The latest economic news and market highlights from the UK and abroad.
The key takeaways
🔥 US trade tensions heat up – the US is set to introduce tailored export taxes on trading partners in response to tariffs, VAT policies, subsidies, and currency manipulation affecting the US.
🕊️ Peace talks – US President Trump and Russian President Putin are in negotiations to end the war in Ukraine. European nations are being encouraged to step up their financial and military support for Ukraine, allowing the US to focus on other security concerns.
🥤 Steel no longer a steal – a US executive order imposing a 25% tariff on steel and aluminium imports is starting on 4th March 2025. Coca-Cola has already hinted they may use more plastic bottles in the US to offset the cost increases.
📢 Noisy US inflation – seasonal factors contributed to a hotter headline inflation rate of 3%, however, the Producer Price Index (PPI) suggests there will be a cooler rise in the core Personal Consumption Expenditures (PCE) deflator, the Fed’s preferred inflation measure.
📈 UK surprises with growth – strong consumer spending in December helped the UK economy grow by 0.1% in Q4 2024.
What does that mean for you and your clients?
With Valentine’s Day upon us, expectations are in the spotlight – sometimes met, sometimes missed. That’s certainly been the case in markets over the past week – although pleasingly there have been more positive surprises than disappointments.
An end to the devastating war in Ukraine would be an immeasurable relief to the world, especially to those directly impacted by the conflict. While we’re not there yet – with far more road to travel to arrive at lasting agreements between all parties – we appear to be closer to resolution than at any point since Russia invaded Ukraine’s territory.
Meanwhile, the UK economy delivered an unexpected silver lining. It feels churlish to mention the gloomy mood in the UK given the suffering elsewhere, but in an economical sense expectations have been low for months. GDP was expected to have contracted over Q4. However, things weren’t quite as bad as they seemed for the UK economy, with strong hospitality spending nudging GDP into marginal growth.
Whilst Wednesday’s US Consumer Price Index (CPI) release sparked some concern about inflation re-heating, subsequent data has reassured investors.
However, the most controversial move of the week comes from President Trump’s tariff plans. Reciprocity is usually a good thing on Valentine’s Day, but when applied to trade policy, it risks escalating tensions rather than fostering harmony.
Markets are remaining positive at this stage – perhaps because, as history has shown, Trump’s policy follow-though isn’t always guaranteed.
Chart of the week - expect the unexpected
Source: Schroders
Why’s this worth sharing?
Whilst it might feel like the world has become a lot more uncertain since President Trump’s re-election, global economic policy uncertainty has been on the rise for over a decade.
It’s a trend that appears to be continuing and increases the importance of managing risk across a portfolio. Big tech has offered somewhat of a relative safe haven in recent years, but today, gold appears to be taking on that role.
Having too much confidence in a position – or assuming the status quo will hold – could fall foul in an environment of rapid change, particularly if the exposure is concentrated.
Diversification, alongside reliable income from bonds and equities with persistent dividend yields, can provide an anchor in choppy waters.
The markets
FTSE tiptoes forwards: the FTSE 100 strode to another record high earlier in the week, boosted by a surge in BP shares following activist investor Elliott Management’s stake. However, it has since pulled back, largely because of concerns over US tariffs.
America first: US stocks reacted positively to the announcement of reciprocal tariffs, which in isolation could favour domestic companies by increasing costs on foreign competitors. Tech stocks shone following a decline in Treasury yields and Hewlett Packard’s shipment of Nvidia’s Blackwell chip - galvanizing the AI-narrative. Dollar weakness lessened returns for UK investors.
Chinese cheer: a bullish rally in the Hang Seng has been driven by tech stocks, with Alibaba reaching a 3-year high after announcing a partnership with Apple on AI-services in China. President Xi Jinping is reported to be chairing a conference for Chinese business leaders, boosting private sector sentiment.
Gold is all that glitters: another eventful week in geopolitics with new uncertainties arising has reinforced the endurance of gold’s run ahead of other assets.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.82% | 7.40% |
| FTSE 250 | 0.57% | 1.71% |
| S&P 500 | 0.64% | 4.06% |
| NASDAQ | 1.55% | 4.78% |
| Hang Seng | 2.10% | 8.57% |
| Nikkei 225 | -0.27% | 1.43% |
| Brent Crude | -0.57% | 0.16% |
| Gold Spot | 2.02% | 12.10% |
| UK 10yr Gilt yield | +1bps | -8bps |
| US 10yr Treasury yield | +4bps | -4bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close Thursday 13th February 2025.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
