The FTSE 100 index today fell sharply on a “Manic Monday” first day of trading since Donald Trump announced tariffs on Mexico, Canada and China.
Meanwhile, the US dollar climbed against a basket of currencies as traders digested the consequences of the weekend move.
Market update: FTSE 100 down 1% in volatile session, miners 4% lower
09:26 , Graeme EvansThe FTSE 100 index today fell 1% as Donald Trump’s 25% tariffs on Canada and Mexico triggered a major bout of volatility across financial markets.
Big fallers in London’s top flight included drinks giant Diageo, given that an estimated 46% of its US sales are imported from Mexico and Canada.
Its shares fell 3% or 75.5p to 2343.5p ahead of interim results tomorrow. Other global players under pressure included the speciality chemicals firm Croda International, which reversed 3% or 106.4p to 3237.6p.
Mining stocks also weakened as copper prices fell to a three-week low amid fears over the impact of global trade volatility. Antofagasta lost 4% or 43p to 1042.5p and Glencore retreated 9.65p to 340.85p.
Other fallers included the Nvidia backer Scottish Mortgage Investment Trust, which slid 4% or 43p to 1042.5p.
Only five stocks made positive territory, including the traditionally safe haven investments of Imperial Brands and BAE Systems.
The FTSE 100 index fell 119.53 points to 8554.53, a decline of 1.4% after setting a series of records last week. The Dax and Cac 40 were both 1.5% lower amid the prospect of tariffs on European Union goods.
Susannah Streeter, head of markets at Hargreaves Lansdown said: “Investors are buckling up for a rollercoaster ride for the global economy, with the European Union expected to be next in line for punitive duties.”
The dollar initially surged amid expectations the inflationary impact of the tariffs will result in US interest rates staying higher for much longer than expected.
However, the pound later recovered a little to above $1.23 as traders bet that rates may end up moving lower if tariffs end up derailing the US economy.
Tariffs heighten Diageo results jitters
08:56 , Graeme EvansDiageo shares have fallen 3% or 71p to 2348p. The drinks giant reports half-year results tomorrow, the same day as the tariffs are due to come into force.
US bank Jefferies points out that 46% of the company’s US sales are imported from Mexico and Canada. This includes Crown Royal, Don Julio and Casamigos.
The bank sees Diageo using the results to provide a new guidance framework of 3-6% organic sales growth and 4-8% on earnings, effective from the 2027 financial year rather than 2026.
It added: “This provides a cushion to absorb potential volatility around possible tariffs under Trump 2.0 and to build in 2026 as a recovery year to rebuild credibility before hitting full stride.”
Mining stocks also came under pressure after copper futures fell to a three-week low amid a stronger dollar and the prospect of global trade volatility.
Antofagasta reversed 4% or 43p to 1042.5p while Glencore retreated 9.65p to 340.85p and Anglo American lost 54.5p to 2326p.
Susannah Streeter, head of markets at Hargreaves Lansdown said: “Investors are buckling up for a rollercoaster ride for the global economy, with the European Union expected to be next in line for punitive duties.
“The FTSE 100 has been stopped in its tracks with the record run upwards going into reverse. It fell sharply in early trade amid worries that listed multinationals could be caught in the cross-fires of the trade wars.”
Other fallers in London included the Nvidia backer Scottish Mortgage Investment Trust, which slid 4% or 43p to 1042.5p.
European markets down 1.5%, miners under pressure
08:27 , Graeme EvansEurope’s Dax and Cac 40 have fallen 1.5% after Donald Trump said he will "definitely" hike tariffs on European Union goods "very soon"
The FTSE 100 later settled 1.1% or 93.18 points lower at 8580.78.
Richard Hunter, head of markets at Interactive Investor, said: “Markets famously dislike uncertainty, and the fact that the UK could be within the President’s tariff sights was enough to send the main indices sharply lower at the open.
“The almost unanimous markdown of prices included particular weakness for China-exposed stocks such as the miners and Prudential, while Scottish Mortgage topped the loser board given its own focus on US tech.”
