UK markets continued to rise this week, with the FTSE 100 Index gaining 1.3% to trade at 8,555 points at the time of writing.
British factory exports shrank at their sharpest pace in almost five years and cost pressures intensified in April, according to a survey that showed the impact of US President Donald Trump’s trade war and a UK tax hike for employers. Foreign demand for UK manufactured goods fell in the US, Europe and China, S&P Global said on Thursday. The pace of decline for exports was the fastest since May 2020 during the Covid-19 pandemic.
The headline S&P Global Purchasing Managers’ Index for UK manufacturing rose to 45.4 in April, remaining below the 50.0 threshold marking contraction for the seventh consecutive month. However, it improved from March’s 44.9 and April’s initial estimate of 44.0. The Bank of England, expected to cut interest rates by 0.25% to 4.25% next week, says it’s too early to gauge the inflationary impact of tariffs, though Governor Andrew Bailey warns they will likely weigh on growth.
UK house prices fell 0.6% month on month in April, below the zero growth forecasted by economists polled by London Stock Exchange Group and taking the average house price down to £270,752, according to lender Nationwide.
This was the largest monthly drop since August 2023, resulting from the increase in stamp duty levied on property price purchases at the start of the month. Early indications suggest there was a significant jump in transactions in March, with buyers bringing forward their purchases to avoid additional tax obligations.
Stamp duty thresholds reverted to pre-2022 levels on 1st April, increasing the tax cost for many property buyers. Nationwide said house prices were still 3.4% higher than in April last year, but below analysts’ expectations of 4.1% and down from an annual rise of 3.9% the previous month.
Commodity markets
Brent crude futures traded around $62 per barrel on Friday and are on track for a weekly decline, driven by concerns over the US economy and the potential for increased OPEC+ output. Prices fell after Saudi Arabia signalled it would not support the market with supply cuts and could endure prolonged low prices.
Reuters reported that several OPEC+ members may propose accelerating output hikes for a second month in June, with eight members meeting on 5th May to decide on the plan. However, hopes of easing US-China trade tensions, the latter being the world’s largest crude importer, offered some support to prices.
Oil prices were also supported by US President Donald Trump’s threat to impose secondary sanctions on buyers of Iranian oil, heightening concerns over tighter global supply. His comments came after US-Iran nuclear talks were postponed and followed the reinstatement of his “maximum pressure” campaign aimed at cutting Iran’s oil exports to zero to prevent the development of nuclear weapons.
Gold prices traded around $3,260 an ounce on Friday and are set for a weekly fall, pressured by signals of softening trade tensions which dampened safe haven demand, and a holiday in top consumer China.
Equity markets
US equity futures rose on Friday as investors digested earnings from tech giants and awaited the release of the April jobs report. In Thursday’s regular trading session, the Dow Jones Industrial Average gained 0.21%, the S&P 500 advanced 0.63%, whilst the Nasdaq Composite rose 1.52%.
The US economy contracted by an annualised 0.3% over the first quarter, the first fall since 2022, worse than economists’ most recent forecasts and compared with a 2.4% rise in Q4 2024. The fall in the GDP reading was largely the result of US companies’ rush to buy goods from abroad ahead of Trump’s sweeping tariffs, with imports rising at an annualised rate of 41%.
Many analysts argue that the recent drop in headline US GDP was largely due to a sharp rise in the trade deficit, rather than underlying economic weakness. Economists at Morgan Stanley noted that the surge in imports boosted inventories, consumption and investment, positive contributors to GDP that were not fully captured in Wednesday’s figures.
President Donald Trump said this week he has ‘potential’ trade deals with India, South Korea and Japan, though he’s in no hurry to finalise them, claiming the US is already benefitting from existing tariffs.
Meanwhile, the US has approached China to discuss Trump’s 145% tariffs, and China’s Commerce Ministry confirmed on Friday that talks could take place, signalling a potential de-escalation in the trade war. The shift comes as China’s economic data shows strain, with April factory activity falling at the fastest pace since 2023 as export orders declined. This marks a softening in Beijing’s stance from last week, when it said US tariffs must be lifted before any talks could begin.
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