Closing post
Time to recap…
A 17-month period of expansion in the UK’s services sector came to an abrupt end in April as uncertainty created by Donald Trump’s tariff war hit new orders and exports.
A poll of purchasing managers in services businesses showed that the US president’s tariff campaign had sent a chill through the sector, which accounts for about three-quarters of the UK economy, hitting business confidence about the prospects for the years ahead.
Service sector export sales were particularly subdued, with total new work from abroad decreasing at the fastest pace since February 2021, during the Covid pandemic.
Smaller domestic services companies also said tax increases introduced by the chancellor, Rachel Reeves, were weighing on costs and had led to them laying off workers at a faster rate in April.
At 49.0 in April, down from 52.5 in March, the headline seasonally adjusted S&P Global UK services PMI activity index was the lowest since January 2023. A score of more than 50.0 represents expansion.
In other news…
The US trade deficit has widened to a record level in March, as American companies scrambled to import goods before new tariffs came into effect.
Britain and India have agreed a long-desired trade deal that ministers said would add £4.8bn a year to the UK economy by 2040.
The deal promises a boon for the UK’s car and alcohol industries, which have suffered from the impact of Donald Trump’s tariffs in the US.
India’s tariffs on British whisky and gin will be halved from 150% to 75% before reducing to 40% by the 10th year of the deal, according to the business department.
UK car sales have dropped 10% in April, a decline blamed on “a fragile economic backdrop and weakened consumer confidence.
Ford, Mattel and Ferrari have all warned that tariffs will eat into their profits.
The Irish government revised down its economic outlook as global trade uncertainty caused by US President Donald Trump’s tariff tirade threatens growth.
Canada is likely to fall into recession this year due to the US trade war, ratings agency Fitch warned.
FTSE 100's record run continues
The UK stock market’s longest running winning streak on record just got a little longer!
The FTSE 100 index of blue-chip shares in London has ended the day up one point, or 0.07%, at 8597 points.
That means the Footsie has now risen for 16 sessions in a row, extending the record set at the end of last week.
Gold miners led the FTSE 100 risers today, with Endeavour Mining up 5,2% and Fresnillo gaining 4.7%, followed by supermarket chain Sainsbury’s (3.4%).
This rally means the FTSE 100 has recovered all the losses it suffered in early April, when it plunged to just 7,544 points in the market panic after Donald Trump’s “Liberation Day” tariff announcement.
The recovery began when the president u-turned, and delayed most tariffs for 90 days.
Updated
Treasury Secretary Scott Bessent has said today that the U.S. is in the midst of negotiations with 17 of the country’s largest trading partners, Fox Business report.
In testimony to the House Appropriations Subcommittee on Financial Services and General Government, Bessent explained that the timing of trade deals “will be path dependent on our trade partners.”
He added:
“As I’ve said before, there are 18 very important trading relationships. We are currently negotiating with 17 of those trading partners. China we have not engaged in negotiations with as of yet.”
“Approximately 97% or 98% of our trade deficit is with 15 countries, 18% of the countries are major trading partners, and I would be surprised if we don’t have more than 80% or 90% of those wrapped up by the end of the year.”
With around 40 minutes trading to go, it’s nip-and-tuck whether the London stock market will extend its record-breaking run.
The FTSE 100, which has risen for the last 15 sessions, is curently down 2 points today at 8593 points.
So shortly after 4.30pm today, after the closing auction, we’ll know if the rally has faltered…
Updated
Back in Frankfurt, stocks are recovering after Friedrich Merz won a second vote to become the next German chancellor, a few hours after dramatically losing the first vote.
The DAX is now down just 0.4%. The euro has pushed a little higher too – now up half a cent against the US dollar at $1.136.
UK lender Nationwide has announced cuts to its mortgage deals – perhaps anticipating the Bank of England lowering borrowing costs on Thursday.
Nationwide is trimming up to 0.3 percentage points off some mortgage products, which means rates now start at 3.84%.
The cuts mean Nationwide is now offering sub-4% first-time buyer rates for first time since September 2024.
It’s lowest first-time buyer rate is 3.94% and available on a two-year fixed rate product at 60% loan-to-value (LTV) with a £1,499 fee.
