Global financial markets experienced significant turbulence this week, culminating in a sharp decline for major indices as new tariffs imposed by the US President combined with unsettling US jobs data to fuel widespread economic anxiety. The unexpected confluence of these factors has prompted a reevaluation of the global economic outlook, leaving investors and analysts alike grappling with the potential for further market instability.
The bellwether FTSE 100 index bore the brunt of this apprehension, concluding Friday’s trading session down 64.23 points at 9,068.58, marking a challenging week for British equities. Beyond the leading index, the broader FTSE 250 also saw a substantial fall of 1.9%, while the AIM All-Share, representing smaller growth companies, registered a 2.6% loss, underscoring the pervasive nature of the downturn across various market segments.
A critical catalyst for the market’s unease was the latest US jobs report, which revealed anaemic job growth, a development viewed with particular concern given the nascent stage of the tariff implementation. Experts suggest that such weak economic indicators, appearing before the full impact of trade barriers is realized, signal a potentially more fragile economic foundation than previously assumed, amplifying worries about a sustained slowdown in global economic activity.
Adding complexity to the narrative, Federal Reserve officials offered contrasting perspectives on the inflationary potential of the new tariffs. While Federal Reserve vice chair for supervision Michelle Bowman and governor Christopher Waller acknowledged temporary inflationary effects, they primarily advocated for strengthening the economy to mitigate further weakening, emphasizing the central bank’s role in bolstering financial resilience amidst trade tensions.
The market’s already downbeat mood was significantly exacerbated by the US President’s decision to reignite trade disputes, imposing substantial tariffs on numerous trading partners. Notably, Canada faced a tariff rate of 35%, India was hit with 25%, and Switzerland saw a 39% tariff imposed, measures that collectively signal an escalating global trade war and contribute to heightened uncertainty within international commerce.
Market analysts, including Russ Mould at AJ Bell, noted that investors were “caught off guard” by the swift implementation of these new tariff levels. There had been a prevailing hope among market participants that the US President would defer or avoid such aggressive trade actions, making the actual imposition a surprising and unsettling development that necessitated a rapid recalibration of investment strategies.
In currency markets, the British pound demonstrated resilience, rising to 1.3247 dollars late on Friday afternoon, an increase from 1.3230 dollars the previous day. Similarly, the euro strengthened against the dollar, trading at 1.1538 dollars compared to 1.1442 dollars. Conversely, the dollar weakened against the Japanese yen, exchanging hands at 148.12 yen, down from 150.48 yen, reflecting shifting investor confidence in the face of economic headwinds.
The pharmaceutical sector in London experienced considerable pressure, weighing heavily on the FTSE 100, following the US President’s demand for drug companies to significantly lower prices for American consumers. This directive signals a potential confrontation between the administration and the pharmaceutical industry, leading to widespread share price declines as the market anticipates challenges to profit margins and regulatory landscapes, impacting global pharmaceutical giants.
Despite the overall market downturn, some companies managed to buck the trend. Pearson, Melrose Industries, Fresnillo, Unilever, and British American Tobacco emerged as the biggest risers on the FTSE 100. However, the day’s significant fallers included Intertek, Weir, Rentokil Initial, Anglo American, and Barclays, reflecting sector-specific vulnerabilities and broader market anxieties related to the prevailing economic climate and trade policy uncertainties.
