Market report: High unease as investors brace for widespread tariffs
Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘’The last day of March is spring-loaded with uncertainty on financial markets. Unease about the effect of Trump’s tariffs has been amplified, causing sharp moves at the start of the week. London-listed stocks will not be immune to the tariff fall out, with the FTSE 100 set for a difficult start to the week as investors brace for the debilitating effect of widespread tariffs.
There have been steep falls on indices in Asia as hopes for a more targeted set of fresh duties have evaporated. The President’s comments over the weekend appeared to indicate that blanket new tariffs would be unleashed on Wednesday, a day he’s dubbed ‘Liberation’ day but one which is likely to ensnare many more countries in his punishing trade policies. While the implications of his comments are still far from clear, he appears determined to target countries which are competitive in a whole range of sectors, to try spark a revival of home-grown industries. But building new manufacturing bases will take years, and much higher costs in the meantime, look set to raise prices and depress economic activity. Concerns about the depth of the tariff plan and the knock-on effects of a potential recession in the world’s largest economy is sparking this fresh round of nervousness, following Friday’s losses on Wall Street. Friday’s inflation snapshot already showed that inflation came in hotter than expected, and that’s even before tariffs push up consumer prices further. Markets are bracing for fresh retaliatory tariffs to be imposed by countries around the world. It’s now looks less likely that there will be two interest rate cuts this year in the US, keeping borrowing costs higher for millions of consumers and businesses.
There’s been a stampede into safer havens, with gold racing above the $3100 mark as the tariff rhetoric is ratcheted up. The precious metal is in high demand, as investors look at ways to shelter their money, amid a high stakes trade game. The gold rush comes as central banks have been piling up their reserves, given the rise in long-term inflationary expectations due to the high levels of debt some countries have amassed. The gold rush has sparked a rush of interest from individual investors, and shoppers have been snapping up jewellery as the FOMO effect has taken hold.
Trump’s frustration with Russia in ceasefire talks has sparked threats that fresh sanctions on Russia could be imposed – secondary tariffs which could hit Russia oil exports. However, this hasn’t yet fed through to oil prices, with the price of the benchmark Brent Crude hanging around the $72.7 a barrel mark. Any supply concerns are being outweighed by concerns about growth and demand for energy around the world, as traders brace for a tariff war.”