Updated
Ireland is bracing for a growth slowdown if Donald Trump maintains tariffs on the European Union.
Ireland’s finance ministry has issued new forecasts, showing that growth in Ireland’s domestic economy is expected to slow to 2% this year if a 10% tariff on U.S. imports from the European Union remains in place or 2.5% if tariffs are removed.
Wall Street has opened in the red, with the main indices all lower in early trading.
Dow Jones industrial average: down 273 points, or 0.66%, at 40,945 points
S&P 500: down 39 points, or 0.7%, at 5,611 points
Nasdaq composite: down 160 points, or 0.9%, at 17,684 points
Fitch: trade war will push Canada into recession this year
Ratings agency Fitch is predicting that the trade war with the US will push Canada into recession this year, and push up unemployment.
In a new report today, Fitch warns that “due to the impact of U.S. tariffs, we forecast a recession” – a blow to new prime minister Mark Carney.
Fitch predicts that Canadian GDP will declining for three-quarters, starting in April-June this year, with annual average growth in 2025 of just 0.1%.
The agency adds:
The rapidly changing tariff and trade landscape in the U.S. will both directly affect Canadian exports and also indirectly via slower U.S. GDP growth. This will have an adverse effect on the labour market; Fitch expects the unemployment rate to rise to over 8%.
UK and India clinch trade deal
Britain has secured its biggest trade agreement since Brexit, by agreeing a free trade deal with India.
Britain’s business department says the deal, just announced, is a “huge economic win” for the UK, and will cut Indian tariffs on key products such as whisky, cosmetics and medical devices.
The deal is expected to increase bilateral trade by £25.5bn “in the long run” (which I think means by 2040).
Business and Trade Secretary Jonathan Reynolds says:
“By striking a new trade deal with the fastest-growing economy in the world, we are delivering billions for the UK economy and wages every year and unlocking growth in every corner of the country, from advanced manufacturing in the North East to whisky distilleries in Scotland.
“In times of global uncertainty, a pragmatic approach to global trade that provides businesses and consumers with stability is more important than ever.”
Under the deal, India’s tariffs on UK whisky and gins will be halved from 150% to 75% before reducing to 40% by year ten of the deal, while automotive tariffs will go from over 100% to 10% under a quota.
Other UK goods with reduced tariffs include cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate, and biscuits.
In return, the UK will cut tariffs on Indian producs including clothes, footwear, and food products including frozen prawns.
India’s prime minister Narendra Modi has also hailed the deal, saying:
“These landmark agreements will further deepen our comprehensive strategic partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies.”
Delighted to speak with my friend PM @Keir_Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention. These landmark agreements will further deepen our…
— Narendra Modi (@narendramodi) May 6, 2025
US trade deficit hits record amid pre-trade war stockpiling
Just in: New data confirms that the US trade deficit rose to a record level in March.
America’s total goods and services deficit increased by $17.3bn to $140.5bn in March, up from $123.2 billion in February, the US censud bureau reports.
The increase was due to a 4.4% rise in imports in March, to $419bn, while US exports were only 0.2% higher at $278.5bn.
The increase in imports may be due to companies trying to stock up before the White House imposed new tariffs on goods from abroad in April.
The report shows that imports of consumer goods increased by $22.5bn, while capital goods imports rose by $3.7bn, computer accessories were up $2bn and automotive vehicles, parts, and engine shipments increased by $2.6bn.
The report also shows that the US achieved budget surpluses with Netherlands ($4.5bn), South and Central America ($3.2bn), Hong Kong ($1.9bn), United Kingdom ($1.2bn), Singapore ($500m), Brazil ($500m), and Saudi Arabia ($200m).
But beficits were recorded with the European Union ($48.3bn), Ireland ($29.3bn), China ($24.8bn), Mexico ($16.8bn), Switzerland ($14.7bn), Vietnam ($14.1bn), Taiwan ($8.7bn), India ($7.7bn), Germany ($7.5bn), South Korea ($6.8bn), Japan ($5.8bn), Canada ($4.9bn), Italy ($4.4bn), France ($3.9bn), Malaysia ($3.2bn), Australia ($1.0bn), Israel ($1.0bn), and Belgium ($100m).
