Closing summary
Stock markets are rallying in Asia, Europe and the US and the dollar has risen.
Anxiety among investors has given way to relief, at least for now, after Donald Trump said his tariffs on China would come down “substantially” and he had “no intention” of firing the chair of the American central bank, Jay Powell.
The German stock market leapt 3.2% while the UK’s FTSE 100 is 1.1% ahead, and the Nasdaq in New York jumped by 3.95.
The dollar is up by 0.5% against a basket of major currencies.
The rally comes despite gloomy business surveys for the UK, Europe and the US that show trade tariffs and uncertainty are beginning to take their toll.
Meanwhile gold, seen as a safe-haven investment in times of turmoil dropped back by 3.2% to $3,277 an ounce. Yesterday, it broke through $3,500 an ounce.
Our other main stories:
Thank you for reading. We’ll be back tomorrow. Bye! – JK
Updated
US business activity hits 16-month low in wake of tariffs
Business activity in the US has hit a 16-month low as confidence slumped, and companies raised their prices at a faster rate, according to a survey that showed a negative impact from Donald Trump’s tariffs.
The headline US PMI Composite Output Index from S&P Global fell from 53.5 in March to 51.2 in April, according to the preliminary ‘flash’ reading. This means the private sector is still expanding, but at a slower row, after a three-month high in March.
Growth with the services sector slowed sharply to only a modest pace, registering the second-weakest expansion recorded over the past year, in response to slower order book growth. Firms flagged uncertainty surrounding the economy and tariffs.
Demand growth was subdued in particular by a fall in exports of services (which include tourism-related activities as well as cross-border activities by service providers) on a scale not seen since January 2023.
Manufacturing output meanwhile edged back into growth after slipping into decline in March, though the expansion was only marginal. Whilst new orders placed at factories rose at a slightly faster rate, linked to higher domestic orders, the increase was only modest and curbed by a marked fall in export orders.
While tariffs had in some instances reportedly helped drive new sales to domestic customers, trade policy was widely linked to falling foreign sales.
Sentiment among companies about their output over the coming year fell for a third successive month, dropping sharply to register the least optimistic outlook since July 2022. The latest reading was the joint-second lowest since September 2020, surpassed only by October 2022.
Wall Street joins global stock market rally
US stocks have jumped on Wall Street, joining a global stock market rally, after president Donald Trump reassured investors by saying he had no plans to fire Federal Reserve chair Jerome Powell, hinted at lower tariffs for China.
The S&P 500 was 2.9% higher in early trading, following yesterday’s 2.5% gain that came after heavy losses on Monday. The Dow Jones Industrial Average was up 967 points, or 2.5%, and the Nasdaq composite leapt by 3.7%.
Wall Street’s gains followed strong moves higher for stocks across much of Europe and Asia.
The market will “more likely than not continue to be dictated by Trump’s latest whims regarding tariffs and trade,” said Tim Waterer, chief market analyst at KCM Trade.
Updated
IMF warns government debt levels will jump
After downgrading its growth forecasts and highlighting mounting financial stability risks yesterday, the International Monetary Fund is kicking off Wednesday in Washington with more depressing news, our economics editor Heather Stewart reports from the US capital.
In its Fiscal Monitor, it is warning that government debt levels are set to jump in the coming years, as a result of the volatility unleashed by Donald Trump’s tariffs, alongside geopolitical tensions.
The IMF’s analysts project global government debt increasing by 2.8% of GDP this year - twice as fast as in 2024 - and hitting 100% of GDP by the end of the decade, back at levels seen in the Covid pandemic.
And it goes on to warn that in a “severely adverse scenario,” in which the trade war escalates further, or geopolitical tensions worsen, public debt could hit 117% of global GDP, the highest level since the second world war. “As significant policy changes and heightened uncertainty reshape the global economic landscape, the fiscal outlook has worsened,” the IMF says.
The Washington-based lender also underlines concerns that emerging economies may be hit especially hard, if funding costs in global markets increase as a result of financial market volatility in the US - a situation that it says may be exacerbated by overseas aid cuts.
Watchdog partially upholds complaints about 'misleading' Octopus Energy ads
A watchdog has partially upheld complaints about Octopus Energy ads made by rival British Gas that they could mislead customers about the savings they could make when switching.
The Octopus ads across social media, radio and billboards claimed “Most homes would save with Octopus“, while an email on October 7 stated: “We’ve been notified by another supplier that you’ll be switching to them... Will they really save you money? We’re generally the cheapest or near enough: in fact, nine out of 10 Octopus customers pay less than they could with any other large supplier on the same product.”
