London’s equity stocks markets advanced on Tuesday as investors responded positively to US President Donald Trump’s decision to pause tariff increases on the European Union. The FTSE 100 index rose 0.69% to close at 8,778.05 points, while the FTSE 250 climbed 1.11% to finish at 20,938.58 points. Currency markets showed sterling down 0.44% against the dollar, trading at $1.3504, and edging up 0.09% against the euro at €1.1923.
Investor Sentiment Boosted by Tariff Pause
The pause on tariffs provided relief to UK and US investors returning from long weekends, IG chief market analyst Chris Beauchamp said. He noted that “the half-life of each tariff increase continues to get shorter and shorter, and traders continue to fade the move.” Beauchamp added that while the DAX reached a new record high, the FTSE 100 remained around 100 points from its peak. He cautioned that it was “unwise” to expect all upcoming US data to be as positive as Tuesday’s confidence figure but said it was “certainly a relief” that US consumers maintained a positive outlook. Wall Street showed early volatility but ended with gains despite the anticipation of Nvidia’s earnings report.
UK Retail Sector Faces Challenges
UK economic indicators painted a mixed picture as retail sentiment fell sharply while broader European data suggested tentative recovery signs. The Confederation of British Industry (CBI) reported its steepest decline in UK retail sentiment in five years, with its business sentiment gauge dropping to -29% in May from -19% in February. The year-on-year retail sales balance weakened significantly, and expectations for June sales deteriorated further.
CBI Highlights Impact of Rising Costs
CBI lead economist Ben Jones described the survey as “fairly downbeat” and highlighted ongoing challenges in retail and distribution. Jones pointed out that while online sales held up better, firms felt the impact of higher National Insurance contributions and the National Living Wage increase.
Price Trends Show Mixed Signals
Separately, the British Retail Consortium reported steady shop price deflation at -0.1%, but food inflation rose for the fourth consecutive month, driven mainly by fresh foods and rising wholesale beef prices. BRC chief executive Helen Dickinson noted price deflation slowed in non-food categories such as fashion and furniture, while electrical prices fell faster as retailers sought to encourage spending ahead of potential US tariffs.
IMF Adjusts UK Growth Forecast
The International Monetary Fund raised its UK growth forecast for 2025 to 1.2% from 1.1%, citing a stronger-than-expected first-quarter performance. However, the IMF warned that global trade tensions, particularly US tariff threats, could weigh on the UK economy next year. The fund urged Chancellor Rachel Reeves to consider relaxing fiscal rules to avoid emergency public service cuts. The IMF said current constraints risked forcing abrupt policy shifts if conditions deteriorated and called for changes to the UK’s fiscal framework to allow greater flexibility.
Eurozone Economic Sentiment Improves
Economic sentiment in the eurozone improved slightly in May after two months of decline. The European Commission’s economic sentiment indicator rose to 95.2 in the EU and 94.8 in the euro area, though both remained below the long-term average of 100. Gains came from rebounds in retail and consumer confidence, especially in Italy and Germany, while sentiment weakened in France and other economies. Employment expectations improved modestly, but consumer fears over job security increased.
German Consumer Confidence on the Rise
German consumer confidence rose for a third consecutive month, reaching its highest level since November. The index climbed to -19.9 for June, supported by better income expectations. Despite this, consumers remained cautious, showing reduced willingness to spend and increased intentions to save.
Defence and Industrial Shares Lead London Gains
On London’s markets, defence and industrial stocks led the gains. Investors positioned ahead of the upcoming NATO summit, where higher defence spending is expected. Melrose Industries rose 3.7%, BAE Systems gained 2.6%, and Rolls-Royce Holdings increased by 0.93%.
Corporate Activity Spurs Stock Movements
Elementis surged 11.4% after announcing a $121 million sale of its Talc business and launching a £50 million share buyback. Jupiter Fund Management jumped 9.9% following an upgrade from Peel Hunt citing expected cost savings. Burberry climbed 5.3% after Barclays upgraded the stock due to reduced brand dilution risks. Whitbread, owner of Premier Inn, gained 1.7% after naming Christine Hodgson as its new chair. Bodycote advanced 5.1% after reaffirming its full-year outlook despite revenue declines. Aston Martin Lagonda shares rose 3.9% amid optimism over a potential US trade deal and CEO Adrian Hallmark’s recent purchase of nearly 200,000 shares.
Mining Stocks and Premier Foods Decline
Mining stocks suffered declines as gold prices retreated. Fresnillo dropped 2.1%, Endeavour Mining fell 1.3%, and Hochschild Mining tumbled 5.7%. Premier Foods declined 1.2% after a downgrade by RBC Capital Markets.
Market Summary and Key Movers
The FTSE 100 closed at 8,778.05 points, up 0.69%, while the FTSE 250 ended at 20,938.58 points, up 1.11%. The techMARK rose 1.38% to 4,822.34 points. Among FTSE 100 risers, Melrose Industries led with a 5.56% gain, followed by International Consolidated Airlines Group at 4.53%. Centrica fell 1.54%, and Rio Tinto dropped 1.40%. On the FTSE 250, Elementis led gains with an 11.38% increase, while Hochschild Mining was the largest faller with a 5.66% decline.