UBS does not believes that the 25% tariffs on Canada and Mexico will be sustained for a prolonged period.
In its base case, the bank said: “The Trump administration would not want to jeopardise US economic growth or risk higher inflation by leaving the tariffs in place for a sustained period, and significant stock market volatility could lead to a change in approach.
“We would expect industry groups representing companies on the northern and southern borders to file court challenges and lobby for their removal.”
FTSE 100 and FTSE 250 down more 1%, Diageo off 3%
08:10 , Graeme EvansThe FTSE 100 has opened about 1.3% or 112.55 points lower at 8561.41.
Global drinks giant Diageo has fallen 3% or 70p to 2349p while specialty chemicals firm Croda International is 3% or 95p cheaper at 3249p.
The UK-focused FTSE 250 index has declined by 1.7% or 352.45 points to 20,598.03. On currency markets, the pound is about 1% lower at $1.228.
Trade war fuels fears of US economy slowdown
07:54 , Graeme EvansThe 25% tariffs on imported goods from Mexico and Canada, and a 10% levy on imports from China, are due to be enforced tomorrow.
The plans also feature a mechanism to escalate if retaliatory measures are imposed on the US.
Peel Hunt chief economist Kallum Pickering said the unveiling of sudden huge tariffs on a major chunk of US imports seemed to contradict the hope in markets that the US may adopt a gradual approach.
He added: “This weekend’s news could thus seriously jar risk markets in the days ahead. As part of a broader risk-off mood, expect dollar strength, a spike in bond yields and possibly a pullback in risk assets like equities.”
The bank sees US growth slowing from 2.8% in 2024 to 2.1% in 2025 as the economy take a negative hit from trade wars.
Pickering added: “If bond markets react badly to the risk of an escalating tit-for-tat tariff war, US momentum could slow by more than we anticipate.”
Nikkei 225 down 2.5%, EU benchmarks set for big falls
07:37 , Graeme EvansJapan’s Nikkei 225 has fallen by more than 2.5% amid the negative reaction of Asia markets to the tariff developments.
The Taiwan stock market fell 3.5%, with the country’s semiconductor heavyweight TSMC off by 6%.
Chinese markets are closed until Wednesday for the Lunar New year holiday.
Meanwhile, the Cac and Dax benchmarks in Paris and Frankfurt are seen falling by more than 2% amid the prospect of EU tariffs.
IG Index said: “Stock indices around the globe have gapped lower and the US dollar has surged, while cryptocurrencies have also taken a knock.
“Investors are braced for more losses in stock markets as the impact of this trade war is priced in, while interest rate pricing is in flux, with the CME FedWatch tool actually suggesting more Fed cuts are likely if the US economy begins to weaken due to the effects of tariffs. “
Tariffs at “most hawkish end of the protectionist spectrum”
07:26 , Graeme EvansDeutsche Bank described the weekend tariff announcements as being at “the most hawkish end of the protectionist spectrum we could have envisaged.”
It said the speed of implementation, the scope and the breadth of the tariffs covering 44% of total US imports were all aggressive.
George Saravelos, the bank’s global head of FX research, added: “If these tariffs go ahead, we see them as constituting the largest shock in global trade policy since the collapse of Breton Woods.
“We see immediate recessionary consequences for some of the economies involved and broad-based negative read-across to the world economy.”
FTSE 100 seen sharply lower, dollar surges
07:04 , Graeme EvansGlobal stock markets are set for big falls after US president Donald Trump imposed 25% tariffs on Mexico and Canada.
According to IG Index futures, the FTSE 100 index is seen 1.4% or 125 points lower. The S&P 500 index is seen about 1.7% lower when US markets open later.
The dollar has surged amid expectations the inflationary impact of the tariffs will result in US interest rates staying higher for longer than expected.
The pound is down by about 1% this morning to $1.22, while the Canadian dollar is at its lowest level since 2003.
