“The US market rebound didn’t last very long. After yesterday’s last-minute surge on Wall Street following the 90-day tariff pause, US markets opened in the red which suggests investors have lingering concerns about the trade war and likelihood of recession,” says Dan Coatsworth, investment analyst at AJ Bell.
“Fundamentally, the US still has a major problem on its hands by imposing such significant tariffs on Chinese imports, particularly with China having retaliated on a grand scale. Costs could go through the roof for US consumers and push up inflation.
“Today’s inflation reading is arguably meaningless as it relates to the pre-Liberation Day environment. What matters is where inflation is heading over the coming months, and the data could be ugly.
“Trump’s 90-day pause has brought some relative calm to markets but it doesn’t remove the clear risk of a global economic slowdown. Many countries are still subject to a 10% baseline tariff, so that alone creates headwinds for sales and profits. Business confidence has been shattered by the chaos of the past week and it’s hard to imagine many companies will be feeling upbeat, even after the ‘pause’.
“What’s interesting is how the US market pullback failed to derail the rebound in the UK stock market. Wall Street often sets the tone for how other markets behave, but this time there were divergent fortunes. A 3% gain in the FTSE 100 wasn’t on the same level as Wall Street’s explosive rally last night, but investors will certainly take the UK performance as a major win given what’s happened over the past week.”
TESCO
“Tesco reminded investors that even so-called defensive stocks can still deliver bad news. Markets had been fretting about the prospect of a new price war in the supermarket sector in the months leading up to Liberation Day, spurred on by Asda slashing prices in a sign of desperation.
“The big market sell-off that began last week saw investors forget about Tesco’s challenges and its share price held up well as people thought demand would be resilient. Defensive-style shares were in vogue and Tesco’s position as the UK grocery market leader made it a popular place to hide amid the market bloodbath.
“Unfortunately, the company has now flagged that the grocery sector price war is intensifying, and said earnings wouldn’t be as strong this year. If Tesco was an outlier last week when other share prices fell and its stock remained firm, it was also an outlier today as it was one of only a handful of stocks to fall on the FTSE 100.”