British Gas complained that only consumers currently on a standard variable tariff (SVT) with another supplier would save money.
Octopus said the ads were intended to highlight the potential savings that a significant majority of consumers currently on standard tariffs could achieve if they switched to the supplier.
It told the Advertising Standards Authority (ASA) that it did not claim that Octopus was the cheapest supplier in every scenario or for every tariff type, adding that it would be willing to make changes to its advertising.
The ASA said consumers would understand from the claims that energy bills would be cheaper for most households if they were to switch to Octopus from any other provider.
The regulator understood that 80% of gas customers and 71% of electricity customers with other providers were on their supplier’s default SVT.
It noted that Ofgem data from June 2024, based on average annual tariffs in the preceding quarter, showed that Octopus had the cheapest SVT of the seven major suppliers, saying:
We considered that those customers who switched from a non-Octopus SVT to an Octopus SVT were therefore likely to achieve a saving.
Because those potential customers constituted the majority of UK households, we considered that most homes could or would potentially save money.
However, the watchdog understood that consumers who were on a fixed tariff with another supplier might not necessarily save if they switched to Octopus, while Octopus customers on an SVT seeking to move onto a fixed tariff might get a greater saving if they switched to another supplier.
The ASA said:
Because the ads did not make clear that the claims that most homes ‘could’ or ‘would’ save applied only to consumers on non-Octopus SVTs who chose to switch to an Octopus SVT, we considered they were likely to mislead.
Regarding the claim that Octopus was “generally the cheapest or near enough”, the ASA found that other types of tariff, such as fixed rate tariffs, could be cheaper with another large supplier, ruling: “Because the ad did not make clear the basis of the claim, we considered that it was misleading.”
The watchdog explained:
The ads must not appear again in their current form. We told Octopus Energy to ensure that they included adequate substantiation to support claims, including comparisons with identifiable competitors, in their marketing materials and to make the basis of any claim clear in their advertising. We also told them to ensure that any comparative claims were verifiable.
An Octopus Energy spokesman said:
The ASA confirmed the headline in our advert - that most homes could save with Octopus - but asked for a little bit more clarification in the small print, which we were delighted to add.
AstraZeneca boss joins other pharma CEOs in calling for higher drug spending in Europe
AstraZeneca boss Pascal Soriot has added his voice to other European pharmaceutical bosses calling for higher spending on medicines in Europe.
The world order is shifting right now and Europe needs to invest more in what really matters to it. Europe has stepped up to invest more in defence and now it must protect its health sovereignty.
Europe spends a substantially lower share of GDP on innovative medicines than the US and, as a result, is falling behind in attracting R&D and manufacturing investments, putting its ability to protect the health of its own people at risk.
The chief executives of Swiss drugmaker Novartis and France’s Sanofi have called on the EU to increase drug prices to bring them more into line with those paid by the US, arguing it will encourage innovation –- i.e. the development of new treatments.
Several major European pharma companies have announced total investments of more than $150bn in the US in recent weeks, at least in part intended to head off potentially punitive Donald Trump tariffs. The latest was Switzerland’s Roche with a $50bn investment in US manufacturing over the next five years unveiled yesterday.
In a letter to the Financial Times published today, Novartis CEO Vas Narasimhan and Sanofi’s Paul Hudson, argue that the European Commission should set a spending target for medicines and vaccines to “fairly reward innovation”.
European price controls and austerity measures reduce the attractiveness of its markets. Launch prices are suppressed, patented medicines’ growth capped, and prices reduced when new applications are found. The US and China are finding ways to incentivise innovation, while Europe is penalising it.
The US pays nearly three times as much for branded and generic medicines as other comparable countries, according to US government estimates.
The EU should create a Europe-wide list price for medicines “within range of US net prices”, the pharma bosses say, adding that this could be adjusted though rebates for some countries. Secondly, they argue that the EU should also set a Europe-wide spend target for innovative medicines and vaccines.
The letter points to data that 30% of medicines approved in the US are still not available in Europe after two years. Narasimhan and Hudson add:
Over time it is inevitable that clinical trials and R&D [research & development] will further shift to the US and China.
The letter comes after pharma bosses wrote to European commission president Ursula von der Leyen earlier this month to warn that “unless Europe delivers rapid, radical policy change then pharmaceutical research, development and manufacturing is increasingly likely to be directed towards the US”.
The EU’s average government spending on health in 2022 was 7.7% of GDP. By comparison, the US spent 16.5% of its GDP on healthcare in 2023.
