UK sheltered from Trump’s tariff storm

US President Donald Trump agreed to restart negotiations on trade with the UK, as Prime Minister Sir Keir Starmer heralded a “new economic deal” between the two countries. Mr Trump said during a joint press conference with Sir Keir that a deal could happen “very quickly” to help the UK avoid being swept up in in his tariffs battle. Sir Keir heads to Washington.

The situation for the European Union (EU) was very different, with no signs of any shade of ‘special relationship’ in evidence. The US announced plans to raise tariffs of 25% on goods made in the EU, which said it would react “firmly and immediately” against unjust tariffs.

The FTSE 100 was a rare bright spot in global equities. Markets fell across Asia South Korea Hong Kong on the US with technology stocks leading decliners. By Thursday evening the S&P 500 had wiped out all its gains for the year. UK equities performance returns were mixed over the week. The FTSE 100 was up 1.1% by mid-session on Friday, with the more UK-focused FTSE 250 trading down1.6%.

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Economics

The UK jobs market suffered the worst start to a year since the depths of the Covid-19 lockdowns in 2021, as cautious employers reduced hiring in the wake of record tax increases in Labour’s budget delivered in October 2024. Fewer than 828,500 jobs were available in January, a month on month drop of 1.9% and 4.5% lower than in January last year, according to vacancies website Adzuna.

The chief executive of Emirates airline, Sir Tim Clark, has warned that Heathrow airport’s plans for a third runway should not be funded by forcing airlines to finance the construction through additional charges. Chancellor Rachel Reeves has indicated that she supports construction of a third runway at Britain's largest airport to foster economic growth. Heathrow’s chief executive Thomas Woldbye has already said that the cost would be significantly more than the £14bn estimated in 2014, mainly due to inflation. The airport’s board will release detailed financial plans this summer, with the expansion expected to be privately financed by shareholders who will respect who will expect a return on investment.

Talks between the UK and India over a trade deal started in Mumbai after they were paused for elections in both countries last year. UK Prime Minister Sir Keir Starmer has indicated that striking such a deal was one of his government's priorities as well as striking deals with six Gulf countries, Israel, South Korea, Switzerland and Turkey. Foreign direct investment from India increased by 28% year on year at the end of 2023, the most recent data shows.

The European Central Bank (ECB) risks “sleepwalking” into making too many interest rates cuts, according to the head of Belgium’s central bank. Markets currently expect the ECB will make a further cut to its benchmark interest rate at its next meeting on 6 March, with interest rates falling to 2% from the current 2.75% by the end of 2025. Pierre Wunsch, governor of the Central Bank of Belgium, told the Financial Times that he wasn't pleading for a pause just yet but was warning that the central bank must not sleepwalk to 2% interest rates without thinking about it properly.

Geopolitics

Hopes mounted that a settlement to Russia’s invasion of Ukraine is in sight. Donald Trump said Ukraine’s President Zelensky will sign a “very big agreement” in the US on Friday. Kiev and Washington have been discussing a deal to share Ukraine's mineral wealth (especially rare earth minerals) in return for past US aid and possibly security guarantees for the future.

Mr Trump said that 25% tariffs on goods imported from Canada and Mexico would go into effect on Tuesday unless more is done to stop the flow of fentanyl into the US. He also said he will press ahead with an additional 10% tariff on Chinese goods.

The rift between Europe and the US deepened this week, with several European officials calling for a decoupling of policies from those pursued by Washington. During Donald Trump's first term in office European states were under pressure to take a more hawkish stance towards Beijing. A stance that was continued by Joe Biden. Earlier this month European Commission president Ursula von der Leyen called for improved relations between Brussels and Beijing.

