Introduction: Gold at new record high amid tariff worries
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The markets are clad in a fog of uncertainty as investors around the world brace for Donald Trump to unveil country-specific tariffs tomorrow.
Trump’s ‘Liberation Day’ is already being dubbed ‘Demolition Day’ by some City wags, and traders really aren’t sure quite what to expect. That uncertainty drove a sell-off across European and Asia-Pacific markets yesterday, as market participants tried to cut risk.
This morning, gold has hit a new all-time high, touching $3,148.8 per ounce, amid a nervous dash for safe assets.
Last night, Trump pledged he would be “very kind” to trading partners when he unveils further tariffs this week, which he suggested would come “tomorrow night or probably Wednesday.”
He said:
“We’re going to be very nice, relatively speaking, we’re going to be very kind.”
White House Press Secretary Karoline Leavitt told reporters yesterday that Trump will announce his reciprocal tariff plans on Wednesday during an event in the White House Rose Garden,
Leavitt declared:
“The president will be announcing a tariff plan that will roll back the unfair trade practices that have been ripping off our country for decade.
It’s time for reciprocity and it’s time for a president to take historic change to do what’s right for the American people.”
But many investors fear that whacking new trade levies on imports into the US, and risking retaliatory tariffs from America’s trading partners, will backfire on the economy.
As Tom Stevenson, Investment Director at Fidelity International, puts it:
“Investors are starting to price in the growing likelihood of a painful cocktail of recession coupled with stubbornly high inflation. What has surprised many is the extent to which the President seems prepared to take a hit to the economic prospects of the US as well as the rest of the world.
“The nature of protectionism is that it hits American businesses and consumers just as hard as those in the US’s rivals. Tariffs raise prices and curtail confidence and growth for the country levying them as much as for the apparent targets.
After an early sell-off yesterday, Wall Street rebounded off its lows to close a little higher, but still posted its worst quarter since 2022. The S&P 500 fell around 4.6% in the first quarter of this year, suggesting that some of the trade war damage has been priced in.
But quite possibly not all – if Trump does disrupt global trade badly.
Stephen Innes, managing partner at SPI Asset Management says tomorrow’s announcement will set the tone for the next phase of global market reaction. He explains”:
Meanwhile, the Trump administration appears to be in its own state of flux—scrambling behind the scenes to finalize tomorrow’s “Liberation Day” tariff rollout.
The internal tug-of-war? Whether to apply bespoke tariff rates for each trading partner (a softer, more nuanced approach) or unleash a campaign-era sledgehammer with broad-based across-the-board tariffs.
The agenda
-
8am BST: Kantar survey of UK grocery inflation
-
9.30am BST: UK manufacturing PMIs for March
-
10am BST: Eurozone inflation report for March
-
10am BST: Treasury committee to quiz Office for Budget Responsibility about the spring statement
-
2pm BST: Treasury committee to quiz top economists about the spring statement
Key events
European corporate distress at six-month high
In a worrying sign, corporate distress across Europe has hit its highest level in six months.
The latest Weil European Distress Index (WEDI) shows there were paticularly sharp increases in companies hitting trouble in Germany and the UK in February
The report shows:
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Retail & Consumer Goods: Corporate distress in this sector has surged to its highest level since October 2014, spurred by global uncertainty, fears of an economic slowdown, and cost-of-living pressures. This has resulted in poor investment and liquidity metrics, with profitability declining sharply across the sector.
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Industrials: Distress in the industrial sector has hit its highest level since October 2020, driven by investment pressures and falling global demand, particularly in Germany’s export-driven economy. Elevated capital costs have compounded the strain.
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Germany: Distress in Germany has reached its highest level since July 2020, driven by weak investment, poor profitability, falling valuations, and a sharp downturn in exports, manufacturing, and domestic consumption. The downturn in 2025 has been sharper than initially expected.
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UK: Corporate distress in the UK has risen to its highest level since September 2023, driven by growing economic uncertainty, tighter liquidity, and concerns over investment following changes to National Insurance and the National Living Wage.
