS) PLC
37Glencore PLC87Smiths Group PLC
38GSK PLC88Spirax-Sarco Engineering PLC
39Haleon PLC89SSE PLC
40Halma PLC90St. James’s Place PLC
41Hargreaves Lansdown PLC91Standard Chartered PLC
42Hikma Pharmaceuticals PLC92Taylor Wimpey PLC
43Hiscox Ltd93Tesco PLC
44Howden Joinery Group PLC94Unilever PLC
45HSBC Holdings PLC95Unite Group PLC
46IMI PLC96United Utilities Group PLC
47Imperial Brands PLC97Vodafone Group PLC
48Informa PLC98Weir Group PLC
49Intercontinental Hotels Group PLC99Whitbread PLC
50Intermediate Capital Group PLC100WPP PLC
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Fed holds rates steady – calculates a less confident view on inflation

Federal Reserve

The Federal Reserve maintained its key interest rate on Wednesday 29th January 2025, reversing a recent trend of policy easing as it assesses the likely turbulent political and economic landscape ahead.

As expected, the Federal Open Market Committee (FOMC) left its borrowing rate unchanged in a range between 4.25% and 4.50%.

The decision followed three consecutive cuts since 2024 and marked the first Federal Reserve meeting since frequent Fed critic Donald Trump assumed the presidency last week. He almost immediately expressed his intention for the central bank to cut rates.

The post-meeting statement scattered a few clues about the reasoning behind the decision to hold rates steady. It offered a more optimistic view on the U.S. labour market while losing a key and telling reference from the December 2024 statement that inflation ‘has made progress toward’ the Fed’s 2% inflation goal.

Statement

Text appearing for the first time in the new statement is in red and underlined. Black text appears in both statements.

Text appearing for the first time in the new statement is in red and underlined. Black text appears in both statements.

The decision comes against a volatile political backdrop.

In just over a week, Trump has disrupted Washington’s policy and norms by signing hundreds of orders aimed at implementing an aggressive agenda.

The U.S. president has endorsed tariffs instruments of economic and foreign policy, authorised a wave of deportations for those crossing the border illegally, and a series of deregulatory initiatives.

Trump spoke of his confidence that he will bring down inflation and said he would ‘demand’ that interest rate be lowered ‘immediately.’

Although the president lacks authority over Fed beyond nominating board members, Trump’s statement indicated a potentially contentious relationship with policymakers, similar to his first term.

Inflation has moved down sharply from the 40-year peak it hit in mid-2022, but the Fed’s 2% goal has remained elusive.

In fact, the central bank’s preferred pricing gauge showed headline inflation ticked higher to 2.4% in November, the highest since July, while the core measure excluding food and energy held at 2.8%.

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Recent surprise rise in UK borrowing – deals yet another disappointment for the chancellor

UK borrowing

The latest UK borrowing figures, reveal a significant increase in public sector net borrowing. In December 2024, the UK government borrowed £17.8 billion, which is the highest figure for the month for four years.

This amount was reportedly £10.1 billion higher than the same month last year and exceeded the £14.1 billion forecast by most economists.

The reported rise in borrowing was driven by several factors, including increased spending on public services, benefits, debt interest, and capital transfers. The interest payable on central government debt alone was £8.3 billion, nearly £4 billion higher than the previous year.

Additionally, a reduction in National Insurance contributions following rate cuts earlier in 2024 partially offset the increase in tax receipts.

Chancellor Rachel Reeves faces a challenging fiscal environment, with borrowing costs rising due to lower economic growth, higher public sector wages, and increased benefits payments. The unexpected jump in December 2024’s borrowing highlights the difficulties in balancing the budget and maintaining economic stability. The Chancellor’s budget was one of growth, but employer NI hikes have unravelled her ‘growth’ plan.

Despite the rise in borrowing, government bond prices remained relatively stable, suggesting that traders were not overly concerned by the surge. However, the overall fiscal position remains precarious, with public sector net debt estimated at 97.2% of GDP, the highest level since the early 1960s.

