On Thursday, a cautious wave of optimism swept over Wall Street as recent figures indicated a less severe inflation issue. However, traders remained vigilant given the current state of U.S. President Donald Trump’s trade dealings and escalating tensions in the Middle East.
Trump’s vow to dispatch letters to U.S. trading counterparts outlining their individual tariff rates within the forthcoming weeks has been seen as a renewal of the impending risk of contractual hikes without any agreed upon deals.
Moreover, Scott Bessent, the Treasury Secretary, conveyed to Congress that there’s a strong possibility of an extension to the 90-day tariff respite for nations currently involved in trade talks with the US. The current hiatus is scheduled to run out on July 9.
In parallel, a turn of fortunes was witnessed in Europe. The FTSE 100 and European stock indices managed to recoup some of their earlier losses as the day progressed. This occurred despite the predicted shrinkage of the UK economy by 0.3% in April, as reported by the Office for National Statistics (ONS). This was more than economic analysts’ anticipated 0.1% shrinkage.
For the UK’s chancellor, Rachel Reeves, these figures present a distinct challenge. Greater economic growth is at the heart of the chancellor’s agenda, fueling her spending proposals.
This GDP contraction follows a first-quarter growth rate of 0.7% This oxymoronic pattern was joined by the ONS’s report showing a 0.4% decrease in service output from the 0.4% growth recorded in March. This decline played a significant role in April’s reported GDP downfall.
The ONS also reported a reduction in production output by 0.6%. A silver lining was found in the construction sector, which saw an increase of 0.9% in output for April.
Amplifying British economic growth forms the bedrock of Chancellor Reeves’s vision as she seeks to solidify the country’s fiscal situation.
In a statement on Thursday, Reeves responded to the deflating figures, pledging her commitment to boost growth in order to increase disposable income for British citizens through her ‘Plan for Change’.
Following the spending review the previous day, Reeves revealed her comprehensive strategy that promises to generate jobs and growth across sectors such as city-region transport, affordable housing, and nuclear power. This includes a commitment to funding the Sizewell C nuclear power station.
Reeves ended her assertive statement with a show of determination to make working citizens wealthier, endorsing the promise of investing in the country’s renewal.
By the close of day, London’s popular index (^FTSE) had risen by 0.3%, showing improvement from its earlier uncertain performance during the session.
The DAX in Germany (^GDAXI) and the Paris-based CAC (^FCHI) did not perform as well, dipping 0.5%, while the CAC hovered around the break-even point. Losses were slightly evident in the pan-European STOXX 600 (^STOXX), which was down by 0.2%.
Stateside, the Dow Jones Industrial Average (^DJI) remained relatively steady, with insignificance gains, while aircraft manufacturing giant, Boeing (BA), saw shares plummet in response to an airplane crash in India.
The S&P 500 (^GSPC) and the tech-concentrated Nasdaq Composite (^IXIC) experienced modest growth of approximately 0.2%.
In foreign exchange news, the GBP experienced a 0.35% increase against the USD (GBPUSD=X) trading at 1.3595. The drop to a three-year low for the US dollar against a range of international currencies contributed to the euro reaching its highest worth since late 2021.