Grocery inflation across the UK has edged up, in a blow to households.
Market researcher Kantar has reported that annual grocery price inflation inched up to 3.5% in March, up from 3.3% in February.
TESCO SALES UP 5.4% IN 12 WEEKS TO MARCH 23 YEAR-ON-YEAR, SAINSBURY’S SALES UP 4.1%, SAYS KANTAR
— PiQ (@PiQSuite) April 1, 2025
ASDA SALES DOWN 5.6% IN 12 WEEKS TO MARCH 23, MORRISONS SALES UP 0.6%, SAYS KANTAR
ALDI UK SALES UP 5.6% IN 12 WEEKS TO MARCH 23, LIDL GB SALES UP 9.1%, SAYS KANTAR
OCADO SALES UP 11.2% IN 12 WEEKS TO MARCH 23, SAYS KANTAR
— PiQ (@PiQSuite) April 1, 2025
European stock markets rally
Shares are pushing higher across Europe, a day after trade war fears triggered some heavy falls.
In London, the FTSE 100 share index is up 53 points, or 0.6%, at 8636, rising from a two-week low.
Germany’s DAX has gained 1%, while France’s CAC index is up 0.8%.
Kathleen Brooks, research director at XTB, says:
What a difference a day makes, European stocks have bounced at the start of the new quarter and indices are a sea of green. The Eurotosxx 600 index is higher by 1%, eroding some of Monday’s losses.
Brooks warns, though, that markets remain ‘jittery’,
The focus is on the US reciprocal tariff announcement that is due tomorrow. At this stage, hopes are that a recovery rally could take hold if Trump’s tariff announcements are seen as the final move from the White House in its trade war, and if the new levies are reasonably easy to comply with.
The downside risk for stocks could emerge once more if Trump suggests that even more tariffs could be coming down the line or if there is a lack of clarity about reciprocal tariffs in the announcement.
Markets are hoping for a clean decision, that allows traders to move on from tariffs.
Trump’s new tariffs could backfire if they are set too high, explains Mark Haefele, chief investment officer at UBS Global Wealth Management:
“Wednesday’s reciprocal tariffs could push the effective tariff rate another 4 percentage points higher. Anything further than that could move tariffs beyond a revenue-raising ‘sweet spot,’ in our view.
Globally, the risk of high tariffs disrupting trade and economic activity would potentially offset any US federal revenue gains that the Trump administration seeks to use to further domestic policies.”
Reynolds: every country will be affected by Trump tariffs
UK business secretary Jonathan Reynolds has predicted that “every country in the world will be affected” by Donald Trump’s decision on tariffs tomorrow.
Speaking to BBC Breakfast, Reynolds explained that:
“It appears tomorrow there’ll be no country in the world exempt from the initial announcements”.
However, there will then be the potential to reach an agreement with the US on a “better way forward”, he suggested.
Reynolds admits that “ideally” the UK would have been exempt from these new tariffs, given the work that has been done with the US to try to achieve a carve-up.
He argues that tariffs are unnecessary:
I tihnk that our trading relatinship is a very strong, and fair and balanced one, so I don’t think there is the need to do this.
[both the US and UK’s trade data suggests they run a surpus with the other country]
Reynolds is hopeful that the UK and US can reach an agreement that avoids tariffs on each other and also strengthens their trade relationship., giving UK businesses more access to the US markets.
The Treasury has responded to the call for more financial support for apprenticeships (see previous post), with a government spokesperson saying:
“Developing the skills this country needs is vital to our mission to grow the economy under the Plan for Change.
“Employers will be at the heart of the government’s reforms with our new levy-funded growth and skills offer, creating routes into good, skilled jobs in growing industries, aligned with the government’s Industrial Strategy.
“Any decisions on funding for skills will be taken at the Spending Review in the usual way.”
Reeves urged to use apprenticeship cash to fund new engineers
Richard Partington
Rachel Reeves has been urged to fund 40,000 new engineers to boost the UK economy by allocating the £1.4bn the government already collects from employers for apprenticeships but does not spend.