Other evens supporting the rift narrative included:

• Friedrich Merz, Leader of the Christian Democrat Party which won the German federal election with 28.5% of the vote at the weekend, promised to achieve independence from the US. The far-right AfD party came second doubling its vote to its highest ever market share of about 21%. Mr Merz said that Germany must fundamentally remake its security arrangements and end a decades-long reliance on Washington, noting that Donald Trump was “largely indifferent” to Europe’s fate. The euro rallied following the result as investors welcomed the outcome.
• The European Union (EU) should make its own China policy and not copy the Trump administration's confrontational stance, according to Spain's foreign minister José Manuel Albares.

The EU is spending more money on Russian oil and gas than on financial aid to Ukraine, according to estimates from the centre for research on energy and clean air. The EU bought €21.9bn of Russian fossil fuels in the third year of the war compared with aid to Ukraine of €18.7bn in the equivalent period.

The German elections created more uncertainties for Europe- and the outcome is unlikely to unite the European Union. Implications of the German election

Cryptocurrency

Cryptocurrency exchange Bybit had $1.5bn of digital coins stolen from its platform by hackers in what is believed to be the single biggest digital theft in history. The Dubai based platform said an attacker gained control of a wallet of Ethereum one of the most popular digital currencies after Bitcoin and transferred the contents to an unknown address.

Companies

It was another upbeat quarter from artificial intelligence (AI) chip group Nvidia, albeit at a slightly slower pace than most of the quarters in the past two years. But quarterly year-on-year revenue growth of 78% remains stunning – and guidance for the first quarter came in slightly ahead of expectations too. The emergence of China’s DeepSeek a month ago is not as negative as some think. The competition will drive innovation, just like during the Cold War when rivary between nations it propelled man to the Moon. Such ‘disruptive innovation’ often creates a new product or service that's more accessible, affordable and simpler than existing options. This is good for future consumers. It may also ensure that the other leaders in the sector – such as Microsoft, Amazon and Alphabet – will deploy investment capital more prudently, benefitting shareholders over the long term. The Trump administration’s trade actions remain a significant threat. The banning of sales of certain chips to China is a significant sales risk and future policy is unclear as it is still being debated and shaped in private.

Shares in Rolls-Royce surged by a fifth after the aerospace and defence company lifted mid-term guidance, reinstated its dividend and unveiled a £1bn share buyback as annual profits jumped, driven by its civil engine unit. Roll’s recent problems were created by the fact that many older engines were being withdrawn from service at a rate that outpaced the installation of new engines. Also, economics dictates that newer engines take longer to make a profit as development and testing costs are taken into account in this period. The Covid-19 pandemic compounded group cashflow problems as service revenues are directly related to the number of flying hours recorded by individual units. With most aircraft grounded, the revenues dried up.

There was a big change of strategy at oil major BP. Most of its plans to turn into an environmentally friendly renewables business have been scrapped and the company will significantly increase its investment in hydrocarbons.

Shares in Elon musk's electric car maker Tesla slumped after the EU and UK sales fell by almost 1/2 in January this dragged the company’s equity market valuation below the one trillion level for the first time since November 2024

Warren Buffett's investment component company Berkshire Hathaway reported record annual profits and an increasing cash pile. The company had $334.2bn billion in cash on its balance sheet following nine quarters of selling more stocks than it bought the 94-year-old veteran also warned that it won't be long before he is no longer heading the company.

Discount retailer B&M European Value Retail issued its second profit warning of 2025 and said chief executive Alex Russo will leave the group at the end of April. The profit downgrade reflected current trading performance of the business, an uncertain economic outlook - and the potential impact of exchange rate volatility, the company said.

National Grid is selling its US onshore renewables business to Brookfield Asset Management In a deal that values the business at $1.7bn. The sale is part of a streamlining strategy the company announced in May 2024.

Deliveroo shares rose after peer Just Eat Takeaway.com agreed to be bought by South African private equity group Prosus in a €4.1bn deal. The deal will be worth €20.30 a share for holders of Just Eat’s Amsterdam-listed shares. That represents a 22% premium to its three-month high, but less than a fifth of its peak above €100 in 2020.