UK Stocks Edge Up Following Rate Cut
The UK’s FTSE 100 stock index opened slightly higher this morning, with an increase of 0.26%.
JD Sports led the gains, seeing its shares rise by 2.2%. This was closely followed by Glencore, whose shares went up by 1.9% after reports indicating that the company would maintain its primary listing in London instead of moving to New York.
On the other hand, the mid-cap FTSE 250 index is lagging, down about 0.1%. TBC Bank, despite reporting a 5% profit increase for the second quarter and initiating a buyback, had the poorest performance, with its shares plummeting by as much as 12% in early trading.
Gold Futures Soar Amid Surprise US Tariffs
Good morning and welcome to our business and financial market coverage.
Gold futures achieved record highs on Friday following news that the US has imposed tariffs on one-kilo gold bars, a development that puts additional pressure on Switzerland, a key player in the precious metals market.
The Financial Times has obtained a letter from the Customs and Border Protection agency indicating that these gold bars should be classified under a customs code that attracts higher tariffs.
One-kilo bars are among the most widely traded in the COMEX, which is the largest gold futures market, and they represent a significant portion of Switzerland’s gold exports to the US.
US gold futures rose by 1.3%, hitting $3,499.30 after reaching a record high of $3,534.10. Additionally, the price difference between New York futures and spot prices expanded by around $100.
This situation represents another challenge for Switzerland, as Donald Trump has imposed a surprising 39% export tariff. Swiss firms, whose exports to the US comprise a notable fraction of total foreign sales, are facing one of the steepest tariff rates in Trump’s trading strategy, surpassing only Laos, Myanmar, and Syria. The EU negotiated rates of 15%, while the UK managed 10%.
According to the Financial Times, Switzerland exported $61.5 billion worth of gold to the US over the past year, which would incur additional taxes of around $24 billion under the current tariff.
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Market Reactions to Recent Decisions
Meanwhile, the pound is losing ground against the US dollar this morning, despite the Bank of England’s Monetary Policy Committee (MPC) voting to lower its main base rate to 4% yesterday.
The pound dropped by 0.13% against the dollar but remains above $1.34.
This rate cut follows a notably tight decision process, with a 5-4 vote split, highlighting growing dichotomies in market expectations, especially in response to the potential for the Federal Reserve to cut US interest rates next month.
In a related note, Donald Trump has indicated his intent to nominate Stephen Milan to replace the current governor, Christopher Waller, as the next Fed chair.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, has suggested that both Milan and Waller are perceived as dovish.
However, the two-year US yields did not react strongly. Historically, rate cuts haven’t consistently resulted in decreased borrowing costs. For instance, after an unexpected 50bps cut last September, the two-year yield surged nearly 30bps in the following months. Currently, the market anticipates another cut in September, potentially driving the S&P 500 to near record highs amidst trade uncertainties and shifting policies.
