FTSE 100 Live Friday
- IAG profit tops forecast
- House prices rise
- Car finance ruling due
Market update: FTSE 100 falls on tariff fears, Watches of Switzerland down 8%
10:27 , Graeme EvansPresident Trump's latest trade salvo brought risk aversion back to the FTSE 100 index today as AstraZeneca fell sharply and IAG lost results-day gains.
Levies of more than 40% on some countries left the US effective tariff rate at the highest level since the 1930s at 18%, up from 2.3% last year.
Capital Economics said this was higher than it previously assumed, posing a modest downside risk to its global GDP forecast and small upside risk to US inflation.
Dealmaking and the intervention of US courts may yet reduce the tariff rate, but for today’s session traders opted for a safety first approach.
Leading European benchmarks fell by more than 1.5%, while the FTSE 100 index retreated by a more resilient 0.6% or 58.31 points to 9074.50p. The decline followed July’s 4.2% rise, when London’s top flight set a series of record highs.
AJ Bell investment director Russ Mould said: “The fact Trump hasn’t chickened out and pushed back the 1 August deadline to 1 September has soured the tone.
“We haven’t had a repeat of the sharp market sell-off seen immediately after the 2 April Liberation Day speech.
“However, it’s fair to say there is a broad negative tone at the end of the trading week and recent upwards market momentum has evaporated.”
European healthcare stocks were among those under pressure after Trump told firms to charge the US the same as other countries for new medicines.
Amid a sector-wide sell-off, AstraZeneca fell 4% or 414p to 10,910p and GSK dropped 22.5p to 1395.5p. Smith & Nephew weakened 18.5p to 1144p.
Sentiment was also impacted by jitters ahead of this afternoon’s US labour market report and a downbeat Wall Street reaction to last night’s Amazon quarterly results.
This meant poor sessions for Polar Capital Technology Trust, Scottish Mortgage Investment Trust and Pershing Square Holdings, with their shares down 2%.
British Airways owner IAG also fell 2% or 6.8p to 373.7p, having earlier set a post-pandemic high of 393.2p on the back of strong half-year results.
The carrier’s second quarter operating profit increased by 35.4% to 1.68 billion euros (£1.45 billion), which compared with the consensus of 1.45 billion euros.
IAG said it continued to benefit from robust levels of demand, despite reporting some softness in US point-of-sale economy leisure. Peel Hunt reiterated its Buy rating and 420p target price following the results.
On the risers board, GKN Aerospace owner Melrose Industries rose 5% or 28.2p to 540.4p after 24% growth in underlying profits to £248 million came in higher than City forecasts.
Educational resources publisher Pearson also enjoyed a strong results-day session, lifting 5% or 49p to 1121.5p after an underlying 2% rise in operating profit to £242 million beat hopes.
It forecast stronger second half growth and said it was making rapid progress bringing AI-powered products to market.
The FTSE 250 index fell 0.9% or 193.2.4 points to 21,769.59. Amid the impact of last night’s tariffs announcement, Watches of Switzerland fell 8% or 26.4p to 324.2p.
US tariff rate highest since 1930s, GDP risks increase
09:30 , Graeme EvansThe executive order signed by President Trump implies that the US effective tariff rate will rise to about 18%, the highest level since the 1930s and up from 2.3% last year.
Capital Economics said today: “That is a little higher than we assumed and so presents modest downside risks to our forecast for global GDP growth and a small upside risk to our US inflation forecast.
“That said, this is unlikely to be the final word, as it still seems likely that some other countries will reach their own deals with the US, while there is a chance that the US courts will eventually strike down these tariffs.”
UBS Global Wealth Management added: “We believe there is room for further negotiation for some trading partners, and our base case remains that the US effective tariff rate should settle at around 15% by year-end.
“But with much of the good news already well-priced, markets are vulnerable to volatility in the near term.”
Melrose results beat forecasts, shares jump 7%
09:05 , Graeme EvansGKN Aerospace owner Melrose Industries has shrugged off tariffs disruption to post half-year profits of £379 million, against losses of £105 million a year ago.
Shares in the FTSE 100 listed group rose 7% or 36.6p to 548.8p after the results beat City forecasts, including 24% growth in underlying profits to £248 million.
Melrose makes engine parts for jet fighters and military helicopters, as well as civil aircraft, and provides a range of technology for flights.
US labour market figures due later, jobless rate seen higher
09:00 , Graeme EvansThe risk-averse mood of markets following last night’s tariffs announcement also reflects nervousness ahead of this afternoon’s US labour market figures.
The closely-watched release will go some way to determining whether the Federal Reserve has scope to cut interest rates at its next meeting in September.
Those hopes were dealt a setback yesterday after a sharper-than-expected rise in the Fed’s preferred inflation measure of core PCE prices. The dollar rallied following the update, leaving the pound at its lowest level since May at just below $1.32.
Wall Street economists expect the non-farm payrolls figure to slow to 110,000 in July from 147,000 in June. They see the unemployment rate edging up to 4.2%.
