Gold hits record on trade concern

The S&P 500 had another record close this week despite escalating concerns over Donald Trump’s trade war, which sent the gold price to another all-time high. Spot gold prices hit $2,954.69 an ounce on Thursday as markets mulled Mr Trump’s threat of 25% tariffs on cars and pharmaceuticals.

UK equities edged lower over the week. The FTSE 100 was -0.6% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading -0.7%.

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Market Moves

Market Moves provides a round-up of market movements from the last seven days.

Economics

Consumer price inflation (CPI) rose to 3% year over year in January from 2.5% in December, versus expectations for a smaller uptick to 2.8%. On a monthly basis, CPI fell 0.1% last month, compared with a 0.6% fall in January 2024. The Office for National Statistics said the largest upward contribution to the monthly and annual changes came from transport, and food and non-alcoholic beverages, while the largest downward contribution came from housing and household services. Core CPI – which strips out volatile food and energy costs – was 3.7%, up from 3.2% in December. Meanwhile, services inflation ticked up to 5% from 4.4%. The figures revealed a rise in private school fees, where prices increased by 12.7% on the month after the government imposed a 20% Value Added Tax.

There were some signs of life in the UK consumer, but Britons remain cautious with their spending. UK retail sales bounced back more than expected in January, according to figures released by the Office for National Statistics. Retail sales grew 1.7% on the month following four consecutive months of falls and after a downwardly revised 0.6% drop in December. Economists were expecting a smaller increase of 0.3%. UK consumer confidence also rose in February, according to the GfK consumer confidence index. It rose two points to -20 in February, marking a slight improvement compared to January.

UK manufacturing output volumes fell again in the quarter to February, but expectations turned positive, according to the latest industrial trends survey released on Thursday by the Confederation of British Industry (CBI). "Manufacturers expect to raise output in the quarter ahead. But with firms having rapidly rundown stocks of finished goods, it's possible that the need to re-build inventories partly explains this rebound. Order books remain weak from a long-term perspective,” Ben Jones, lead economist at the CBI, said.

However, there was more bad news for Chancellor Rachel Reeves. The UK’s public finances swung to a smaller than expected surplus in January. The public sector was in surplus by £15.4bn in January, £0.8bn more than last year and the highest seen in that month since 1993, the Office for National Statistics said on Friday, citing record income and capital gains tax receipts. However, this was still smaller than the £20bn January surplus the Office for Budget Responsibility had been expecting when it last published forecasts alongside the Chancellor’s October Budget.

The minutes of the most recent policy setting Federal Open Markets Committee (FOMC) hit equity markets as they indicated further rate cuts were a distant possibility. "Participants indicated that, provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate," the minutes said. Participants of the Federal Reserve’s rate setting body generally pointed to upside risks to the inflation outlook.

Geopolitics

Donald Trump is considering imposing tariffs of about 25% on imports of cars, drugs and chips into the US as he teased the next steps of a rapidly escalating trade war. The US president said he was weighing tariffs “in the neighbourhood” of 25% on automotive imports and at least that level on pharmaceutical products and semiconductors. The gold price was propelled to another record high on safe-haven buying due to concerns over the escalating trade war.

Reciprocal tariffs are coming. What tariffs does the UK impose already on US goods? What could the UK do to prevent damage to trade with the US? Can the UK escape Donald Trump’s tariffs?

Europe and the US are divided over what action to take in Ukraine and Gaza, but Donald Trump marches on with his plans.

Companies

Defence group BAE Systems issued a solid set of annual results that were ahead of consensus expectations. A record order backlog of £77.8bn builds on two years of record order intake in 2022 and 2023 and has guided to another strong year in 2025 with expected sales growth of 7%-9%. Growth is broad based with positive contributions from all five divisions as defence spending is ramped up in European nations due to pressure from Donald Trump.

Asia-focused bank Standard Chartered said it would buy back $1.5bn of shares after a rise in annual earnings driven by its pursuit of wealthy customers. However, it warned that global growth could be hit by protectionist trade policies amid threats of widespread tariffs by the new US government. Operating income rose 14% to $19.7bn boosted by a record performance in the wealth division, which grew 29%.

Lloyds Bank shares gained despite a 20.4% year-on-year fall in profits, an outcome worse than the market had expected. It also set aside an extra £700m to cover potential claims against motor finance commission deals. The latest hearing on the latter is in early April.

British Gas owner Centrica jumped as it hiked its dividend and announced a £500m share buyback after full-year earnings beat forecasts. Management said it is in talks with the UK government to secure financial support to expand and redevelop the country’s largest gas storage site, arguing that the move could help stabilise prices.

Despite delivering earnings slightly below consensus estimates Rio Tinto benefitting from the mix shift away from iron ore towards copper due to the ramp up of its massive Oyu Tolgoi project. Iron ore prices fell 11% over the year. The dividend beat consensus and 2025 guidance was mixed, with iron ore guided to the same range as 2024 despite worries over cyclones in Australia.

Anglo American shares moved higher, despite posting a full-year loss of $3.1bn following a large – and expected – impairment related to its De Beers diamond operation. It continues its restructure to focus on copper and iron ore. Its dividend was also cut.

Mondi chief executive Andrew King described the paper and packaging group’s performance last year as “resilient” amid a challenging trading environment. The figures also revealing €13m in costs related to its thwarted offer for DS Smith. Mondi pulled its plans to merge with DS Smith in April 2024 after International Paper stepped in with a rival bid. Mondi is now in the process of acquiring Schumacher Packaging’s Western Europe operations in a €634m deal expected to complete in the first half of 2025. Its order book has seen some improvement as we entered 2025, management noted.

Online travel agency Booking Holdings beat analysts' expectations for fourth-quarter profit and revenue, as demand for international travel boomed. Leisure travel in Europe, the company's largest market, remained healthy, led by both domestic and long-haul trips from wealthy American travellers. Demand has also been strong in Asia-Pacific, with destinations in Southeast Asia benefiting from an influx of high-income Chinese tourists after the lifting of some visa restrictions.