(Alliance News) - Stocks in London advanced on Tuesday, and the FTSE 100 hit a new all-time high, after Donald Trump took a softer than expected stance on tariffs - at least for now.
The FTSE 100 index rose 27.75 points, 0.3%, at 8,548.29, just shy of a new intra-day high of 8,550.41.
The FTSE 250 ended 108.99 points higher, 0.5%, at 20,595.73, and the AIM All-Share rose 0.82 of a point, 0.1%, at 719.11.
The Cboe UK 100 ended up 0.4% at 857.42 on Tuesday, the Cboe UK 250 advanced 0.4% at 18,000.47, and the Cboe Small Companies firmed 0.5% at 15,779.46.
In European equities on Tuesday, the CAC 40 in Paris ended 0.5% higher, while the DAX 40 in Frankfurt closed up 0.3%.
Financial markets in New York were higher on Tuesday at the time of the London close. The Dow Jones Industrial Average was up 0.9%, the S&P 500 was up 0.5% and the Nasdaq Composite was 0.1% higher.
Limiting the Nasdaq's gains, iPhone maker Apple dropped 4.3% after Jefferies downgraded to 'underperform'.
Markets were reacting to the first day of Donald Trump's presidency which saw a raft of new policy announcements, with tariffs remaining the hot topic.
After reports that the incoming administration may take a more lenient view than had been expected, Trump hit back stating 25% tariffs might be imposed on Canada and Mexico on February 1.
"Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens. For this purpose, we are establishing the external revenue service to collect all tariffs, duties and revenues. It will be massive amounts of money pouring into our treasury coming from foreign sources", Trump said on Monday.
Nonetheless, David Mericle at Goldman Sachs said the policy announcements on tariffs were "more benign than expected".
Citi thinks the threats to Canada and Mexico are more of a negotiating tool than a desire for structurally higher tariffs against these countries.
"Our view remains that tariffs will likely be more moderate than market concerns and will not lead to significantly more hawkish monetary policy."
The broker believes the administration may seek to avoid the most disruptive tariff policies, with any across-the-board tariff likely to have carve-outs for various countries and products.
Russ Mould at AJ Bell felt the lack of immediate action on trade tariffs was a "big surprise".
"For someone who has talked repeatedly about wanting American companies to buy American goods and to deter foreign countries from profiting from the US, it was a surprise to see tariffs take a back seat," he remarked.
The pound was quoted higher at USD1.2319 late on Tuesday in London, compared to USD1.2298 at the equities close on Monday.
The euro firmed to USD1.0417 on Tuesday against USD1.0399 at the time of the European market close Monday. Against the yen, the dollar was trading lower at JPY155.43 compared to JPY155.69.
Stephen Innes at SPI Asset Management said the mixed messaging on tariffs "highlighted the unpredictable market dynamics often accompanying Trump's presidency, underscoring the need for vigilance and adaptability in response to his administration's shifting policy landscape."
Traders also assessed UK average earnings and jobs data.
Figures from the Office for National Statistics showed average earnings in the UK excluding bonuses increased 5.6% annually in the three months that ended November 30, accelerating from 5.2% in the immediately previous three-month period and surpassing the consensus estimate of 5.5%.
Including bonuses, average earnings increased 5.6% from a year before, in line with consensus and up from 5.2%.
In the three months to November 30, the UK unemployment rate for people aged 16 years and over was estimated at 4.4%, the ONS reported. This was above the 4.3% recorded for the three months to October, with FXStreet-cited market consensus having expected no change.
It was the highest level of unemployment since May 2024.
Barclays said the wage strength adds uncertainty for the Bank of England, although the broad picture is unchanged.
The broker noted wage growth will certainly add to discussions around sticky wages.
Weighing against this, the Monetary Policy Committee had expected the unemployment rate to be 4.2% in the fourth quarter, while it now looks more likely to be 4.4% or higher, it noted.
Barclays continues to expect the MPC to vote for a rate cut in February, followed by four more 25 basis points cuts this year in May, June, August and September.
On the FTSE 100, Lloyds Banking Group rose 4.0% after a report said that the Treasury is seeking to protect car loan providers against multi-billion pound payouts relating to a potential mis-selling scandal.
Late Monday, the Financial Times said the Treasury has taken the unusual step of seeking permission to intervene in a forthcoming Supreme Court case, amid concerns that banks and other lenders could face a compensation bill costing tens of billions of pounds.
Russ Mould at AJ Bell explained the Treasury appears eager to ensure that lenders (and the UK economy) "aren't derailed by the issue and any redress is simply proportionate to the loss suffered, rather than significantly greater sums inflated by large compensation payments."
Shares in other car finance providers benefited. Close Brothers surged 22%, Barclays rose 0.4% and S&U shot up 15%.
Rightmove slid 2.6% after broker Jefferies cut the property portal firm to 'underperform' from 'hold', and slashed its price target to 495 pence from 720p.
Sainsbury fell 1.6% and Primark owner AB Foods dropped 2.1% as Morgan Stanley downgraded both to 'underperform'.
On the FTSE 250, trading statements saw gains for 4Imprint, up 12%, Elementis, up 6.3%, and Kier, up 3.6%.
But updates from Qinetiq, down 10%, Marshalls, down 6.8%, and Wag Payment Solutions, down 5.2%, failed to impress.
Brent oil was quoted lower at USD79.51 a barrel from USD79.69 late Monday.
Gold was quoted higher at USD2,740.35 an ounce late in London on Tuesday against USD2,707.18 on Monday.
Wednesday's economic calendar has UK public sector borrowing figures.
The local corporate calendar has trading statements from budget airline easyJet, gold miner Hochschild Mining, pub chain JD Wetherspoon and private equity firm Intermediate Capital Group.
By Jeremy Cutler, Alliance News reporter
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