Market report: Trade uncertainty, TikTok reprieve and Chinese tech hopes
Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘‘As the world holds its breath in anticipation of where the latest round of US tariffs will land, the Footsie has lost ground in early trade. Although President Trump’s pledge to impose reciprocal tariffs on trade partners has set off a fresh round of uncertainty, the more gradual approach has been tentatively welcomed. With a fresh deadline set for April, he’s essentially triggered fresh rounds of talks, and haggling is set to ensue with leaders. The UK government had hopes it may escape the worst of the tariffs given the majority of trade with the US is in services rather than goods. But with Trump’s claims that VAT is a tariff and the digital services tax on tech giants also in scope, trade envoys and ambassador Peter Mandelson will have their work cut out to claim that the UK should be viewed as a special case. Like other nations, the UK remains highly vulnerable to the whims of capricious US policy. The pound has regained further form against the dollar, still helped by the better than forecast growth in the UK economy at the end of last year, with traders also sanguine for now about the knock-on effects of US trade policy. This puts a little more pressure on the overseas earnings of the multinationals listed on the FTSE 100, although sterling is still trading 6% lower than its level back in September.
Chinese-focused tech stocks have been buoyed by tentative hopes US tariffs may end up with a bit less bite amid hopes of greater support domestically. The postponement of the enforcement of a ban on TikTok in the US until 5 April has also lifted sentiment. The wildly popular social media platform is back on Apple and Google App stores in the US, which will be greeted by a big sigh of relief from businesses and influencers who rely on it. Hong Kong’s Hang Seng has surged up more than 3% with optimism high over upcoming talks with the technology sector. Huge volatility hit Chinese tech firms in 2021 amid a clampdown on the sector, but there are signs authorities are keen to sow better seeds for growth. Chinese President Xi Jinping is expected to meet with senior executives, including Alibaba founder Jack Ma and Tencent Chairman Pony Ma. This is sending fresh enthusiasm through the sector which is already infused with AI optimism surrounding the progress made by DeepSeek and its low-cost large language model.
Wall Street has been calm in the face of chaotic policymaking from the White House, with the S&P 500 rising 1%, despite the risks of Trump’s threats for consumer prices, coming on top of the latest steamy inflation snapshot. Although Trump’s way of doing business is to infuse unpredictability into trade partnerships to gain the appearance of domestic political wins, the prospect of tax cuts ahead is mitigating some concerns. There is also expectation that fresh rounds of tariff announcements will be quickly followed by hasty phone calls and fast rounds of negotiation. A raft of better-than-expected corporate news has also helped lift spirits. MGM resorts, the high-end casino and hotel group, known for its big Las Vegas presence, posted record revenue, of $17.2 billion. Its China division is roaring ahead, with revenues swelling 27%. The lingering pandemic restrictions over its operations in Macau have lifted, with pent-up demand from tourists pouring in. There has also been a growth surge in the digital part of the business of 27%, with heavy investments paying off, and the betting platform of recently acquired Tipico expected to launch this month.
NatWest is in focus today with some robust results amid expectation that the UK government will sell off the remaining stake it holds in the bank this year. This would be the final full stop of a chapter which began in the bailout drama of the Great Financial Crisis. NatWest shares have risen by 113% over the last year, and ministers are clearly keen to capitalise on NatWest’s recent run of success.”
With more here’s my colleague Matt Britzman, senior equity analyst, Hargreaves Lansdown: “NatWest caps off a strong year with a good set of fourth-quarter numbers that saw a slight beat on the profit line driven by higher non-interest income and better impairments. There’s been a seismic sentiment shift over 2024, as NatWest has moved on from its troubles at the helm and the UK banking environment has played out much better than some had feared. The setup for 2025 is one of cautious optimism, with borrowers remaining resilient, inflation in a more manageable place, and a UK economy that’s trying its hardest to squeeze out some growth.
2025 could be the year NatWest finally sheds its government ties, with the bank on track to return to full private ownership. After the UK government’s failed attempt to sell its stake earlier in 2024, this news will be a welcome development for investors who have long been waiting for the bank to regain its full independence. As we saw with Barclays yesterday, NatWest’s 2025 guidance is in line with expectations, which may cause some weakness in early trading. The buzz around the sector and better-than-expected results in the final quarter mean investors will have been hoping to get a punchier outlook. For the longer-term investor, this was a decent set of results, setting up another positive year in 2025.”