Pharma stocks struggle in weaker FTSE 100, IAG up 2%
08:27 , Graeme EvansHealthcare stocks are among those under pressure during a poor session for European markets.
The FTSE 100 index has fallen 0.5% or 45.88 points to 9086.93, while leading benchmarks in Europe are down by more than 1%.
The selling came after President Trump last night announced fresh tariffs of up to 41% on imports from dozens of countries.
AstraZeneca posted the biggest fall in London after Trump told healthcare companies to charge the US the same as other countries for new medicines.
Amid a sector-wide sell-off, Astra fell 3% or 314p to 11,002p and GSK dropped 23.2p to 1394.8p. Smith & Nephew is down 20.5p to 1142p.
On the risers board, the shares of British Airways owner IAG have lifted another 2% or 8.5p to 389p after second quarter results beat City forecasts. The shares are trading at their highest level since the start of the pandemic.
There was also results-day cheer for GKN Aerospace business Melrose Industries and education publisher Pearson as their shares rose 7% or 33.3p to 545.5p and 4% or 43.5p to 1116p respectively.
Heathrow delivers £49 billion expansion plan
07:54 , Graeme EvansHeathrow has delivered to the Government a £49 billion plan for expansion of the airport that will see it build a third runway and create a new tunnel for the M25.
The formal submission follows decades of delay and is certain to trigger a huge legal and planning battle with environmental campaigners concerned about emissions and residents worried their lives will be blighted by noise and years of construction disruption.
Heathrow has claimed that expansion will add 0.43% to the UK’s GDP with 60% of the benefit felt outside London and the south east. It said it hoped for initial feedback from the Government “by September to stay on track for ministers’ ambitious timeline”.
House prices up in July, affordability improves
07:36 , Graeme EvansNationwide today said house market activity appears to be holding up well after the lender recorded a month-on-month price increase of 0.6% in July.
The annual rate of growth picked up to 2.4% from 2.1% in June, which is based on a new average price of £272,664.
It also reported an improvement in housing affordability, boosted by a period of strong income growth and subdued house price growth.
The price of a typical home is around 5.75 times average income, well below the all-time high of 6.9 times recorded in 2022 and the lowest level for over a decade.
Nationwide chief economist Robert Gardner said: “This is helping to ease deposit constraints for potential buyers, as has an improvement in the availability of higher loan to value mortgages.”
Supreme Court car finance ruling due later
07:24 , Graeme EvansThe Supreme Court is to rule later today on whether millions of motorists could be entitled to compensation on their hire-purchase agreements.
In October last year, the Court of Appeal ruled that “secret” commission payments to car dealers as part of finance arrangements made before 2021 without the motorist’s fully informed consent were unlawful.
Two lenders, FirstRand Bank and Close Brothers, took the row to the Supreme Court, telling a three-day hearing in April that the decision was an “egregious error”.
Lords Reed, Hodge, Lloyd-Jones, Briggs and Hamblen are due to hand down their ruling at 4.35pm on Friday.
IAG profit tops forecasts, sees robust demand
07:15 , Graeme EvansBritish Airways and Iberia owner IAG said it continues to benefit from robust demand after second quarter results beat City expectations today.
Operating profit increased by 35.4% to 1,68 billion euros (£1.45 billion), leading to a 43.5% rise in the half-year surplus to 1.88 billion euros (£1.6 billion).
Revenues lifted 8% to 15.9 billion euros (£13.8 bllion) in the six months.
IAG said strength in premium cabin demand partially mitigated some softness in US point-of-sale economy leisure. It is 57% booked for the second half, with booked revenue in line with last year.
Chief executive Luis Gallego said: “We continue to benefit from the trend of a structural shift in consumer spending towards travel.
“We remain focused on our market-leading brands and core geographies, where we continue to see robust performance, allowing us to invest in fleet as well as technology to improve operational efficiency and customer experience.”
FTSE 100 seen lower, Asia markets struggle
07:01 , Graeme EvansThe FTSE 100 index is seen opening 0.2% lower after President Trump’s latest tariff moves led to a weak session for Asia markets.
Tokyo’s Nikkei 225 is down by 0.6%, while the Hang Seng index in Hong Kong has fallen by about 0.5%.
The selling came after President Trump signed an executive order imposing a new set of tariffs, including a 10% global minimum and some of more than 40% for countries with trade surpluses with the US.
New tariffs include Canada at 35%, India’s 25%, Taiwan at 20% and Switzerland’s 39%.
IG expects a muted reaction on Wall Street later as recent key deals with Japan and the EU have softened the impact and talks with China and Mexico continue.
On Wall Street, the Dow Jones Industrial Average lost 0.7% and the S&P 500 index fell 0.4% after new figures fuelled inflation worries.
Microsoft and Meta Platforms closed 4% and 11% higher respectively after their strong results on Wednesday night. In dealings after the closing bell, Apple rose 2% and Amazon fell 6% following their latest figures.
The FTSE 100 index closed slightly lower on Thursday but still registered a gain of 4.2% across July.