Updated
Luxury car maker Ferrari has joined the pack of auto companies warning that the US trade war could hurt its earnings.
Ferrari reported a 13% rise in revenues in the first three months of this year, with operating profit up 23%.
“Another year is off to a great start” said Benedetto Vigna, CEO of Ferrari, explaining:
“In the first quarter of 2025, with very few incremental shipments year on year, all key metrics recorded double-digit growth, underscoring a strong profitability driven by our product mix and continued demand for personalizations.
Vigna added that Ferrari is “very excited about what lies ahead.”
But that roadmap includes the threat of tariffs – and Ferrari warns that the introduction of import tariffs on EU cars into the USA could knock 50 basis points (half a percentage point) off its profitability percentage margins this year.
Ian Plummer, commercial director of online vehicle marketplace Auto Trader, said “short-term turbulence” is most likely to blame for April’s drop in new car sales (see earlier post for details).
He added:
“We’re seeing new car visits on Auto Trader up 8% on 2024 and we’re confident this will convert to sales in the coming months.”
Dan Caesar, chief executive of lobby group Electric Vehicles UK, said:
“Month after month at least one in five new car buyers are now going battery electric.
“As the industry demonstrates that battery electric vehicles are the cheaper and better option, more and more end-users will opt for all-electric vehicles.”
Sales of new light commercial vehicles (LCVs) also fell last month in the UK.
Van registrations dropped by -14.9% in April, with 20,332 vans, 4x4s and pick-ups sold, according to the latest figures published today by the Society of Motor Manufacturers and Traders (SMMT).
Updated
Shares in Ford are set to fall when trading begins in New York in just under two hour’s time.
Ford’s stock is down almost 2.5% in premarket trading, after it withdrew its financial guidance last night and indicated tariffs could wipe $1.5bn off its profits this year.
The EU has launched a market surveillance of Chinese imports into the bloc amid fears that the trade war with the US is diverting goods to Europe, my colleague Lisa O’Carroll reports.
It comes amid reports that discount online retailers Shein and Temu have upped their marketing spend in Europe after Donald Trump’s tariffs were introduced on all packages up to $800 in value on Saturday.
Trade commissioner Maros Sefcovic has again warned that the existing tariffs on the automotive and steel sectors along with the threat of tariffs in six other areas is “unacceptable”.
Speaking at the European parliament on Tuesday he again urged the US to cut a deal describing the EU as “by far the most important economic partner of the US”.
He said if Trump carries through his various threats of tariffs in addition to existing import duties on cars and steel, its import taxes would jump from €7bn in 2024 to €100bn.
He said:
“This situation is not acceptable and we cannot afford to stay idle.”
If the US doesn’t cut a deal, Europe is prepared for retaliatory tariffs and litigation, he warned.
In the meantime the EU has started monitoring potential diversion of trade from China to the US to Europe with the first results of the survey anticipated in mid-May.
“The aim is to protect the EU market from possible surges of imports from other countries that are also hit by US tariffs and which seek alternative markets. The first results of this work are anticipated in mid-May,” he said.
Updated
The decline in the UK private sector last month adds to the pressure on the Bank of England to ease monetary policy.
The BoE is widely expected to cut interest rates at its next meeting, on Thursday. The money markets indicate there’s a 92% chance of a quarter-point cut to Bank rate, to 4.25%, and an 8% possibility of a larger, half-point cut to 4%.
Daniela Sabin Hathorn, senior market analyst at Capital.com, sets the scene:
The Bank of England (BoE) is widely expected to deliver a rate cut at its upcoming meeting, as policymakers balance weak domestic growth with the inflationary risks stemming from global trade tensions. At its March meeting, the Monetary Policy Committee (MPC) voted 8-1 to keep the Bank Rate at 4.5%, with only external member Swati Dhingra advocating for a 25-basis-point cut.
At that time, persistently high inflation was a key factor in maintaining the current rate. Headline CPI had climbed back to 3% in January, and the BoE projects it could rise further to 3.75% by summer. Geopolitical uncertainty and renewed U.S. tariff threats have also prompted a cautious stance, even as domestic data shows lacklustre growth and hiring plans, while wage pressures in services remain elevated.
