BUSINESS LIVE: UK GDP grows 0.5%; Shein gets okay for City IPO; US slaps China with 145% tariffs

Russ Mould, investment director at AJ Bell, comments on the markets this morning:

It was a pleasant surprise to see UK stock markets moving higher for the second day in a row in early trading.

When you consider that US markets fell by 3% to 4% last night on Wall Street and tariff uncertainty continues to dominate the headlines, one might have expected investors to be feeling gloomy. Yet we’ll take all the good news we can get at the moment.

Admittedly, the UK market struggled to hold onto early gains, but at least there wasn’t a sharp slump to start the day with a headache.

UK GDP figures coming in much stronger than expected will have helped to lift the market mood. It gives hope that the country is more resilient than some might think. Unfortunately, there is a feeling that this might be as good as it gets for a while.

China will impose 125 per cent tariffs on U.S. goods from Saturday, up from the 84 per cent previously announced, its finance ministry has announced.

The White House upped tariffs on Chinese imports to the US to 145 per cent overnight.

The boss of troubled spirits giant Remy Cointreau has quit as it grapples with tariffs and a tumbling share price.

After leading the cognac maker for five years, Eric Vallat said he would leave the French group for another project this summer.

BP has lowered its outlook for gas production for its first quarter as the energy giant cautioned that its debts are set to jump.

The London-listed company said production will be lower in gas and low-carbon energy for the first three months of the financial year, compared with the previous quarter.

The gas marketing and trading result is expected to be weak’, BP told investors in an update on Friday.

It nevertheless expects oil production and operations to be slightly higher than the quarter before.

Shein has reportedly been given the green light by the City watchdog for a long awaited initial public offering on the London Stock Exchange.

It comes ten months after the fast fashion giant, which sold $38billion of clothes last year, confidentially filed an initial public offering to the FCA.

Regulators have delayed sanctioning the listing due to concerns about the company’s labour practices and a challenge by an organisation advocating on behalf of the Uyghur minority.

Tesco yesterday fired the starting gun on a supermarket price war, sending shockwaves through the sector.

Boss Ken Murphy said Britain’s biggest supermarket is ready to take a £400million hit to profits this year as the competition intensifies.

Lale Akoner, global markets analyst at eToro:

‘The UK economy grew 0.5% in February, with gains across services, production, and construction. But this modest recovery comes amid deepening global trade tensions.

‘The recent escalation of US tariffs, raising costs of most UK exports by at least 10%, adds pressure at a time when Britain is still adjusting to Brexit’s long-term drag on growth, investment, and productivity.

‘Zooming out, trade friction between Washington and Brussels could also spill over, hitting UK sectors closely tied to both economies, such as autos and aerospace. British exporters risk being caught between retaliatory measures, reduced demand, and rising costs.

‘The government is trying to diversify through new trade deals, such as with India or the Gulf, but these are no quick fix. Meanwhile, many UK firms, particularly SMEs, have pulled back from European markets. Tariffs now represent more than economic headwinds; they’re signals in a global power game. Future GDP prints will give investors a steer on their true impact on the UK economy.’

Consumers could lose their appetite for shopping as tariff uncertainties take their toll, the British Retail Consortium has warned.

The trade association reported a 5.4 per cent decrease in shopping visits in March compared to the same month last year.  The drop was skewed by the timing of the Easter holidays, which fell earlier in 2024.

But beleaguered High Street bosses are worried that the carnage sparked by Donald Trump’s trade wars could put a further dent in already battered consumer confidence,

BRC chief executive Helen Dickinson said: ‘Global uncertainties resulting from tariffs and a potential economic slowdown could reduce the appetite for shopping trips in the coming months.’

Francesco Pesole, FX strategist at ING:

‘The dollar and Treasuries are acting as high-beta assets to risk sentiment and remain highly vulnerable to further selloffs.

‘Even if the dollar bounces on any hint of positive news on trade now, we suspect repairing the damage will require a broader unwinding of Trump’s protectionism policies.

‘A move to 1.15 in EUR/USD is now a more tangible possibility.

‘The dollar collapse is working as a barometer of “sell America” at the moment. The rotation to other traditional safe-havens like CHF, the Japanese yen or even the euro is justified by the loss of USD safe-haven appeal.