The government has pledged to take a hard line on unnecessary spending and to ensure that every penny of taxpayer money is spent productively.

As the fiscal year progresses, the Chancellor will need to navigate these financial challenges carefully to maintain economic stability and growth.

However, it is anticipated next month, following the January tax income boost, figures will appear favourable for the government, albeit temporarily.

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S&P 500 at new high!

Stocks up

On 23rd January 2025, the S&P 500 reached a new all-time high, closing at 6,118.71

This milestone was driven by a combination of strong fourth-quarter earnings results and a significant announcement from President Trump regarding a $500 billion investment in AI infrastructure.

The investment, led by OpenAI, SoftBank Group Corp., and Oracle Corporation, aims to develop data centres and create over 100,000 jobs, further fueling investor optimism.

Additionally, solid earnings reports from major corporations like Netflix and Capital One Financial Corporation contributed to the positive market sentiment.

The S&P 500’s new high reflects the broader market’s confidence in the economic outlook and the potential for continued growth in the technology sector.

But be careful. Despite ‘pundits’ suggesting the S&P 500 could hit 6,600 or higher this tear – we are now in pricey territory and a pullback is likely due soon.

S&P 500 one-year chart

S&P 500 one-year chart

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Japan increases interest rate chasing down rising inflation

Bank of Japan

The Bank of Japan recently raised its interest rate by 25 basis points to 0.5%, marking the highest level since 2008

This decision was influenced by sustained inflation and rising wages, signalling a cycle in the economy.

The move was expected by many economists and resulted in the Japanese yen strengthening against the dollar.

The Bank of Japan has indicated that more interest rate hikes may be on the horizon.

One year Nikkei chart

One year Nikkei chart
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S&P 500 touches new record high!

Stocks rose on Wednesday 22nd January 2024 with the S&P 500 reaching a new all-time high, as technology shares including Nvidia and Oracle surged on optimism surrounding artificial intelligence and President Donald Trump’s new term in office.

The S&P 500 advanced after hitting an intraday record of 6,100.81, exceeding the last milestone touched in December 2024 before pulling back. The index closed at 6,086.37, slightly below its all-time closing high.

S&P 500 one-month chart as of Wednesday 22nd January 2024

S&P 500 one-month chart as of Wednesday 22nd January 2024

The S&P’s move to an all-time high comes as investors witnessed a December 2024 pullback. Despite the index ending last year with a 23% gain, the S&P 500 shed 2.5% in December 2024, as traders fretted that the Federal Reserve wouldn’t be able to cut rates as much as anticipated.

That lacklustre performance bled into the first few trading sessions of 2025, but some data indicating modest easing on the inflation front and good earnings results have helped the market recover.

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UK FTSE 100 back in favour as it breaks new highs!

FTSE 100

The FTSE 100, the UK’s premier stock market index, has recently reached unprecedented new highs, marking a significant milestone in the UK financial world.

On 20th January 2025, the FTSE 100 closed at a record high of 8,548, surpassing the 8,500 barrier for the first time.

This achievement is a testament to the resilience and strength of the UK’s largest companies, even amid global economic uncertainties.

Several factors have contributed to this remarkable performance. Firstly, the anticipation of potential interest rate cuts by the Bank of England has fueled investor optimism. Lower interest rates typically reduce borrowing costs for companies, encouraging investment and expansion, which in turn boosts stock prices.

Additionally, the recent rise in oil prices has significantly benefited major oil companies like BP and Shell, which are key components of the FTSE 100.

FTSE 100 reaching new highs – one month chart as of 22nd January 2025 (08:21)

The banking sector has also played a crucial role in driving the index higher. With full-year earnings reports expected soon strong performance from banks could further propel the FTSE 100.

Furthermore, the index’s composition, which includes a substantial number of companies with global operations, has allowed it to benefit from the weaker pound. A weaker pound makes UK exports more competitive and increases the value of overseas earnings when converted back to sterling.

