HL LIVE
HL commentary as it happens
Friday 11th July
Brent Crude trades higher as geopolitical concerns swirl
Oil prices have trod higher as geopolitical concerns continue to swirl. Attacks on vessels in the red sea by Houthi rebels have keep concerns about supply disruptions from the in Middle East alive. Nevertheless, trade uncertainty is expected to keep a lid on prices, with OPEC lowering its global demand forecast for future years.
The UK economy contracted in May by 0.1%
Some shine looks set to come off the FTSE 100, after the index shot to a fresh record closing high, with lacklustre performance expected in early trade. Amid higher trade tensions, the latest growth snapshot for the UK may act as a bit of a drag on confidence. The economy contracted in May by 0.1%, with a drop in production the main culprit for the contraction. This is a set-back for Chancellor Rachel Reeves who is already wedged in between a rock and a hard place when it comes to the public finances. A fall in activity is likely to hit tax receipts, just at a time when there’s a bigger hole to fill after the government was forced to backtrack on spending cuts to welfare.
However, the Footsie still looks set to cling onto the bulk of yesterday’s gains. There remain hopes that despite the trade bluster from Trump, the tariffs won’t weigh on the global economy as much as had been feared, especially as new trading relationships are being forged. The defensive nature of the FTSE 100 is also well-positioned for any rotation out of the US, as investors look to diversify and insulate their portfolios against Trump induced turmoil and potential volatility among the tech mega-caps. The UK was the first to do a trade deal with the US and although fiscal challenges remain for the government, the UK’s reputation for stability has been shored up. With a longer-term growth plan in the works, it set to keep sentiment largely on side.
Trump promises duties of 35% on imports for Canada
Donald Trump is rattling sabres in his trade war again, causing more nervousness to creep into sentiment. The US President has ratcheted up threats against Canada promising duties of 35% on imports, while blanket tariffs of 15-20% are being planned for other nations. The baseline assumption is that these will eventually be negotiated down, and that’s it’s a tactical ploy. Nevertheless, there is plenty of weariness around about the more fractured nature of trade relationships in the Trump era. There had been hopes that the EU had inched closer to a deal with the US, but it remains elusive for now, with the President telling leaders to expect a letter detailing new tariffs terms today or tomorrow.
Thursday 10th July
FTSE 100 has hit a new intraday high of 8965
The Footsie is footloose, shrugging off trade worries to dance to an all-time high. Even a fresh volley of tariff letters from President Trump has failed to knock investors sentiment. The President’s latest moves are seen as posturing, and there is high expectation that there will be plenty of negotiations to head off higher duties in the weeks ahead. Indications that the EU is edging closer to a deal with the US, with an agreement thought to be possible in a few days, has added to the positive vibes. So, hopes are riding high that the effects on global growth won’t be as onerous as feared.
The FTSE 100 is stuffed full of multinationals which are sensitive to the outlook for the world economy and with the so-called ‘TACO trade’ in full swing, it’s benefiting from more optimism around. Investors expect that Trump will ‘chicken out’ from imposing his threat.
Miners have roared back to life, topping the index. Copper prices have hit record levels, which will benefit major producers in the short-term, while fears about a longer-term tax on imports appear to be receding. There’s a lot of second guessing going on. Trump has underlined copper’s strategic importance and critical for security, so the expectation is that he ultimately won’t want US manufacturers to pay inflated prices for this key component for crucial infrastructure like semiconductors data centres, radar systems and missile defence.
Oil hovers around $70 a barrel
Oil markets are on edge as Trump’s new tariff threats add to recent pressure on copper and other imports, while a surprise 7.1-million-barrel crude stockpile build defied expectations. Still, strong demand for gasoline, tensions in the Red Sea, and upcoming OPEC+ supply increases (with the UAE highlighting steady inventories) are keeping prices somewhat supported.
US markets gear up for earnings season
US investors looked the other way as President Trump issued another wave of tariff letters. But uncertainty is still in the air, as investors gear up for an important earnings season in the coming weeks. So far, tariffs haven’t made a noticeable dent in inflation, but the real test is whether they’ll start to weigh on corporate earnings. Growth expectations have been falling all year, which could set the stage for upside surprises - if companies have managed to absorb tariff costs through productivity and efficiency gains. Still, futures point to a weaker open today, as this unloved bull market continues to wrestle with elevated volatility.
FTSE 100 opens higher
Investors have voted with their wallets, brushing aside tariff uncertainty to send risk-on assets higher. If all-time highs for NVIDIA and Bitcoin are anything to go by, markets seem to be pricing in very little chance of any meaningful disruption to the bull party, at least in the near term. US markets closed higher yesterday, and European stocks have joined in this morning, with the FTSE 100 trading up at the open.
Wednesday 9th July
FTSE shrugs off Trump’s threat of new massive tariffs
The FTSE 100 has opened up about 25 points shrugging off Donald Trump’s threat of massive tariffs on copper and pharmaceuticals. Macro pressures are said to be building, but with AI transforming the creative industry, questions are bound to be raised about the group’s operating model and strategy.
Brent Crude steady at near $70 a barrel
The renewed trade tensions haven’t been enough to erase the gains seen for Brent Crude oil so far this month. An unexpected increase in inventories reported by the American Petroleum industry has raised further demand concerns and official crude inventory figures from the Energy Information Administration (EIA) are due later today. But prices remain just shy of $70 per barrel as supply continues to dominate the narrative. There’s been another attack on a vessel in the Red Sea raising concerns about this key crude oil supply route. And in the US, the EIA has trimmed this year’s production forecast to 13.37 million barrels per day. With rig counts at near four-year lows there’s little sign that American producers are incentivised to ‘drill baby drill’.
Trump steep threatens on copper and pharmaceuticals
The White House’s war of words on international trade has intensified again as Donald Trump touted the prospect of 50% tariffs on copper and a border levy of 200% on pharmaceuticals, which have traditionally been sheltered from import charges. The President also said that semiconductor tariffs will be announced soon. But details of when how and who remain thin on the ground. Confusion has become the new normal with Asian stocks showing little in the way of firm direction overnight. And despite the heavy weighting of pharmaceutical and mining companies on the FTSE 100, the index is expected to hold onto most of yesterday’s small gains at the open.
It’s been no secret to drug developers that their exemption has been under threat and the industry has already had some time to prepare mitigation plans. For now, that exemption remains in place and it could be another year before any taxes come into effect. Washington needs to tread a fine line between acting tough on trade and maintaining the electorates access to vital medicines. For many treatments there just aren’t any alternatives.
That said, European pharmaceutical companies already have a strong manufacturing footprint in the US, and the likes of AstraZeneca, Novartis and Roche have already announced multi-billion-dollar expansion plans in-country. There’s likely to be more of the same across the industry. Fears over tariffs, most favoured nation pricing and US policy on vaccines are weighing on sector sentiment. That presents some opportunities to invest in companies strong on both innovation and long-term growth drivers.
For industrial metals there’s already a precedent with steel and aluminium tariffs already at 50%. The UK currently remains at the previous rate of 25% and that could drop to zero under the trans-Atlantic trade deal. With copper too there could well be some carve-outs. But that’s not stopped copper prices surging to record highs with spot prices at nearly $400 as buyers scramble to build their stockpiles.