Governor Andrew Bailey reiterated the need for prudence, noting that while easing is on the table, it must be guided by “accumulating evidence that price pressures are easing,” and emphasizing that there is “no presumption about cuts at the next few meetings.
Thursday’s rate decision will be released at 12.02pm, incidentally, rather than bang on noon, due to the two-minute silence to mark VE Day.
Moody's Ratings cuts global growth forecast due to trade war
Moody’s Ratings has cut its global growth forecast to 1.9% in 2025 and 2.3% in 2026, driven by tariff uncertainty and trade tensions.
Moody’s updated forecasts now predict:
Reduced UK real GDP growth of 0.8% in 2025 and 1.3% in 2026.
US real GDP growth to fall to 1% in 2025 and 1.5% in 2026, with inflation to hit 3% this year.
China’s real GDP growth to slow to 3.8% in 2025 and 3.9% in 2026.
In the Eurozone - Germany’s real GDP growth is expected to be 0% in 2025 and 1.4% in 2026, with slowdowns in France (0.5% in 2025 and 1.2% in 2026) and Italy (0.5% in 2025 and 0.6% in 2026).
European markets fall after Merz loses vote to become Germany's chancellor
Back in the City, the early stock market gains have vanished.
The FTSE 100 index is now down 17 points, or 0.2%, at 8597, threatening to end its record-breaking run of 15 daily rises in a row.
The slide comes as European markets drop, led by Germany’s DAX which has fallen by 1.9% today. Frankfurt traders are alarmed that Friedrich Merz has failed to get enough votes to become chancellor in the first vote today in the Bundestag.
That’s quite a shock, as Merz had been expected to be rubber-stamped to succeed Olaf Sholz today.
His CDU/CSU/SPD coalition nominally has 328 votes in the Bundestag – but he got only 310, six short of the majority required to confirm him as the next chancellor.
It has prompted the far-right Alternative für Deutschland party calls for fresh elections in Germany.
Tesla sales drop 62% in April
Sales of Tesla cars tumbled by over 60% last month, amid a wider backlash against Elon Musk.
Just 512 new Tesla models were registered in April, the latest sales data from trade body the SMMT shows, down from 1,352 in April 2024.
Tesla’s market share shrank to 0.43% in April, down from 1% a year ago, as sales of battery electric vehicles (BEV) increased 8.1%.
Tesla’s sales have also been dropping across Europe this year, with some customer shunning the brand following Musk’s tilt to the political right.
But last month’s sales drop may also be due to model changes at Tesla. Deliveries of its latest Model Y, codenamed “Juniper”, were expected to begin in May, so customers may have been waiting for it to arrive.
In February, Tesla’s Model 3 and Model Y cars were the second and third most popular in the UK after the Mini Cooper. But both failed to make the top 10 in April, with Kia’s Sportage topping the list:
Updated
UK business expectations tumble
Worryingly, UK business expectations for the year ahead fell sharply last month.
This morning’s PMI report shows that service sector firms are bracing for an extended period of global economic turbulence and heightened recession risks.
Some 22% of the survey panel predict an outright decline in business activity during the next 12 months, up from 14% in March and well above the post-election low of 6% in July 2024.
Tim Moore, Economics Director at S&P Global Market Intelligence, says:
“UK service sector output slipped into contraction for the first time in one-and-a-half years as heightened business uncertainty weighed on order books during April. Export conditions were particularly weak, with new business from abroad falling to the greatest extent since February 2021.
Survey respondents often commented on the impact of global financial market turbulence in the wake of US tariff announcements. Businesses in the technology and financial service sectors noted rising risk aversion and delayed spending decisions among clients, especially in relation to major investment plans.
Consumer service providers meanwhile cited subdued domestic economic conditions and challenges with passing on rising payroll costs, especially those in the hospitality and leisure sectors.
Updated
UK business activity falls for the first time since October 2023 as trade tensions hurt economy
Newsflash: Business activity across the UK has fallen for the first time in 18 months, as trade war fears batter the British economy.
The latest poll of purchasing managers at UK service sector companies has found that business activity declined in April, ending a 17-month run of growth, and pulling the wider private sector into a contraction.
