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Rachel Reeves Addresses Market Concerns Amid Trade War Tensions
On Tuesday, Rachel Reeves took steps to calm the stock market’s nerves as indications emerged that the severe global sell-off instigated by US trade tariffs might be beginning to subside.
In a session at parliament, the Chancellor relayed her conversation with Andrew Bailey, the Governor of the Bank of England, who reassured her that “markets are functioning effectively and that our banking system is resilient.”
Reeves reiterated her stance that a trade conflict would be detrimental to all parties involved and affirmed the UK’s intention to pursue a new agreement with the United States. She is scheduled to meet with US Treasury Secretary Scott Bessent in the near future.
Furthermore, Reeves highlighted that the UK was collaborating with global partners to “reduce the barriers to trade right across the world,” mentioning recent discussions with officials from Canada, Australia, Ireland, France, Spain, and the European Commission. She is expected to engage with the Indian government on Wednesday.
Her remarks coincided with a positive uptick in stock markets across the UK and the EU during Tuesday’s morning trading, as some investor optimism returned following sharp declines influenced by Donald Trump’s tariff announcements last Wednesday.
The FTSE 100, London’s index of blue-chip stocks, saw a significant increase, rising by 152 points or 2%, reaching 7854. Similar gains were noted in Germany’s Dax, which rose by 1.5%, while France’s CAC index climbed by 1.4%. The pan-European Stoxx 600 index also enjoyed a boost, increasing by 1.7%.
On the FTSE, companies like Rolls-Royce and BAE Systems emerged as major gainers, with both experiencing about a 6% rise.
Reeves, however, chose not to support calls from the Liberal Democrats for a government-led “buy British” campaign, stating, “When it comes to purchasing British goods, individuals will make their own choices. Our objective is to avoid a trade war that promotes an insular approach in Britain.”
Investor sentiments brightened with reports indicating that Bessent would spearhead trade discussions with Tokyo, suggesting a willingness from the Trump administration to negotiate regarding tariffs.
This news contributed to a modest recovery in Asian markets overnight, particularly reflected in Japanese stocks. The Nikkei index in Tokyo increased by 5.6%, while Hong Kong’s Hang Seng index rebounded by 1.6% following a notable drop that marked its steepest decline since the 1997 Asian financial crisis. South Korea’s Kospi index ended with a 0.5% gain after previously peaking at an increase of 2.3%.
In contrast, Taiwan’s TWII benchmark closed 5% lower, suffering from its worst daily drop on record on Monday. The island nation, heavily reliant on semiconductor exports, faced significant challenges due to a 32% duty imposed by the US.
Despite some recoveries, uncertainty persists among Asian investors. The Chinese government has signaled its determination to resist the US trade strategies, declaring its intent to “fight to the end” should tensions escalate further, after Trump threatened to impose additional tariffs should China not retract its own tariffs.
In Europe, the European Commission announced it had previously proposed a “zero-for-zero” tariff deal on automobiles and industrial goods to the US weeks ahead of the tariff conflicts initiated by Trump. EU Trade Commissioner Maroš Šefčovič emphasized the EU’s openness to dialogue while stating that they would not remain patient indefinitely.
Matt Britzman, a senior equity analyst at Hargreaves Lansdown, remarked on the market’s recovery, noting, “Investors are finally greeted with a positive outlook, as European indices open higher across the board.”
He cautioned, however, against considering this a definitive end to market turmoil, particularly given President Trump’s unwavering stance regarding perceived trade disparities, especially with China.
Bessent remarked on Tuesday that the US possessed a strategic advantage in the trade conflict with China, describing the Chinese government’s reaction as a “big mistake,” since their escalation only serves to weaken their position.
He noted, “What do we lose if the Chinese raise tariffs? We only export one-fifth of what they export to us, making this a losing strategy for them.”
Britzman pointed out the significance of potential US-Japan trade discussions, offering a “glimmer of hope” for improved market clarity. “The sooner agreements are solidified, the quicker companies and investors will have a clearer understanding of the business landscape,” he added.
On another note, investment bank Goldman Sachs projected that Brent crude oil prices might plunge below $40 (£31) a barrel by late 2026 in a worst-case global economic scenario, which includes a comprehensive rollback of OPEC+ production limitations.
Oil prices, which fell to a four-year low of under $64 a barrel on Monday, experienced a slight increase of 0.1% on Tuesday.
Source
www.theguardian.com