The independent Industrial Strategy Skills Commission, led by Tom Watson, the former Labour deputy leader, and ex-Conservative skills minister Robert Halfon, said billions of pounds was being raked in from businesses that was supposed to fund apprenticeships.
However, about £800m per year being raised for the exchequer from the apprenticeship levy, which is being revamped by Labour as the “growth and skills levy” is not currently allocated to the English apprenticeship budget.
A further £650m from an immigration skills charge – a fee paid by employers sponsoring an overseas worker, to fund training of the domestic workforce – is also not being spent.
In an intervention ahead of the chancellor’s June spending review, when the government will outline its funding priorities for the next three years, the cross-party panel convened by the trade body Make UK said a step change in funding for apprentices was required to reboot economic growth.
It said the £1.4bn combined could fund 40,000 new engineers, going a long way to filling the 55,000 skills gap in the manufacturing sector which is currently costing the UK economy £6bn in revenue each year.
Introduced in 2017 under Theresa May, the Conservatives had planned to levy employers to help fund apprenticeships. It is paid at a rate of 0.5% on an employers’ annual wage bill for firms with a wage bill of more than £3m a year. However, apprenticeship starts have fallen by 42% since then.
Labour promised before the general election to replace it with a growth and skills levy, and is making changes to drive up apprentice numbers. However, the chancellor set the ground for a tight spending review at last month’s spring statement, which employers’ groups fear could undermine their ambitions to see more funding for apprenticeships.
Stephen Phipson, the chief executive of Make UK, said the old apprenticeship levy had been “nothing short of a disaster”.
“Government is sitting on a pot of cash that should immediately be ringfenced and spent on skills training. The first priority is properly funding courses, so colleges and training providers aren’t put off delivering higher cost courses such as engineering. There also needs to be targeted efforts to recruit experienced tutors to train up the next generation in the skills we need now and in the future.”
UK hoping US tariffs could be reversed with new deal
The UK government is hopeful that any tariffs imposed on Britain this week by Donald Trump can be reversed, if London and Washington agree a new economic deal.
Business minister Jonathan Reynolds is doing the media rounds this morning, and told Sky News on Tuesday that Britain was taking a “calm-headed approach”.
Asked if he was hopeful that a deal would lead to tariffs being dropped in weeks or months, he said:
“I am, that would be my objective.”
Reynolds also warned the longer a deal took, the more likely it would become that Britain would need to impose retaliatory tariffs.
“The longer we don’t have a potential resolution to that, the more we will have to consider our own position.
I think we have to have all options available to us. I think that’s reasonable.”
Reynolds also told Times Radio that food standards were a “red line” in trade talks.
After a bruising day yesterday, Asia-Pacific markets are mostly higher today.
South Korea’s KOSPI is leading the way, up 3%, with Australia’s S&P/ASX 200 up 1%, and gains in Hong Kong, Thailand and Malaysia.
But both Japan’s Nikkei and China’s CSI 300 are effectively flat, with traders unwilling to take many risks before they know what Donald Trump’s tariff plans are.
A big concern for investors is that the US tariffs will be met by retaliatory moves from trading partners, who will announce their own levies on US goods in response.
That could lead to a further round of escalation as the US seek to respond, warns Jim Reid, market strategist at Deutsche Bank, explaining:
So that’s meant inflation expectations have continued to rise, with the 1yr US inflation swap (+13.3bps) yesterday hitting another two-year high of 3.25%. Other traditional inflation hedges have done well on the back of that, with gold prices (+1.24%) moving up to another record high.
Reid adds:
In terms of the upcoming tariff announcement, we still don’t know which countries they’ll be imposed on and what rate. It’s fair to say that the administration might not have the final plan ready as yet
Yesterday, White House Press Secretary Leavitt said a planned Rose Garden announcement would feature “country-based” tariffs, with further sectoral duties to come later, while last night Treasury Secretary Bessent said on Fox News that Trump will announce the reciprocal tariffs at 3pm EST on Wednesday.
