UK markets pulled back slightly this week with the FTSE 100 Index falling by 0.35% to trade at 9,065 points at the time of writing.
The FTSE was dragged down by a surprise move from US President Donald Trump, who exempted refined copper from new US tariffs, triggering turmoil in copper markets and causing the share prices of major mining companies to fall.
British executives are gloomier about the UK economy now than they were after the Brexit referendum, the onset of the Covid-19 pandemic, or Liz Truss’ ‘mini’ Budget, according to a poll by the Institute of Directors.
More than 80% of business leaders polled by the lobby group in July said they were “very” or “quite” pessimistic about the outlook over the next year. It said worries about tariffs, rising costs and the threat of further tax increases in the Autumn Budget have driven the deepest drop in sentiment since the Institute of Director’s monthly poll began in July 2016.
Forecasts this week by the IMF gave a more measured view, showing the UK economy is set to grow by 1.2% this year and 1.4% in 2026, faster than many European economies, although below the growth rate expected in the US and Canada.
However, the Institute of Directors poll adds to evidence that both consumers and businesses are becoming more cautious in the face of a weakening jobs market, ongoing cost pressures and speculation over tax policy.
The British Retail Consortium published a poll this week of finance directors in the sector, showing that nine out of 10 of them listed taxes and regulatory burdens among their top three concerns.
UK house prices returned to growth in July as the property market stabilised following the end of a stamp duty holiday, the lender Nationwide said on Friday. House prices rose 0.6% on the previous month, slightly ahead of the 0.5% increase analysts had expected, Nationwide’s monthly index showed. The annual rate was 2.4%, up from 2.1% in June. The recovery follows a sharp monthly price fall in June, when the market was becalmed following the expiry of a tax break earlier in the year.
Commodity markets
In the commodity markets, Brent crude futures traded around $71 per barrel on Friday and are set for a weekly rise, after Donald Trump threatened to place tariffs on buyers of Russian crude, particularly China and India, to persuade Russia into halting its war in Ukraine.
Trump’s threats to impose 100% secondary tariffs on Russian crude buyers has supported prices because of concerns the tariffs would disrupt oil trade flows and remove some oil from the market. JP Morgan analysts said in a note on Thursday that Trump’s warnings to China and India of penalties on their ongoing purchase of Russian oil potentially puts 2.75 million barrels per day of Russian seaborne oil exports at risk. Investors also digested the impact of new higher US tariffs that may curtail economic activity and lower global fuel demand.
Gold prices traded around $3,295 an ounce on Friday and are set for a weekly fall as pressure from a stronger Dollar outweighed support from trade uncertainty caused by US tariffs.
Equity markets
US equity futures fell on Friday after Donald Trump hit dozens of countries with tariffs, as the US President pushed ahead with his ambition to redraw the global trading order.
In Thursday’s regular trading session, the Dow Jones Industrial Average lost 0.74%, the S&P 500 fell 0.37%, whilst the Nasdaq Composite dipped 0.03%. The Federal Reserve left interest rates unchanged at 4.25% to 4.5% after a meeting on Wednesday, despite an aggressive campaign by Trump to slash borrowing costs to 1% and continuing uncertainty over the impact of his trade policy on the economy.
Federal Reserve Chair, Jerome Powell said following the meeting that “The economy is not performing as though restrictive policy is holding it back inappropriately”. However, he cautioned that “there’s downside risk to the labour market in the coming months”.
The US central bank also signalled that it could hold interest rates steady at least through September, which was perceived as hawkish by many market participants. Short term US treasuries were sold off as investors reduced bets on a September rate cut and the US Dollar rallied more than 1% against a group of six major world currencies, leaving it on course for its best week since 2022.
Powell also said uncertainty remains over the effects of Trump’s tariffs on inflation. Trump hit dozens of US trading partners with tariffs this week, while formalising recent deals with others, including the UK and EU, as he plunged the global economy into a new era of mercantile competition. Crucial exporters to the US such as Taiwan, the world’s most important semiconductor exporter, will incur steep new levies.
Trump also raised tariffs on Canada, an ally and major trading partner, to 35%. India was hit with a rate of 25% and Switzerland with 39%. The US President’s executive order on Thursday announced the tariffs, saying they were designed to reduce America’s trade deficit with many countries, which it described as an “unusual and extraordinary threat to the national security and economy of the United States”.
The tariffs will also raise US revenue, the order said, reflecting Trump’s plan to use duties on imports to pay for deep domestic tax cuts. The new regime marks a softening of the aggressive levies the President announced on “liberation day” on April 2nd, but still leaves the US’s effective tariff rate at its highest level in decades. Trump and his allies insist the tariffs will only have a limited effect on inflation and say the Federal Reserve should immediately cut rates to bolster the economy and lower government borrowing costs.
Official figures from the Bureau of Economic Analysis on Wednesday showed the US economy grew at an annualised rate of 3% in the second quarter, up from a 0.5% contraction in the previous period. The number was driven higher by a sharp drop-off in imports as Trump levies came into effect, while a rush to purchase foreign goods in the first three months of the year sharply reversed.
Overall, the US economy grew at a 1.1% annualised rate in the first half of 2025, compared with 2.9% in the second half of 2024, according to the Financial Times. Consumer spending, the crucial driver of the US economy, also cooled in the first half of 2025 compared with the end of 2024. Analysts at JP Morgan have said that they expect growth to slow further to an annualised 0.75% in the second half of the year.
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