New order books at services companies shrank last month, driven by the fastest decline in exports since February 2021, when the Covid-19 pandemic was hitting activity.
Data provider S&P Global says that “survey respondents widely commented on risk aversion and delayed spending decisions among clients in response to rising global economic uncertainty.”
This dragged the S&P Global UK Services PMI Business Activity Index down to 49.0 in April, down from 52.5 in March, which is the lowest reading since January 2023. Any reading below 50 signals a contraction.
The PMI report says:
While many firms continued to report unfavourable domestic demand conditions, the latest survey indicated a particularly marked decline in new work from overseas markets.
The rate of contraction was the steepest for just over four years and mostly linked by survey respondents to the impact of rising global trade tensions.
S&P Global also reports that the wider UK private sector also contracted last month.
Its UK PMI Composite Output Index, which also tracks the manufacturing industry, fell to 48.5 in April, down from 51.5 in March and below the 50.0 no-change value for the first time in one-and-a-half years.
Updated
UK car sales drop 10% in April
Car sales across the UK fell by over 10% last month, compared to a year ago.
New industry data shows that 120,331 new vehicles were registered in April, 10.4% fewer than in April 2024.
New car market declines -10.4% in April with 120,331 units registered.https://t.co/VBZdNsfsrO pic.twitter.com/43ZI6AW3je
— SMMT (@SMMT) May 6, 2025
The Society of Motor Manufacturers and Traders (SMMT) attributes “a fragile economic backdrop and weakened consumer confidence” for the sixth fall in the last seven months.
The SMMT also blames increases in Vehicle Excise Duty (VED) which began at the start of April – and which let to a jump in sales during March.
It says:
In what is traditionally a quieter month following the March plate change, volumes were also impacted by the late timing of Easter, resulting in fewer working days.
In addition, the implementation of VED changes affecting all new cars, including the Expensive Car Supplement which became applicable to many new EVs from 1 April, pushed transactions into March as shrewd buyers got ahead of the tax increases.
The drop in sales last month was broad-based, with private sales down 7.9% and purchases by businesses dropping by around 11%.
Battery electric vehicle sales jumped by 8.1% to 24,558 units, with a market share of 20.4%. Sales of plug-in hybrids (PHEV) jumped by 34.1%.
But sales of hybrid electric vehicles (HEVs) fell -2.9%, with petrol sales down 22% and diesel plunging by 26.2%.
🔋Battery electric car registrations rise 8.1% – but market share at 20.4% still significantly below Zero Emission Vehicle Mandate requirement.https://t.co/VBZdNsfsrO pic.twitter.com/R5WkCNXxlG
— SMMT (@SMMT) May 6, 2025
Eurozone economic growth slows in April
Just in: growth across the eurozone private sector slowed last month.
The HCOB Eurozone composite PMI output index, which tracks activity across the euro area, has dropped to 50.4 for April, down from 50.9 in March, showing a weaker expansion in business activity.
The PMI index, based on data from purchasing managers at European firms, found that new orders fell last month, again, as demand weakened.
France’s private sector contracted for the eighth month running, while Germany’s private sector output barely rose in April. Ireland recorded the strongest increase in activity, while Spain and Italy also expanded.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, says:
“Eurozone economic growth slowed at the start of the second quarter, following a pick-up in the first three months of the year. The services sector, which is a major player, practically stagnated in April. Even though manufacturing output saw a surprising uptick, it wasn’t enough to prevent the overall slowdown in growth.
In the services sector, cost pressures are still relatively high, though they have eased a bit over the past couple of months. Inflation is down for sales prices and continued to trend lower.
Many members of the European Central Bank (ECB) have been hinting at another interest rate cut in June, and these latest figures seem to support their stance.
ABF in talks about selling Kingsmill bread division
Associated British Foods has confirmed it is in talks with the parent company of Hovis about selling its Allied Bakeries business.
ABF’s shares have risen by 1% after telling the City “it is in discussions with Endless LLP regarding a potential transaction” for Allied Bakeries, whose brands include Kingsmill, Allinson’s and Sunblest.
ABF told shareholders:
Allied Bakeries continues to face a very challenging market. We are evaluating strategic options for Allied Bakeries against this backdrop and we remain committed to increasing long-term shareholder value.