Updated
Croda to pass on tariff costs to customers
Croda International said it plans to pass on any additional costs from US tariffs to its customers, as the UK chemical maker seeks to shore up profits in a high-inflation environment.
The 100-year-old company, based in Snaith in Yorkshire, said:
Although our well-balanced local manufacturing and procurement model helps to mitigate our direct exposure to tariffs, we are assessing the likely impact and intend to apply a tariff surcharge to cover any associated incremental costs.
Its share price rose as much as 10% and later traded 7.5% higher, despite a drop in 2024 sales and profits. However in the first quarter, sales rose by 9% to £442m at constant exchange rates, and Croda stuck to its profit forecast for this year. Analysts are forecasting a pretax profit of £209.8m, according to a company poll.
The company, which makes ingredients and specialty chemicals for clients across the beauty, agriculture, pharmaceutical and industrial sectors, had already announced plans for £25m in cost-saving measures to help counter rising costs.
With alternative sources of supply limited in many cases, Croda‘s plans to pass on any incremental costs from tariffs to customers may be something clients will have to accept, according to analysts at Hargreaves Lansdown.
Companies worldwide are digesting the impact of the global trade war sparked by US president Donald Trump’s sweeping tariffs, which has fuelled fears of a recession.
Croda’s sales from North America accounted for almost 24% of its annual revenue in 2024.
EU fines Apple and Meta for breaching fair competition rules
The European Commission has fined Apple €500m (£429m) and Meta €200m for breaking rules on fair competition and user choice, in the first penalties issued under one of the EU’s landmark internet laws.
The fines under the EU Digital Markets Act (DMA), which is intended to ensure fair business practices by tech companies, are likely to provide another flashpoint with Donald Trump’s administration, which has fiercely attacked Europe’s internet regulation.
The commission fined Apple €500m for restricting app developers from distributing apps outside the company’s App Store. It said app developers could not fully benefit from alternative channels, so consumers could not discover cheaper offers.
The commission ordered the company to remove the restrictions within 60 days or risk penalty fines.
Meta, the owner of Facebook and Instagram, was fined €200m over its “consent or pay model” introduced in November 2023, which was an attempt to comply with EU data privacy rules.
Meta is expected to appeal to the European court of justice. In a statement, Meta’s chief global affairs officer, Joel Kaplan, said the commission was “attempting to handicap successful American business” while allowing Chinese and European firms to operate under different standards.
This isn’t just about a fine. The commission forcing us to change our business model effectively imposes a multibillion-dollar tariff on Meta while requiring us to offer an inferior service.
Apple has been contacted for comment.
Bank of England's Pill: Bank ready to intervene in market turmoil if necessary
Huw Pill, the Bank of England chief economist, has said the UK central bank stands ready to intervene if market volatility from Donald Trump’s escalating trade war leads to dysfunctional trading putting the stability of the UK financial system at risk.
Acknowledging an increasingly “global stormy sea” as the US president’s erratic tariff policies rattle global financial markets, Pill said:
We are alive to the potential and able to deal with it.
Speaking to students at Leeds university today, he said the Bank’s preference was to use “surgical” interventions to manage dislocations in markets that would act as a “scalpel to cut out the tumor that is causing a problem”, rather than a “sledgehammer to crack a nut” approach. He said:
It was only a few weeks ago that actually the Bank of England decided to switch from selling longer-term bonds to selling shorter-term bonds at a time that markets were a little bit febrile given recent events.
That was quite a tactical approach to dealing with these types of dislocations, and I think that maybe at the margin helped to calm markets. Although of course there are bigger forces at work now; the global stormy sea is perhaps driving those dislocations in markets more than our own actions.
Wimbledon profits rise
The Wimbledon Championships continued to defy cost-of-living concerns to boost profits and deliver record turnover for The All England Lawn Tennis and Croquet Club.
The AELTC, which runs the Championships, reported pre-tax profits of £37.1m in the year to 31 July 2024. This was up on £36.6m in 2023.
Turnover, income from ticket sales, broadcast deals, retail and food and drink sales across all of the AELTC’s activities, grew almost 7% to a record £410m.
In terms of Wimbledon – which saw Carlos Alcaraz defeat Noval Djokovic for a second year running, and Barbora Krejčíková triumph over Jasmine Paolini – turnover rose from £382.7m to £409m.
However, profits dipped slightly from £37.4m in 2023 to £35.9m last year.
The AELTC, which is embroiled in a legal fight over a planned expansion of Wimbledon, derives almost half of its income from broadcast deals.
The company said that a “small number of key broadcast markets”, notably the UK and US, “provide the majority of that income”.
