Market headlines - a step without spring?

Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US and Asia.

Key market events

📈 UK growth forecast cut in half 

• The Office for Budget Responsibility (OBR) has cut its 2025 UK GDP growth forecast from 2% to just 1%. However, there's a silver lining - long term projections were revised higher, with planning reforms expected to boost GDP by 0.2% in 2029.

🛍️ UK inflation comes in lower 

• February's Consumer Price Index (CPI) dropped to 2.8%, below the consensus. The main driver? Steep discounts on clothing helped push good prices lower. 

📊 Retail sales beat expectations

• UK retail sales rose by 1% in February, with broad growth across all sectors - except food sales.

🚗 Trump's auto tariff shake-up 

• The US President announced a 25% tariff on imported vehicles and auto parts, to take effect from 3 April 2025.

👀 US seeks control over Ukraine's infrastructure 

• A proposed US-Ukraine partnership agreement could give the US first rights over investments in roads, railways, ports, mines, oil, gas and extraction of critical minerals. The deal could undermine Ukraine’s sovereignty and hurt the nation’s aspirations of joining the EU.

UK Chancellor Rachel Reeves’ Spring Statement was a far quieter affair for UK investors than her first bold budget in October. Back then, optimism reigned, with 2%+ GDP growth forecasts. Fast forward to this week, and the Office for Budget Responsibility (OBR) has halved the growth forecast for 2025 to just 1%.

With weaker growth and rising government debt interest costs, the Chancellor took a pragmatic approach, opting for spending cuts - particularly in welfare.

The good news? Bond yields haven’t spiked in the manner they did following October’s budget. And looking further ahead, the OBR points to increased optimism for UK growth in 2026 and beyond.

The less good news is the US administration’s persistence in pursuing isolationism. It's difficult to judge how far they'll go with this approach, especially as US consumer confidence has slumped to a four-year low. For now, uncertainty rules, with investors bracing for a fresh round of tariffs on 2 April 2025.

Chart of the week - US consumer confidence takes a hit 

Source: The Conference Board, March 2025.

The chart above highlights a sharp decline in US consumer confidence in recent months. With expectations of higher costs due to impending tariffs, consumers may already be adjusting their spending habits.

If this trend continues, a meaningful pullback in consumer spending could weigh on the US economy - potentially forcing the administration to reconsider its trade stance and adopt a more cooperative approach.

Steady FTSE

• The UK index was broadly unchanged over the week, supported by Chancellor Reeves indicating her preference for improved trading relations with the US over retaliatory measures. Next shares spiked higher after delivering £1bn annual profits. 

Dollar weakness

• The S&P 500 delivered modest returns in dollar terms, boosted by outperformance from the energy sector. However, for UK investors this was offset by a fall in the value of the dollar versus the pound, with markets viewing President Trump’s tariffs negatively for the former and higher UK retail sales positively for the latter. 

A bitter pill for Europe

• Healthcare stocks dragged European equities lower, with losses from Novo Nordisk, Novartis and Roche in response to US tariffs. 

Oil gains

• Declining US inventories and sanctions targeting countries purchasing oil from Venezuela and Iran have exacerbated supply worries, sending oil prices higher. 

A new gold standard

• Gold hit another record high this week amid continued geopolitical concerns, with gold-backed ETFs seeing their biggest one-day inflow since 2022.

Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 27th March 2025.

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