The FTSE 100 and European stocks faced a downturn on April 16, 2025, primarily driven by the escalating trade war between the United States and China, which overshadowed a significant drop in UK inflation. According to the Office for National Statistics (ONS), inflation eased to 2.6% in March, down from 2.8% in February, creating a potential pathway for interest rate cuts next month, which could benefit Chancellor Rachel Reeves.
The consumer prices index (CPI) reported a year-on-year increase of 2.6%, which was below analysts’ expectations of 2.7%. Simon Youel, head of policy and advocacy at Positive Money, commented on the situation, stating, "Today’s figures will offer temporary relief for households and businesses, but uncertainty in the global economy can't be ignored." He further warned that "Trump's tariff war has undermined confidence and risks a wider economic slowdown, the effects of which would hit the poorest." Youel urged the Bank of England to consider more aggressive rate cuts to alleviate higher borrowing costs.
Meanwhile, China's economy showed unexpected resilience, posting a growth rate of 5.4% in the first quarter, matching the previous quarter's performance. This growth was bolstered by strong consumption and industrial production, although the recent imposition of US tariffs, which reached as high as 145%, has clouded future prospects.
In trading on April 16, London’s benchmark index, the FTSE 100, fell by 0.4%, while Germany's DAX dipped 0.5%, and the CAC in Paris slid 0.6%. The pan-European STOXX 600 index was down 0.8%, reflecting a broad-negative sentiment across the markets. Wall Street was also poised for a negative opening, with S&P 500 futures, Dow futures, and Nasdaq futures all indicating losses.
Tech stocks were particularly affected after Nvidia warned of a $5.5 billion hit in its first-quarter results due to new export controls that require licenses for selling its advanced technology to China. The pound, however, managed to gain 0.3% against the US dollar, trading at 1.3270.
In a notable development within the FTSE 100, Bunzl shares plummeted by 23% after the company issued a profit warning, cutting its guidance for 2025. The workplace supplier cited tougher trading conditions in North America, expecting an operating margin below 8%, down from 8.3% in 2024. Chief executive Frank van Zanten expressed disappointment, stating, "I am disappointed with our performance in the first quarter in this challenging trading environment." Analysts reacted sharply, with many cutting forecasts by about 10% and responding to the company’s pause in its share buyback program.
AJ Bell investment director Russ Mould remarked, "Bunzl is supposed to be a reliable stock – providing everyday essentials like disposable coffee cups to cafes and food wrap to supermarkets. It’s not supposed to pull the rug from under investors’ feet by delivering a major profit warning and abandoning a current share buyback." This sentiment reflected the severity of the market reaction as Bunzl’s reputation as a steady performer took a significant hit.
Despite the overall decline in the FTSE 100, some stocks showed resilience. Land Securities rose by 3.5p to 556p, and Severn Trent improved by 42p to 2741p. Barratt Redrow advanced 5.5p to 433.2p after reiterating its full-year expectations, which include home completions of 16,800 to 17,200.
In the commodities market, Endeavour Mining saw its shares jump by 6%, or 118p, to 2170p, as gold prices reached a record high of $3300 an ounce. Hochschild Mining also rose by 4% to 317p in the FTSE 250 index, although the mid-cap benchmark itself fell by 0.5%.
Mitie, another company in the FTSE 100, surged 6% to an eight-year high of 129.2p, buoyed by a strong finish to its financial year and a newly launched £125 million buyback program. On the flip side, WH Smith shares fell 3% to a four-year low of 920p, despite reporting a 17% increase in profits across its travel shops, as uncertainty in its high street business weighed heavily on its overall performance.
As the economic landscape continues to shift, fund managers are increasingly wary of a potential recession. A recent survey by Bank of America indicated that 42% of respondents expect a recession, marking one of the most bearish outlooks seen in 25 years. Additionally, a staggering 82% of surveyed fund managers believe the global economy is set to weaken, a record high.
In light of the softer inflation data, Deutsche Bank has adjusted its expectations, forecasting that the eventual peak in CPI may be closer to 3.5% rather than the previously anticipated 3.75%. They noted, "For now, the Bank of England can continue its gradual dial down of restrictive policy, on the back of weaker labour market data yesterday and today’s softer inflation data."
As analysts continue to monitor the impacts of the US-China trade tensions and domestic economic indicators, the outlook for both the UK and global economies remains precarious. Investors are advised to stay vigilant as the situation unfolds, with the potential for further market volatility ahead.