The AELTC has contracts in place with the BBC up to and including Wimbledon in 2027, and with ESPN in the USA up to and including the 2035 tournament.
The Championships also delivered a record £48.9m surplus to the Lawn Tennis Association, the sport’s national governing body.
The AELTC employed an average of 511 staff last year, up from 497 in 2023, with a salary and pension bill of £31.2m.
During the year the AELTC extended several broadcast contracts including in Central Europe with Eurosport, and struck a new agreement with Amazon’s Prime Video for rights in Germany.
Several official supplier agreements were also extended with existing partners including Slazenger, while a new agreement was signed with Emirates as official airline partner.
The eurozone reported a €24bn surplus in trade in goods with the rest of the world in February, higher than a year earlier.
The surplus was higher than the €21.7 bn in February 2024, according to Eurostat, the statistics office.
Exports rose by 6.2% to €248.7bn, while imports rose by 5.7% to €224.7 bn.
The United States is the European Union’s biggest trading partner, with exports rising by €51.8bn or 22%, while imports increased by €28.2bn or 2.4%. The EU’s trade surplus with the US rose to €23.6bn from €14.8bn a year earlier.
Turning to the UK, EU exports rose by just 0.2% while imports dropped by 4.4%, resulting in a €15.4bn surplus, up from €14.7bn.
Lunchtime summary: European shares stage relief rally
The relief rally continues in European stock markets, after Donald Trump said he had no plans to fire Federal Reserve chair Jerome Powell, and suggested tariffs could be lowered for Chinese imports.
UK’s FTSE 100 index up 118 points, or 1.4%, at 8,446
Germany’s Dax up 545 points, or 2.56%, at 21,838
France’s CAC up 157 points, or 2.15%, at 7,484
Italy’s FTSE MiB up 384 points, or 1.07%, at 36,332
Crude oil prices are have risen by more than 1%, pushing Brent crude, the global benchmark, to $68.13 a barrel.
Gold, which has been in demand as a safe haven investment during the recent turmoil, has fallen back by 1.5% to $3,331 an ounce, after rising above $3,500 yesterday morning for the first time.
Daniela Sabin Hathorn, senior market analyst at the trading platform Capital.com, said:
Global equities rallied on Wednesday as investor sentiment recovered, following president Trump’s denial of any intent to remove Federal Reserve Chair Jerome Powell. Earlier in the week, risk appetite had been dampened by growing concerns that the administration might interfere with another key independent institution. While the issue now appears temporarily settled, the fact that Trump’s reassurance came only in response to a journalist’s question has left some observers uneasy.
US stocks began to rebound late Tuesday, following comments from US Treasury Secretary Scott Bessent during a private event hosted by JPMorgan Chase. Bessent told investors that he anticipated a de-escalation in trade tensions with China. Adding to the optimism, Trump remarked that he would be “very nice” in upcoming negotiations with Beijing, hinting at the possibility of lowering tariffs — though not eliminating them entirely.
These developments have temporarily lifted investor confidence, providing a much-needed boost to market sentiment. Still, caution remains the prevailing tone. The continuous uncertainty — marked by political unpredictability and shifting rhetoric — continues to weigh on risk appetite. Each crisis averted offers short-term relief, but the underlying instability discourages sustained investment enthusiasm.
Global investors, once heavily overweight in US assets, have recently begun paring back their exposure. Should uncertainty persist, this reversal of “US exceptionalism” could continue, posing further downside risks for both US equities and the dollar.
NatWest’s chairman Rick Haythornthwaite has said NatWest is at an “inflexion point”, where the government is again pushing for the lender to help drive UK economic growth and competitiveness - just as it nears full privatisation 17 years after its £46bn bailout.
The chairman assured shareholders on Wednesday that NatWest had “fixed the issues of the past” and that it was “a much simpler, safer, customer-focused bank” due to the government rescue, which he thanked ministers for this morning:
It is important that we recognise the bold decision taken by the government of the day to step in and stabilise our banking system and, by extension, our economy.
We remain incredibly grateful to the government, and to UK taxpayers, for their intervention and support, which protected millions of savers, homeowners and businesses at a time of global crisis.
However, he told shareholders gathered at the Gogarburn campus that change was underway:
We are at an inflexion point not just in our bank’s history, but in the context in which we’re operating.
After almost two decades of recovery for our banks, and for our country and economy more widely, growth is rightly at the top of the national agenda. And, despite ongoing geopolitical uncertainty, competition and innovation are in focus once more.