A further announcement will be made as and when appropriate.
ABF, which also owns Primark, reported last week that sales at Allied Bakeries fell in the 24 weeks to 1 March.
FTSE 100 on track to extend record-breaking run
Britain’s blue-chip share index is on track to extend its record-breaking run of gains.
The FTSE 100 share index has risen by 27 points, or 0.3%, in early trading, partly thanks to BP’s rally.
The ‘Footsie’ has already risen for the last 15 sessions in a row, the longest run of gains since it was created in the 1980s.
It has now recovered all its losses since 2 April, when Donald Trump announced a swathe of tariffs on trading partners:
Richard Hunter, head of markets at interactive investor, explains why the FTSE 100 has been gaining ground in recent weeks:
The FTSE100 remains something of a beacon of light compared to many of its global peers, with its suite of relatively stable and defensive sectors playing into investors’ desire for alternative investment destinations.
Coupled with an undemanding valuation both historically and globally, alongside an average dividend yield of 3.5%, the index has added 5.6% this year, and at the open further resilience was in evidence. A broad mark up incorporated both defensive and cyclical sectors, the latter of which resulted in some strength in the likes of the retailers and the housebuilders.”
BP shares jump as Shell mulls takeover
Shares in energy giant BP have jumped by 3.3%, following reports that rival Shell has considered a takeover bid.
BP’s shares rose to 361p at the start of trading, a one-week high, making it the top riser on the FTSE 100 share index.
Shell’s shares are down 0.7%.
City traders are responding to Bloomberg’s report last weekend that Shell has been discussing the feasibility and merits of a takeover of BP with its advisers in recent weeks.
My colleague Lauren Almeida reported:
If this were to happen, it would mark one of the biggest deals ever in the oil and gas industry.
Speculation about a possible takeover comes as BP’s shares have suffered this year. They have fallen by more than 30% in the past 12 months as a turnaround plan under the chief executive, Murray Auchincloss, has failed to inspire investors and oil prices have fallen.
Bloomberg also reported that Shell could decide to focus on share buybacks and bolt-on acquisitions rather than a megamerger, and that other large energy companies have also been analyzing whether they would want to bid for BP.
Updated
DoorDash's takeover of Deliveroo agreed
The takeover of UK food-delivery platform Deliveroo by US rival DoorDash has been agreed.
The two sides have reached agreement on DoorDash’s offer of 180p in case for each Deliveroo share, made last month.
The deal values Deliveroo at £2.9bn, and is almost 30% higher than Deliveroo’s share price the day before the offer was made.
It’s less than half the value at which Deliveroo was floated on the London stock market four years ago, though.
Tony Xu, CEO and co-founder of DoorDash, says he has “long admired” Deliveroo’s team, including CEO Will Shu (who will pocket around £170m from the shares he owns):
Like DoorDash, Deliveroo is obsessively focused on their customers - consumers, merchants, and riders. They work day in and day out to improve their consumer value proposition, bring new services to local businesses, and offer flexibility and support to riders.
These efforts and attention to detail from Will and the team have had a tremendous positive impact in the communities where Deliveroo operates.
Updated
Barbie dolls to cost more in a tariff world
American children face paying higher prices for Barbie dolls due to the Trump tariffs on imports.
Mattel, the toy manufacturing giant, revealed last night that it plan to raise prices on American toys due to tariffs, and is also looking to move some manufacturing out of China.
In its latest earning report, Mattel told shareholders it is taking “mitigating actions” to fully offset the potential incremental cost impact of tariffs on future performance.
Those measures include:
Accelerating diversification of its supply chain and further reducing reliance on China-sourced product,
Optimizing product sourcing and product mix, and
Where necessary, taking pricing action in its U.S. business.
Chief financial officer Anthony DiSilvestro explained:
Given the evolving tariff situation, we are taking mitigating actions designed to fully offset the potential incremental cost impact.
Paying more for a new Barbie, or Ken, might highlight the impact of tariffs for US consumers.
Donald Trump, though, argued last weekend that “a young lady” doesn’t need 37 dolls, and might be “very happy with two or three or four or five.”..