Market analysts are now speculating whether the FTSE 100 could reach the 9,000 mark in the coming months. While this would represent a significant rise from current levels, it is not entirely out of reach given the current momentum and favorable economic conditions.

However, some caution that the index’s rapid ascent may be followed by periods of volatility, especially as global economic conditions evolve.

In conclusion, the FTSE 100’s recent surge to new highs is a reflection of the robust performance of its constituent companies and the broader economic environment.

As investors continue to navigate the complexities of the global market, the FTSE 100 remains a key barometer of the health and vitality of the UK economy.

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China’s fourth-quarter GDP grows at 5.4%

China GDP

China’s economy expanded by 5.4% in the fourth quarter, surpassing market expectations, as a series of stimulus measures propelled the economy to meet Beijing’s growth target

This final-quarter surge helped elevate China’s full-year GDP growth to 5.0% in 2024, with the official target of around 5%.

In December 2024, retail sales increased by 3.7% from the previous year, exceeding forecasts of around 3.5%. Industrial output reportedly grew by 6.2% compared to previous year, surpassing expectations of 5.4%.

Contrast these figures to the UK’s quite pathetic 0.1% growth recently announced.

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UK eeks out tepid 0.1% growth

UK growth

The UK economy grew for the first time in three months – but only just.

The tiny growth was driven in part by an increase in trade for pubs, restaurants, and the construction industry.

Official figures showed an expansion of 0.1% after the economy contracted in each of the two months.

The return to growth will be a welcome sign for the government after recent turbulence in financial markets sent borrowing costs to their highest level in several years and caused the value of the pound to fall.

However, the figure was lower than economists had expected, with declines in manufacturing and business rentals and leasing.

Chancellor Rachel Reeves reiterated her pledge to go ‘further and faster’ to improve economic growth in order to boost living standards, declaring it was the ” number one priority” for the government.

‘That means generating investment, driving reform, and a relentless commitment to rooting out waste in public spending,’ she reportedly said. She also repeated her accusation of blame at the Tories for the low growth. The chancellor surely cannot expect to continue escaping accountability with the blame game tactic for much longer.

However, with tax rises set to come into effect in April 2025, businesses have repeatedly warned that the extra costs faced through in National Insurance, as well as the minimum wage, could impact the economy to grow, with employers expecting to have less cash to give pay rises and create new jobs.

In the three months to November, the economy is estimated to have shown no growth, as calculated by the Office for National Statistics (ONS).

UK November 2024 0.1% growth

UK November 2024 0.1% growth

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U.S. core inflation rate slows to 3.2% in December 2024 – less than expected and sets off market feeding frenzy

Inflation

The U.S. Consumer Price Index rose by a seasonally adjusted 0.4% for the month, resulting in a 12-month inflation rate of 2.9%. This figure was consistent with forecasts.

Core CPI annual rate was 3.2%, down from the month before and slightly better than the 3.3% outlook.

Stock markets surged following the release as Treasury yields fell.

U.S. consumer price index

Year-on-year percent change – Jan. 2021 to Dec. 2024

U.S. core inflation (CPI) Year-on-year percent change  Jan. 2021–Dec. 2024
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Latest U.S. producer price index inflation rose 0.2% – in line with expectations

Inflation

The latest U.S. producer price index (PPI) data indicates that wholesale inflation increased by 0.2% in December 2024, primarily driven by higher energy costs

This rise was slightly less than the 0.4% gain witnessed in November 2024. Compared to a year earlier, producer prices were up by 3.3%.

The rise in energy prices, particularly a 9.7% increase in gasoline prices, was a significant factor in the overall increase. Food prices, on the other hand, reportedly fell by 0.1% in December 2024. Excluding food and energy, core wholesale inflation was unchanged from November 2024 but up 3.5% from a year-on-year.

The PPI report is closely watched because it can offer an early look at where consumer inflation might be headed. Some components of the PPI, such as healthcare and financial services, flow into the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index