It is clear that the rhetoric is changing and we must keep up the momentum in order to create a secure, competitive environment that promotes growth, all in the service of the customer.
Updated
Extinction Rebellion protesters have camped outside of the NatWest AGM this morning, amid concerns over amendments to the bank’s policy around fossil fuels, which they claim has opened the door to further financing of oil and gas.
Extinction Rebellion is, this morning, particularly concerned about NatWest’s ongoing support for fossil fuel company BP, chanting:
NatWest, do your best
From BP divest, divest
Kelly Shields, a senior campaign manager at ShareAction said there appear to be some “loopholes” that have allowed NatWest to keep financing BP - including that the bank is assessing BP on 2021 climate policies and footprints.
BP has recently rowed back on its green commitments in a move that sparked a shareholder rebellion last week.
NatWest said in a statement that its total exposure to the oil and gas sector amounted to 0.5% of its financing activity. A spokesperson said:
The UK’s energy transition is dependent on many evolving factors - be that policy, technology or societal response - and we confirmed in our sustainability report earlier this year that we would review our climate targets during 2025, ensuring our policies and frameworks are aligned to the UK’s broader transition outlook.
We will continue to be transparent on our policy and risk criteria in this area and will publish these once the review is completed.
In Edinburgh, NatWest Group’s annual general meeting (AGM) started at 10am.
Shareholders arived at the conference centre at NatWest’s sprawling Gogarburn campus in a cloudy Edinburgh this morning for a historic AGM, reports our banking correspondent Kalyeena Makortoff from Scotland.
This is the final shareholder meeting before the bank, formerly known as Royal Bank of Scotland, fully returns to private hands, nearly 17 years after its £46bn bailout at the height of the 2008 financial crisis. The government, which once owned 84% of the lender, is due to sell off its remaining 2.99% stake in the coming weeks.
And so much has changed.
Prior to its bailout, RBS was the largest bank in the world. But having slimmed down and sold off its raft of international businesses in the wake of the government rescue, it is not even the largest in the UK: trailing behind HSBC, Barclays and Lloyds in terms of assets.
And while executives are due to address shareholders this morning from the £350m Gogarburn campus that came to symbolise the excesses of its disgraced former boss Fred Goodwin, the message will be quite different than his predecessor.
Under chief executive Paul Thwaite, it’s now a message of moderation, careful assessment of risk, and assurances that the bank is much safer than the one that sparked a recession and left Edinburgh’s financial sector in tatters in 2008.
But whether shareholders expect the bank to take bigger risks once the privatisation is complete, remains to be seen.
Carsten Brzeski, global head of macro at ING, said:
The April PMIs [for the eurozone] did not bring the anticipated reaction after three weeks of tariff tensions and uncertainty. In fact, not all puzzle pieces match. While the broader weakening in sentiment in France and Germany is in line with expectations, the fact that the eurozone as a whole saw sentiment in the manufacturing sector even slightly improving is somewhat odd.
As so often is the case, it looks as if traditional survey-based data is reacting with some delay to big events. We wouldn’t be surprised to see a more significant drop in manufacturing PMIs next month. In any case, previous eurozone optimism is crumbling and fears of disinflation and stagnation have returned.
The only good thing about the current situation is that it is mainly man-made and could be easily reversed. However, until it is, it will again be up to the European Central Bank to do the heavy lifting in the eurozone. The announced and intended fiscal stimulus in Germany, as well as European efforts to increase defence spending, will take time to substantially boost economic activity in the eurozone.
Eurozone economy 'broadly stable' in April
By contrast, the eurozone’s private sector output was broadly stable in April, according to a sister survey.
Business activity was held back by a faster reduction in new orders and waning confidence – business sentiment was the lowest for almost two-and-a-half years.
Manufacturers continued to scale back purchasing, and overall inflationary pressures eased, with both input costs and output prices rising at weaker rates.
The flash Eurozone PMI output index from Hamburg Commercial Bank, compiled by S&P Global, posted 50.1 in April, only slightly above the 50.0 no-change mark that divides expansion from contraction. The latest reading was down from 50.9 in March and the lowest in four months.
In the services sector, business activity fell slightly, ending a four-month run of growth. Manufacturing production rose for the second consecutive month, and at the fastest rate since May 2022.
In Germany, Europe’s largest economy, business activity fell for the first time in four months during April after growth hit a ten-month high in March. Meanwhile, France remained in contraction and the pace of decline in business activity accelerated.
The rest of the eurozone continued to record solid growth of output, albeit with the pace of expansion easing slightly from that seen in March.
