- FTSE 100 set for gains in early trade following talk of a de-escalation in US trade war with China.
- Gold retreats from record highs after Trump indicates he’s in mood for negotiation.
- Latest UK government borrowing figures make difficult reading for UK Chancellor Rachel Reeves.
- Brent Crude rises amid hopes for slightly higher energy demand, while sanctions could hit supplies.
- Elon Musk realises he’s got fingers in too many pies and goes part-time in Doge department.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Hopes for a reprieve in the trade war are leading to a small swell of investor confidence, with European markets set to ride a wave of gains in early trade. While there’s been no concrete decisions to hang the hat of optimism on, Trump has indicated that he is in a mood for negotiation, saying that eventual tariffs on China won’t be as onerous as 145% threatened. US Treasury Secretary Scott Bessent says he’s also expecting a de-escalation in the trade war with China. While there had already been expectations of a recalibration, these comments have helped wash away some more pessimistic vibes. Worries about Trump wanting to meddle in monetary policy, following his comments about Fed chair Jerome Powell at the weekend appear to be ebbing away, after the President said he had no indication of removing him from office. US stocks look set to add to gains later with Wall Street set for a higher open. Financial markets are adjusting to Trump’s modus operandi which is to speak and act impulsively, and then retract some moves later. Just how much of the damage will linger remains to be seen and markets are likely to stay volatile as trade negotiations play out.
Expectations for relief in the tariff war have tempered the demand for safe-haven assets like gold. It’s retreated from Tuesday’s record highs, as some investors have repositioned, and equities look more attractive. Nevertheless, it’s still up more than 28% year to date. Nervousness about how the tariff war will play out, and concerns about geo-political risk have kept up demand for the precious metal.
Fresh from the disappointing analysis from the International Monetary Fund which noted a sharp growth slowdown for the UK this year, the latest public sector borrowing costs make difficult reading for the UK government. It was forced to go into the red more than forecast for the year to the end of March. UK borrowing rose to 151.9 billion, £14.6 billion more than expected. With growth this year expected to slow to 1.1% according to the IMF, down from 1.6%, tax receipts will also be lower. Rachel Reeves is between a rock and a hard place, as the tariff turmoil takes its toll, and some businesses become more cautious about investing following the rise to payroll costs introduced in the Budget. While Reeves keeps deflecting rumours about tax rises, something will have to give, to enable to her to meet her fiscal rules.
Brent Crude has made further gains, with the benchmark pushing above $68 a barrel amid the improving sentiment with hopes that lower tariffs will be less onerous on the global economy. Fresh US sanctions on an Iranian energy tycoon Seyed Asadoollah Emamjomeh has led to expectations that there could be a further curb on Iranian exports. Traders are awaiting official US data on crude stockpiles with industry figures indicating a sharp fall in inventories, indicating demand has been higher than expected.
Realisation is dawning for Elon Musk that having his fingers in too many pies isn’t good for business. He’s going part-time in Trump’s administration, forced to focus his attention back on Tesla which has seen a bruising slump in sales with quarterly profits down by 71% and revenues dropping 9.3%. Far from giving him an advantage Musk tying his political mast to the big ship Trump has been nothing short of a disaster for the electric car maker. The latest quarterly update was a big ‘ouch’ to read. With more here’s my colleague Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“This was, objectively, a weak set of numbers – there’s no sugar-coating it. Yet, Tesla shares have managed to ride the wave of a broader market rally as investors seem willing to overlook declining auto sales for now, instead choosing to focus on the bigger prize: an autonomous future.
This quarter was always going to be tough. For a carmaker, plant utilization is critical, and taking production offline to refresh the world’s best-selling vehicle was bound to leave a mark on the financials. But investor patience is wearing thin. Margins have been sliding for a while, and there’s no clear catalyst for a meaningful turnaround in 2025 with tariffs making the near-term outlook murky.
Still, that doesn’t mean the investment case needs a service – and with a $37bn war chest to tap and several long-term tailwinds yet to play out, Tesla is better placed than most to push through with. Investors may breathe a small sigh of relief as Elon Musk said he’ll step back from DOGE next month – potentially easing some of the pressure on Tesla’s brand image.
On the product side, more affordable models appear to be streamlined versions of the existing Model 3 and Model Y. It’s not quite the disruptive refresh some had hoped for, but if these versions can unlock new customer segments, it could be a net win – especially for maximizing output at current facilities.
Then there’s the real crown jewel: autonomy. Tesla’s ride-hailing pilot is set to launch in Austin this June, with full-scale Cybercab production ramping up in 2026. In the race to bring AI into the physical world, Tesla still looks like the company with the most to gain.”
