HL commentary as it happens

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.

Oil price is stable with global tariffs undecided

The price of oil hasn’t shifted much, as traders await the outcome of the OPEC+ meeting on potential production increases. With the global tariff situation still to be decided, Brent Crude is trading around $68 a barrel. For the week it looks set to post a gain of around 2%, recovering from its steepest weekly fall a in over two years after fears of an escalation of the Iran Israel conflict subsided.

UK government borrowing costs retreat further

Concerns about the UK’s fiscal position have retreated after Prime Minister made a big display of support for Chancellor Rachel Reeves. With the government intent on projecting an image of unity, it’s helped stabilise the bond markets. 10-year gilt yields, assessed to judge UK government borrowing costs, have returned to levels they were at before Rachel Reeves’ distressed appearance in parliament and sterling has continued to claw back ground. However, there is speculation that given the difficulties the government has faced in finding savings from welfare budgets, tax rises are likely in the Autumn Budget. Bets are rising that the Bank of England will cut interest rates more quickly with a reduction in August increasingly on the cards. So, that’s kept a bit more downwards pressure on sterling.

US Congress passes the big, beautiful tax bill

The huge and highly controversial tax and spending package passed in Congress, is likely to help stimulate growth in the short term but piles up longer-term financing problems for the US. Trump called it his big, beautiful bill but it risks ending up in an ugly debt spiral. It is forecast to add $3.4 trillion to the huge US debt pile over the next decade. Fans of the tax plan claim it will help boost activity and the tax take but forecasts vary widely about the long-term effect. The Congressional Budget Office estimates it’ll only increase growth by 0.5% over 10 years.

Lower blanket tariffs are expected as Trump runs out of time to do deals

The Trump administration is running out of time to do specific detailed trade deals. and the President has said that instead blocs of nations will be informed by letter that they’ll face tariff rates of around 20-30%. It appears we are returning to a diluted form of blanket tariff policy, which sparked marked mayhem in April. Headline rates threatened have come down markedly but the disruption to trade and growth around the world is still set to be significant. Talks with the European Union are continuing and although a deal is expected, it’s likely to be an eleventh-hour agreement. The 9 July deadline won’t mark the end of the tariff story. There are set to be plenty more twists to come, and there is still a lot of expectation baked in that Trump will eventually retreat further from these latest tariffs threats.

Wall Street has been riding high on signals that so far that Trump’s trade policies haven’t yet weakened the economy. The closely watched US jobs report for June signalled much more strength in the labour market than expected. Although it’s wiped out hopes of an interest rate cut this month, it didn’t hit sentiment, which appears more focused on the resilience of the world’s largest economy. Markets are closed for the 4 July holiday but more cautions is set to creep into sentiment and show up when trading resumes on Monday.

FTSE 100 falls in early trade as worries simmer over trade deadlines

Optimism is evaporating at the end of the week, as the US tariff deadline looms and the signs are that many countries will face higher duties than expected. There’s a distinct lack of Friday fizz for the FTSE 100, as investors mull repercussions for the global economy. Investors are also assessing the implications of the passing of Trump’s big tax cut bill which will add to the mountain of US debt.