Companies were reluctant to raise output given a further reduction in new orders during April, the eleventh in as many months. Moreover, the latest decline in new business was the most marked so far this year, across both the manufacturing and services sectors.
New export orders (which include exports within the eurozone bloc) also declined. New export orders have been falling since March 2022. April saw a sharp drop in business confidence in the euro area, with sentiment the lowest since November 2022.
On top of the tariff chaos since Donald Trump’s ‘Liberation Day’ on 2 April, the rises in business costs announced in last October’s budget came into effect in April – resulting in a pretty “awful April” for many businesses in the UK.
Alex Kerr, UK economist at Capital Economics, said:
The marked fall in the composite PMI in April raises the chances that the uncertainty stemming from the US tariffs chaos will be a bigger drag on the UK economy than we expect. That said, we doubt that GDP growth at the start of Q2 will be as weak as the 0.5% 3m/3m fall the PMI suggests…
Overall, although Trump’s tariffs may prove to be disinflationary for the UK eventually, the continued stickiness of near-term price pressures suggests that the Bank of England will continue to cut interest rates gradually from 4.50% now to 3.50% in the first half of next year.
The collapse in confidence and drop in output during April raise red flags for the economic outlook and add pressure on the Bank of England to reduce interest rates again at its May meeting, said Chris Williamson, chief business economist at S&P Global Market Intelligence.
While recent months have been characterised by UK businesses treading water, broadly stagnating since last autumn’s budget, businesses are reporting more of a struggle to keep their heads above water in April.
April’s fall in output was the largest recorded for nearly two and a half years, consistent with GDP declining at a quarterly rate of 0.3%, reflecting falling activity and demand across both manufacturing and services.
Job cutting remains aggressive as business optimism about the year ahead sank to a two-and-a-half-year low, and one of the lowest levels yet recorded by the survey, even surpassing the low seen in the immediate aftermath of the Brexit vote in 2016.
The disappointing survey reflects the impact of headwinds from both home and abroad. The biggest concern lies in a slump in exports amid weakened global demand and rising global trade worries, but higher staffing costs have also piled pressure on companies – linked to the National Insurance and minimum wage changes that came into effect at the start of the month. Just as export orders are falling at the sharpest rate since May 2020, during the pandemic lockdowns, firms’ costs spiked higher to a degree not seen for over two years.
Slump in export orders pushes UK private sector into decline
The UK’s private sector went into decline for the first time in 1 1/2 years, as new export orders fell at the fastest rate in almost five years, in a sign that trade wars are taking their toll on the British economy.
Weaker demand from international markets weighed on business activity in both the manufacturing and service sectors, according to a closely watched survey.
At 48.2 in April, down from 51.5 in March, the headline ‘flash’ reading from S&P Global was below the 50 mark (that separates expansion from contraction) for the first time since October 2023. While signalling only a modest rate of decline, the latest reading was the lowest since November 2022.
Firms talked about the negative impact of US tariffs and a subsequent slump in confidence among clients. Optimism about the year ahead also slumped, to its lowest level since October 2022.
Many companies flagged concerns about worsening global economic prospects in the wake of US tariffs, as well as subdued confidence regarding the outlook for domestic business conditions.
Service providers recorded a slight decline in business activity during April, which ended a 17-month period of expansion. Rising global economic uncertainty and subdued domestic demand conditions were cited as the main factors.
Manufacturers recorded a fall in production volumes for the sixth successive month. The latest decline was the steepest since August 2022 and widely attributed to weakening market conditions, especially in key export markets.
Peel Hunt’s chief economist Kallum Pickering said:
UK April PMIs reflecting the hit from global trade anxieties more than other parts of Europe - first drop in private output for 1.5 years.... #pmis #ukeconomy #ukmacro #economy pic.twitter.com/OSIkTnhzoa
— Kallum Pickering (@KallumPickering) April 23, 2025
Updated
The eurozone’s second-largest economy, France, remained under pressure this month, according to the latest PMI survey, as private sector output declined for an eighth month in a row.
Business activity was dragged down by a sharp reduction in new orders, with survey data implying pronounced demand weakness within domestic markets. Firms’ expectations for output over the next 12 months were pessimistic and their most downbeat in close to five years.
The headline HCOB Flash France Composite PMI Output Index fell to 47.3 in April, down from 48.0 in March, signalling a moderate but sharper contraction in private sector business activity at the start of the second quarter.
April’s contraction was entirely driven by the service sector, while manufacturing production increased for the first time since May 2022.
