The FTSE 100 began the day on a cautious note, opening slightly higher but failing to erase the previous session’s losses. Sentiment remains wary as the Bank of England’s hawkish outlook tempers optimism, while Brent crude prices ease back amid a shift in focus from supply constraints to demand concerns. Across the Atlantic, Wall Street looks set for modest gains, though early trading could prove volatile as investors weigh the inflationary implications of sweeping tariffs. With this in mind, Susannah Streeter, head of money and markets, Hargreaves Lansdown updates within thorough insight.
’Wary sentiment pervades markets, as investors assess the implications of swathes of tariffs on new trading partners and a hawkish outlook from the Bank of England. The FTSE 100 has opened higher, but the gains are not yet large enough to erase yesterday’s losses. Even though the Bank’s policymakers did deliver a cut, it was a very finely balanced decision. Borrowers will need more patience with the chances of a further rate cut by the end of the year receding sharply.
Tense geopolitics may hold back gains with the Israeli offensive in Gaza showing signs of expanding. The country’s cabinet has now approved a plan to take control of Gaza City, despite intensifying criticism around the world about the destruction. However, there are tentative signs of progress when it comes to Ukraine with Putin and Trump expected to meet in the coming days to discuss a ceasefire. Threats still hover for extra 25% tariffs on Indian imports to the US as a punishment for the country buying Russian oil. Nevertheless, oil prices have dropped back, with Brent Crude trading around $66 a barrel amid optimism about the talks, and a lifting of supply concerns. Prices are being driven by pessimism about demand, amid high trade tensions and fears about a global economic slowdown.
Wall Street is set for a small rise but it’s likely to be a shaky start after stocks stumbled as the implications of tariffs on imports from nearly 200 countries were assessed. The overall effective tariff rate is set to shoot up to around 18.6% according to estimates from the Yale Budget Lab, at Yale University. This is the highest since 1933, with Trump ripping up many decades of free trade. With big US corporates now making what appears to be long-term decisions about manufacturing and trade partnerships to try and escape onerous duties, this punishing US trade policy will be hard to unravel, even when there’s a change at the White House. The higher import costs will bump up the prices for American shoppers on vast swathes of goods but it’s unclear if this will be a persistent trend. Consumers are expecting US inflation to stay more elevated according to the latest snapshot. The New York Fed’s survey showed that the expected level of inflation five years from now rose to 2.9% in July, rising from 2.6%, but expected tax cuts have led to an improved outlook for households’ overall financial situations.
However, the expected quiet day on the markets should be seen against the context of markets holding close to all-time highs. With second quarter earnings season now coming to an end, the tale of the tape so far provides confidence. Around 80% of US large caps have beaten market estimates so far and underlying earnings are on track for growth around 11.7% overall. Tech continued to prove its exceptionalism with the NASDAQ composite bucking the trend yesterday and rising 0.4% after Donald trump said he would exempt chip makers from the proposed 100% semiconductor tariff if there was visible progress towards onshoring production in the United States.
Shares in GSK are up 1.6% today and with more on what’s moving the pharma giant here’s my colleague Derren Nathan, head of equity research, Hargreaves Lansdown:
‘After the announcement of a $370mn patent settlement from CureVac in relation to its mRNA vaccine technology. GSK is also now entitled to a 1% royalty on US sales of both COVID-19 and flu vaccines sold by BioNTech and Pfizer from the beginning of 2025. Today’s rise hasn’t quite clawed back all of the losses seen in the stock over the last month as concerns about tariffs and US vaccine policy continue to circle. But with full-year guidance nudged up to the top-end of guidance in the latest earnings release, GSK looks to be in good health.’’