Gold posted strongest quarter since 1986
Gold’s gains today come hot on the heels of its strongest quarter since 1986.
Bullion rose by 19.3% in the first quarter of this year, driven by fears that trade wars would hurt growth and drive up inflation.
David Meger, director of metals trading at High Ridge Futures, explained:
“The ongoing uncertainty regarding tariffs has affected equity markets and brought another round of safe-haven buying into the gold market.
“There are certain technical areas of resistance along the way that could cause a little profit-taking or pullback. But the ongoing bullish trend remains in place. The fundamental underpinnings remain in place.”
Some Republican senators have been speaking out against Trump’s tariffs on Canada and are considering signing on their support for a resolution blocking them, CNN reported.
Senator Susan Collins warned that tariffs on Canada would be particularly harmful to Maine and that she intended to vote for a resolution aimed at blocking tariffs against Canadian goods.
Republican Senator Thom Tillis also said he was considering backing the resolution, adding:
“We need to fight battles with our foes first and then try to figure out any inequalities with our friends second.”
Introduction: Gold at new record high amid tariff worries
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The markets are clad in a fog of uncertainty as investors around the world brace for Donald Trump to unveil country-specific tariffs tomorrow.
Trump’s ‘Liberation Day’ is already being dubbed ‘Demolition Day’ by some City wags, and traders really aren’t sure quite what to expect. That uncertainty drove a sell-off across European and Asia-Pacific markets yesterday, as market participants tried to cut risk.
This morning, gold has hit a new all-time high, touching $3,148.8 per ounce, amid a nervous dash for safe assets.
Last night, Trump pledged he would be “very kind” to trading partners when he unveils further tariffs this week, which he suggested would come “tomorrow night or probably Wednesday.”
He said:
“We’re going to be very nice, relatively speaking, we’re going to be very kind.”
White House Press Secretary Karoline Leavitt told reporters yesterday that Trump will announce his reciprocal tariff plans on Wednesday during an event in the White House Rose Garden,
Leavitt declared:
“The president will be announcing a tariff plan that will roll back the unfair trade practices that have been ripping off our country for decade.
It’s time for reciprocity and it’s time for a president to take historic change to do what’s right for the American people.”
But many investors fear that whacking new trade levies on imports into the US, and risking retaliatory tariffs from America’s trading partners, will backfire on the economy.
As Tom Stevenson, Investment Director at Fidelity International, puts it:
“Investors are starting to price in the growing likelihood of a painful cocktail of recession coupled with stubbornly high inflation. What has surprised many is the extent to which the President seems prepared to take a hit to the economic prospects of the US as well as the rest of the world.
“The nature of protectionism is that it hits American businesses and consumers just as hard as those in the US’s rivals. Tariffs raise prices and curtail confidence and growth for the country levying them as much as for the apparent targets.
After an early sell-off yesterday, Wall Street rebounded off its lows to close a little higher, but still posted its worst quarter since 2022. The S&P 500 fell around 4.6% in the first quarter of this year, suggesting that some of the trade war damage has been priced in.
But quite possibly not all – if Trump does disrupt global trade badly.
Stephen Innes, managing partner at SPI Asset Management says tomorrow’s announcement will set the tone for the next phase of global market reaction. He explains”:
Meanwhile, the Trump administration appears to be in its own state of flux—scrambling behind the scenes to finalize tomorrow’s “Liberation Day” tariff rollout.
The internal tug-of-war? Whether to apply bespoke tariff rates for each trading partner (a softer, more nuanced approach) or unleash a campaign-era sledgehammer with broad-based across-the-board tariffs.
The agenda
-
8am BST: Kantar survey of UK grocery inflation
-
9.30am BST: UK manufacturing PMIs for March
-
10am BST: Eurozone inflation report for March
-
10am BST: Treasury committee to quiz Office for Budget Responsibility about the spring statement
-
2pm BST: Treasury committee to quiz top economists about the spring statement