Weakness was mainly from within France. While total new orders shrank at a markedly quicker pace in April, new export sales saw its shallowest drop since August 2022. Africa and some areas of Europe were cited as sources of growth.
Rachel Reeves is between a rock and a hard place as the tariff turmoil takes its toll, said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
Fresh from the disappointing analysis from the International Monetary Fund which noted a sharp growth slowdown for the UK this year, the latest public sector borrowing costs make difficult reading for the UK government. It was forced to go into the red more than forecast for the year to the end of March.
With growth this year expected to slow to 1.1% according to the IMF, down from 1.6%, tax receipts will also be lower. Rachel Reeves is between a rock and a hard place, as the tariff turmoil takes its toll, and some businesses become more cautious about investing following the rise to payroll costs introduced in the Budget. While Reeves keeps deflecting rumours about tax rises, something will have to give, to enable to her to meet her fiscal rules.
Brent Crude has made further gains, with the benchmark pushing above $68 a barrel amid the improving sentiment with hopes that lower tariffs will be less onerous on the global economy.
Fresh US sanctions on an Iranian energy tycoon Seyed Asadoollah Emamjomeh has led to expectations that there could be a further curb on Iranian exports. Traders are awaiting official US data on crude stockpiles with industry figures indicating a sharp fall in inventories, indicating demand has been higher than expected.
Here’s our full story on the rise in UK government borrowing, which means the chancellor could be forced to raise taxes or announce deeper spending cuts later this year.
Britain entered the economic shock from Donald Trump’s trade wars with government borrowing having overshot official forecasts by almost £15bn in the most recent financial year.
Adding to the pressure on the chancellor, Rachel Reeves, the Office for National Statistics said borrowing in the financial year ending in March was £151.9bn, more than £20bn higher than in the previous financial year.
After a larger than anticipated rise in borrowing in March, the figure was £14.6bn more than the Office for Budget Responsibility (OBR) had predicted less than a month ago in forecasts published alongside the chancellor’s spring statement.
In a setback for the government, economists warned that Reeves could be forced to increase taxes or announce deeper cuts to public spending at the autumn budget if she wanted to maintain her self-imposed fiscal rules.
Germany’s private sector moved back into contraction in April, as tariff worries and general uncertainty weighed on business confidence and demand, according to a closely-watched survey.
The latest ‘flash’ purchasing managers index from Hamburg Commercial Bank showed firms’ growth expectations sank to their lowest in six months and the labour market remained under pressure, although employment fell only slightly and at the slowest pace in almost a year.
The headline index fell below the 50.0 mark that separates expansion from contraction for the first time in four months in April. However, at 49.7, down from 51.3 in March, it signalled only a marginal rate of contraction.
The renewed downturn was driven by the service sector, which saw business activity fall for the first time since last November and at the quickest rate since February 2024, with that index at 48.8. Manufacturing production rose for the second month running, although the rate of growth was only modest and eased since March, with the index at 51.6.
The latest data also showed the first rise in prices charged by manufacturers in almost two years, while their input prices posted a sharp drop, contrasting with still-strong cost inflation in the service sector.
Updated
US will aim for UK to cut car tariff to 2.5% from 10% – report
As the US is gearing up for trade negotiations with the UK, it will push for London to reduce its automotive tariff from 10% to 2.5%, the Wall Street Journal reports, citing people with knowledge of a draft document circulated by Donald Trump’s administration.
Rachel Reeves, the chancellor, is due to meet Treasury Secretary Scott Bessent this week to push Britain’s case for a trade deal with Washington.
Washington is preparing its terms for the negotiations, and wants London to reduce levies and other non-tariff barriers on a variety of goods, the report said, adding the Trump administration also wants more relaxed rules on US agricultural imports, including beef.
Trump imposed a 10% tariff on most imports from Britain and a 25% tariff on key sectors such as cars and steel.
It is unclear if the US would consider reducing its 10% tariff on the UK if London agrees to all of its trade demands, according to the Journal. Trump has previously said the 10% tariff is a “floor” for all nations, but also indicated there could be exceptions.
White House spokesman Kush Desai said:
The administration’s trade and economic team is working at breakneck speed to negotiate custom-tailored deals with our major trading partners. Any final decisions and agreements, however, will come from President Trump and President Trump only.
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European stocks have also opened higher, as a wave of relief spread across markets.
The UK’s FTSE 100 index is up by 1.2% at 8,430, while the Italian FTSE MiB rose by 1.4%. Germany’s Dax jumped by 2.2% and France’s CAC gained 1.6%.
Gold, which surged through $3,500 an ounce yesterday, a new record high, is down by more than 2% at $3,307 an ounce, as demand for the safe-haven asset receded.
