Matt Britzman, senior equity analyst, Hargreaves Lansdown: “Trump lit the fuse on tariff fears again last night, leaving investors bracing for fresh volatility. Letters went out to a host of countries warning of reciprocal tariffs if they don’t reach trade deals, seemingly putting the US right back to square one as the threatened rates looks eerily like those seen on ‘Liberation Day’. Still, the extension until August has offered some reprieve and European markets are largely brushing off the news with a mixed open this morning. The FTSE 100 managed to creep higher, hovering just shy of the all-time high’s seen last month.
Wall Street was the first to react last night, with major indexes sliding over 1% as the tariff news hit the reels. After recent all-time highs for the S&P 500 and Nasdaq, the new 1 August tariff deadline and fears of skipped negotiations have markets on edge, especially with the US-China trade deal still hanging in the balance. There’s clearly a desire from the White House to get deals done, reflected in the latest extension of the tariff deadline. Investors are still digesting the latest developments, with US futures suggesting a claw back of some of yesterday’s losses when markets open this afternoon. The lack of any real impact from tariffs on inflation, for now at least, has likely kept a lid on the fallout. Still, the clock is ticking, and the White House can only extend deadlines for so long before being forced to swap the carrot for the stick, setting up a volatile few weeks ahead.
The vix index, a key measure of market volatility, spiked on the tariff news but remains significantly lower than levels seen back in April when sweeping tariffs were first announced. Markets have clearly become more tolerant of the tariff and trade drama than earlier in the Trump presidency, a good signal that the current momentum has support beneath it.
Brent crude oil futures slipped to around $69.4 per barrel in early trading, retreating from a two-week high as US tariffs and OPEC+’s 548,000 barrel per day output hike in August fuelled fears of weaker demand and a supply glut. Losses were tempered, however, by renewed geopolitical risks after Yemen’s Houthi rebels attacked Red Sea shipping routes, threatening vital trade corridors.“
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