Daily market update: Trump tariffs, European stocks, China trade war, Tesco

“If you felt a bit of a breeze around 6.30pm UK time last night it was probably the cumulative effect of countless global investors breathing a massive sigh of relief,” says AJ Bell investment director Russ Mould.

“News that the particularly punishing ‘reciprocal’ tariffs introduced by the Trump administration would be put on hold saw substantial gains in the US and across Asia and that pattern is being repeated in Europe this morning. Tellingly one of the biggest gainers was shipping giant Maersk.

“The one laggard is the Chinese market where escalation remains the order of the day with China introducing 84% retaliatory tariffs after the US levy on Chinese imports was increased to 125%.

“A fortnight ago, the prospect of the world’s two largest economies engaging in an all-out trade war would have been cause for significant alarm, but relative to the situation before president Donald Trump hit the pause button on wider tariffs the market’s cheer is understandable.

“Notably yields on long-term US government debt, a surge in which may have helped concentrate minds in the White House, remain elevated even if they have come back from their highs.

“This shows there is still lingering concern about US trade policy and while the 90-day pause is welcome news for stocks, the lack of long-term clarity may become more of an issue as time goes on.”

Tesco

“Tesco cannot be accused of complacency after Asda raised the prospect of a price war in the UK groceries space earlier this year. The company is guiding for lower earnings on the basis it wants to remain competitive in the market – suggesting the recent weakness in the sector wasn’t entirely unjustified.

“For Tesco shares to be firmly down on such an ‘up’ day for the wider market demonstrates the level of investor disquiet. It also reflects the fact that its shares held up better during the trade war ructions and is therefore not seeing the same bounce back as the biggest victims of broader market volatility.

“In addition to the gauntlet thrown down by Asda, the German discounters Aldi and Lidl have enjoyed a strong start to 2025 and seen an uptick in their share of UK shoppers’ spend.

“Essentially Tesco is prepared to take some short-term pain in order to protect its dominant position in the supermarket space and this is a strategy which could pay off over the long term.

“In terms of firepower, Tesco is armed with cannons and its competitors with relative pea shooters, so it will be confident of prevailing in any battle on price. However, the company does face cost pressures thanks to the big increases in the national living wage and employer national insurance contributions announced in last year’s Budget.

“A chunky buyback offers some compensation to shareholders for the disappointing guidance and the company’s results themselves demonstrate its inherent strengths as operating profit came in notably ahead of expectations.”

These articles are for information purposes only and are not a personal recommendation or advice.