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ING currency analyst Francesco Pesole explained:
Bessent threw a lifeline to fragile US sentiment with conciliatory remarks on the US-China trade war. Bessent said the current tariff situation is “unsustainable” and expects a de-escalation in the near term.
We could witness a period where the dollar is tossed around by headlines of Fed independence risk and market-friendly news on US tariff policy. What is clear by now is that no other G10 currency has a higher positive beta to trade news than the dollar.
Net-net, we still think the balance of risks remains skewed to the downside for the dollar in the near term, but we don’t expect a repetition of the one-way traffic in dollar selling we have witnessed of late. Looking a few weeks ahead, our preference is for a stabilisation in the dollar rather than another structural weakening.
Introduction: UK annual borrowing nearly £15bn above official forecast; stocks rise as Trump rows back on Fed attack
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Government borrowing in the UK rose more than expected last month, which means the government borrowed nearly £15bn more than forecast over the year than in the previous fiscal year, underlining the challenges the chancellor Rachel Reeves faces.
Borrowing – the difference between total public sector spending and income – was £16.4bn in March; this was £2.8bn higher than in March 2024, and the third-highest March borrowing since monthly records began in 1993.
This means the government borrowed £151.9bn in the fiscal year to March – £20.7bn more than in the previous year, and £14.6bn more than the £137.3bn forecast by the Office for Budget Responsibility (OBR), the arbiter of the public finances.
Public sector net borrowing excluding public sector banks was £151.9 billion (or 5.3% of GDP) in the 2024 to 2025 financial year,
— Office for National Statistics (ONS) (@ONS) April 23, 2025
£20.7 billion (or 0.5 percentage points) more than in the previous year and the third highest total on record.
Read more ➡️ https://t.co/OKGJdDm02v pic.twitter.com/obTVjjOX9x
Nabil Taleb, economist at PwC UK, said:
Debt interest payments reached £4.3bn in March, the highest March figure since monthly records began 27 years ago. This reflects the fiscal challenge the chancellor faces. Higher debt servicing costs as a share of total revenues will leave the public finances more exposed to future economic shocks.
Rachel Reeves continues to hold the fiscal line, but the next six months will be critical—and she needs some clear wins. While her spring statement restored the £9.9bn headroom, that cushion remains precarious. In the worst-case scenario outlined by the government’s independent forecaster, Trump’s new tariffs could alone shave 1% off UK GDP—enough to wipe out the headroom entirely. The rising cost of government borrowing and growing global uncertainty are compounding the pressure for Reeves to put tax rises on the table during the autumn budget.
Stocks and the dollar bounced back and oil prices rose, as Donald Trump rowed back on his attacks on America’s top central banker, whom he called a “major loser” on Monday for not cutting interest rates.
The US president said he had no plans to fire Federal Reserve chair Jerome Powell, and hints at lower tariffs for China, also from the US treasury secretary, cheered investors. Scott Bessent said the current tariff situation is “unsustainable” and expects a de-escalation in the near term.
Trump said during a White House news conference that high tariffs on goods from China will “come down substantially, but it won’t be zero”.
On Wall Street yesterday, Dow Jones Industrial Average, which tracks 30 large US companies, the broader S&P 500 and the Nasdaq all ended the day up more than 2.5% following Monday’s sell-off.
In Asia, Japan’s Nikkei rose by nearly 2% and Hong Kong’s Hang Seng was up 2.2% and the South Korean Kospi gained 1.6%.
The dollar, which hit a three-year low yesterday before recovering, rose by 0.25% against a basket of major currencies.
ING currency analyst Francesco Pesole said:
The dollar is enjoying some support thanks to a recovery in US market sentiment. At the moment, no other G10 currency has a higher beta than the dollar to US trade news, and Treasury Secretary Scott Bessent’s seemingly conciliatory comments on a US-China trade de-escalation could favour a dollar stabilisation.
In oil markets, Brent crude is 1.3% ahead at $68.32 a barrel while US crude rose by 1.37% to $64.55 a barrel. Signs of de-escalation are positive for the world economy, which would boost demand for crude.
The Agenda
9am BST: Eurozone HCOB PMI surveys flash for April
9.30am BST: S&P Global PMIs flash for April
10am BST: Eurozone trade for February2.45pm BST:: US S&P Global PMIs flash for April
5.30pm BST: Bank of England governor Andrew Bailey speaks
• This post was corrected on 23 April to make clear Donald Trump called America’s top central banker a “major loser” for not cutting interest rates.
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