Market Commentary 15th April 2025 – from Naigil Johnson

The FTSE 250 appeared to be less exposed to global events, largely due to the composition of the index. The FTSE 250 consists mainly of smaller, UK-focused companies, while the FTSE 100 includes more internationally focussed businesses. The recent uncertainty with President Trump’s tariff announcements appeared to weigh on globally trading firms, while domestic-focused businesses in the FTSE 250 seem less affected. UK-based businesses trading with China could potentially benefit if China and others seek to redirect trade flows in response to US tariffs.

According to the Office for National Statistics (ONS), UK GDP grew by 0.5% in February 2025, outpacing all estimates in a Reuters poll of 30 economists, which had predicted just a 0.1% rise. Whilst this was a positive sign, City economists cautioned that the momentum may prove short-lived as higher tariffs and business taxes begin to take effect.

UK manufacturing production saw a strong rebound in February 2025, rising by 2.2% for the month following a revised 1% fall in January. The figure far exceeded market expectations of a modest 0.2% increase and marked the fastest pace of growth since June 2023. Production rose across the majority of sectors, with 10 out of 13 subsectors posting gains.

Most major European indices declined following a spike in volatility triggered by sudden changes in US tariffs, which appeared to heighten concerns about the economic consequences of a potential trade war and shifted attention to whether the US will negotiate trade deals with individual countries. The EU refrained from imposing retaliatory tariffs, and EU Trade Commissioner Maros Sefcovic is set to engage in talks with US officials.

European Central Bank officials warned that US tariffs and potential retaliatory measures could raise inflation, particularly in the short term. They also highlighted that increased government spending, especially on defence, could delay disinflation. Policymakers clarified that the revised policy statement should not be seen as signalling a rate cut or pause in the April meeting, acknowledging uncertainty about whether monetary policy is still restrictive, given the significant rate cuts already made and the possibility of further reductions.

After a volatile week, the major US stock indices closed Friday with some gains, showing signs of stabilisation. Investors appeared to be cautiously optimistic as the road ahead remains uncertain. The 90-day pause on higher tariffs, announced by President Trump, seemed to influence market sentiment and global trade dynamics. This temporary halt in tariff increases created a sense of cautious optimism, but its long-term effects remain unclear. As the 90-day window progresses, it is likely that market participants will be monitoring the situation, waiting for clues on whether the pause will lead to more permanent trade agreements, or if the uncertainty will continue to weigh on investor confidence.

The US annual inflation rate dropped for the second consecutive month to 2.4% in March 2025, its lowest level since September 2024. This marked a decrease from 2.8% in February and is below the expected inflation rate of 2.6%.

China announced countermeasures and hiked tariffs on US goods to 125%, after the US hit them with a 145% tariff on some goods entering the US. Chinese Foreign Minister Wang Yi stated that China is resolute in opposing Trump’s tariffs, not only to protect its own rights and interests but also to “defend the shared interests of the international community.”

Japanese equities continued to struggle with growing market uncertainty, which is likely to have impacted future growth prospects in Japan. In March 2025, Japan’s producer prices rose by 4.2% year-over-year, exceeding market expectations of 3.9% and slightly outpacing the revised 4.1% growth from the previous month. This marked the 49th consecutive month of producer inflation, with costs continuing to climb for most components. A Bank of Japan (BoJ) official said the central bank will closely monitor developments, as the US tariffs may also have an indirect effect on the real economy through market conditions and changes in demand.

The 30 basis point surge in the yield appeared to have been largely driven by President Trump’s sweeping tariffs, as uncertainty continued to linger.

The yield remained steady as investors appeared to evaluate recent US trade policy developments ahead of the European Central Bank’s interest rate decision on Thursday 17^th April.

There was growing speculation around China and Japan selling their US treasury holdings amidst heightened trade tensions. This contributed to yields rising sharply.

GBP / EUR – Current 1.1521 Previous 1.1766

The Pound rose by 1.55% against the US Dollar last week, with investor sentiment led by stronger than expected UK economic data. The value of the US dollar has fallen in recent days to a new three-year low following the uncertainty over the impact of Trump tariffs on the global economy. Against the Euro, however, the Pound declined by 2.08%.