Updated
Philips lowers profit margin guidance over trade tensions
Dutch medical-technology firm Philips has lowered its outlook for profitability this financial year, blaming the US trade war.
In its latest financial results, Philips trimmed its profitability outlook for the year, as it calculated “the assumed impact of currently announced tariffs”.
Philips now expects an estimated net tariff impact of €250m to €300m “after substantial tariff mitigations”, and has lowered its forecast for its adjusted operating earnings margin by one percentage point, to 10.8% to 11.3%.
Roy Jakobs, CEO of Royal Philips, explains:
In an uncertain macro environment that has intensified due to the potential impact of tariffs, we are focused on what we can control.
We are improving our supply chain agility, taking decisive cost actions to mitigate financial impact where possible, and ensuring we can continue to serve our customers and consumers.
Philips makes medical devices such as MRI and CT scanners, and has been using artificial intelligence (AI) to speed up results:
Updated
Ford expects $1.5bn profit hit from Trump tariffs
America’s car industry is calculating the cost of the trade wars.
Overnight, Ford Motor suspended its annual guidance, due to “tariff-related uncertainty”, and estimated new tariffs would cost it about $1.5bn (£1.1bn) of profits this financial year.
Ford CEO Jim Farley told analysts:
“It’s still too early to fully understand our competitors’ responses to these tariffs,”
“It’s clear, however, that in this new environment, automakers with the largest U.S. footprint will have a big advantage.”
Last week, Donald Trump’s 25% import tax on engines, transmissions and other key car parts came into force, a move that will push up costs for automakers.
Ford had previously predicted it would post earnings before interest and taxes of between $7bn and $8.5bn this financial year.
But with uncertainty over how the trade war will play out, Ford told investors that guidance was now suspended, explaining:
Given material near-term risks, especially the potential for industrywide supply chain disruption impacting production, the potential for future or increased tariffs in the U.S., changes in the implementation of tariffs including tariff offsets, retaliatory tariffs and other restrictions by other governments and the potential related market impacts, and finally policy uncertainties associated with tax and emissions policy, the company is suspending guidance.
Updated
China's services growth hits seven-month low as tariffs bite
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Investors will be scrutinising the latest healthchecks on companies across the world today, for signs that the US-China trade war is hurting the global economy.
And… the latest purchasing manager’s survey data has shown that China’s service sector activity growth has hit a seven-month low, as business confidence fell to the lowest since early in the Covid-19 pandemic.
The Caixin China General Services Business Activity Index, released this morning, fell to 50.7 in April, down from 51.9 in March. That shows the slowest rise in activity since last September – but still above the 50-point mark that signals stagnation.
China’s service sector firms reported a slowdown in new business, while business sentiment fell to the lowest level seen since February 2020, while companies continued to cut staffing levels.
The report says:
The slowdown in business activity growth reflected the trend seen for new business. Disruptions to goods trade amid fresh tariffs had negatively impacted some service providers in April, according to anecdotal evidence, and led to the slowest rise in overall new work for 28 months.
New export business increased only fractionally, with some firms noting improved foreign demand amid rising tourism activity.
🇨🇳 China’s services activity deteriorated more than expected in April, the latest setback for its economy.
— Jack Hoogland (@jack_hoogland) May 6, 2025
The Caixin China services PMI fell to 50.7, the lowest level in seven months.https://t.co/j5RVTQqi36 pic.twitter.com/ViDpgQLk89
Data yesterday showed that the US services sector’s growth picked up in April, while the prices paid by American firms for materials and services jumped, indicating that the tariffs announced by the Trump administration are fuelling inflation.
The financial markets are looking for progress in trade talks between the US and its trading partners. Yesterday, treasury secretary Scott Bessent told CNBC that he believes the U.S. is “very close to some deals.”
Bessent explained:
“As President Trump said last night on Air Force One, maybe as early as this week.”
He added that there could be “substantial progress in the coming weeks” with China; last week, Beijing signalled it was “assessing” potential trade talks with the U.S….
The agenda
9am BST: UK car sales data for April
9am BST: Eurozone services sector PMI report for April
9.30am BST: UK services sector PMI report for April
3.10pm BST: US RCM/TIPP Economic Optimism Index