‘But the USD drop against high-beta currencies (including the China-sensitive AUD and NZD) is a signal that markets are heavily building positioning for a broad-based dollar decline.’

David Morrison, senior market analyst at Trade Nation:

‘Finally there’s some good news for UK Chancellor Rachel Reeves. But it’s also the case that one number doesn’t make a trend.

‘The outlook for the UK economy remains downbeat, with the added uncertainty of the effects of Trump’s watered-down tariffs.

‘ Amid the ongoing tariff chaos, the market reaction to the better-than-expected data was understandably muted. Sterling briefly spiked higher, while the FTSE 100 futures added to gains as they followed the overnight rally in US stock index futures.’

London-listed stocks look set to follow Asian markets lower at the open as investors fret an escalating Sino-US trade war after President Donald Trump ratcheted up tariffs on Chinese imports, raising them effectively to 145 per cent.

The dollar has fallen even further as a manic bond selloff reflects fears of a deep recession and shaken investor confidence in US assets.

The anxiety has sparked a rush into safe havens, sending the Swiss franc soaring to a decade high against the dollar, and gold to a new peak after a brief but massive relief rally followingTrump’s move to temporarily lower tariffs on many countries.

Online fast-fashion retailer Shein has secured approval from the City watchdog for its planned London IPO, according to news agency Reuters.

The Financial Conduct Autjority’s approval marks a significant step forward in the China-founded company’s pursuit of a London listing after it confidentially filed papers with the British regulator last June.

But Shein will also have to contend with market turmoil caused by US tariffs of 145 per cent on Chinese imports and tighter rules on duty-free shipments.

Shein, which sells $10 dresses and $12 jeans in more than 150 countries and was valued at $66 billion in its last fundraising round in 2023, will also need to secure approvals from Chinese regulators, notably the China Securities Regulatory Commission (CSRC), for the London float.

Donald Trump’s trade war will have a ‘chilling effect’ on UK growth, a leading Bank of England official has warned.

As market carnage showed little sign of abating yesterday, Sarah Breeden, deputy governor at the Bank, said that ‘overall, tariffs are likely to lower UK growth’.

The comments came as Wall Street markets sold off again, giving up much of the gains they had enjoyed a day earlier when Trump announced a 90-day suspension of his plans in relation to most countries.

Thomas Pugh, economist at RSM UK:

‘At least some of the positive momentum that has been building on the consumer side will be offset by the surge in uncertainty from last week’s tariffs announcements.

‘We don’t think the new arrangements will be enough to tip the UK back into recession, but they will be a headwind to growth that may result in a sharp slowdown in the second half of the year.

‘Growth came from all four corners of the economy in February with construction, manufacturing, total services and consumer-facing services all rising. That provides more evidence that the extremely strong growth in household real incomes last year was finally starting to feed through into higher spending.

‘The big, and obvious, question now is how will the recent tariff developments impact that positive momentum.

‘It seems impossible that there isn’t some hit to business and consumer confidence which will blunt some of that newfound urge to spend.

‘What’s more, the rebound in the manufacturing sector is unlikely to continue with such pervasive uncertainty weighing on the sector. Normally, such a strong growth figure would reduce the chances of a rate cut in May, but given the outlook has now materially worsened, a 25bps cut next month still looks like a good bet.’

Luke Bartholomew, deputy chief economist at Aberdeen:

‘The economy grew much faster than expected in February. Some of this probably represents standard monthly volatility, but the strength is reasonably broad, and the data should provide some reassurance that growth was holding up before tariffs, national insurance, national living wage and the Spring Statement impacted.

‘However, tariff developments and the swings in market sentiment will likely dominate any backward looking data in terms of shaping the outlook for the economy and policy.

‘We continue to expect another rate cut from the Bank of England in May despite the somewhat growth given the likely disinflationary shock from global trade developments.

Meanwhile, the volatility in gilt yields may further encourage an eventual shift in the fiscal rules, as the government tries to insulate from some of the externally-driven movement in financial conditions.’

UK economic growth smashed forecasts in February, propelled by surprising strength in manufacturing, according to the Office for National Statistics.

GDP expanded by 0.5 per cent for the month, compared to economist forecasts of just 0.1 per cent.