In a surprising turn of events, the FTSE 100 index ended its winning streak, falling by 1.5 points to close at 8,706 on March 20, 2025, following mounting fears surrounding a fresh round of tariffs. The Bank of England (BoE) opted to keep interest rates steady at 4.50%, a decision that comes amid ongoing uncertainty in global trade. The toll on European markets was more pronounced, with major indices such as Germany's DAX and Italy's FTSE MIB both dropping over 1%, while France's CAC 40 and Spain's IBEX fell by 0.9% and 0.7% respectively. Investor sentiment soured as they digested the implications of proposed tariffs, which have the potential to derail economic growth across the region.
Shares of ASOS PLC soared by 11% on the same day after the Polvsen family, the largest shareholder, increased their stake to over 28%. Earlier that week, ASOS shares had plummeted to their lowest level in over 15 years, exacerbated by a downgrade from Exane Paribis. Following an announcement of the increased stake by Danish billionaire Anders Holch Povlsen, CEO of Bestseller, the retailer's stock regained some footing. Additionally, Frasers Group PLC, another significant investor in ASOS, raised its holding from 23.4% to 24.2% just days prior, signaling renewed confidence in the online fashion giant.
In related market updates, Chancellor of the Exchequer Rachel Reeves made remarks about the BoE’s decision. "We’ve had three rate cuts since the summer, but there’s still work to do to ease the cost of living. I’m determined to go further and faster to kickstart growth, and bring in a new era of stability, security, and renewal that protects working people and keeps our country safe," she stated, underscoring the government’s focus on providing financial relief to citizens facing ongoing economic challenges.
Market analysts noted a calmer tone amidst a turbulent trading month. Fawad Razaqzada from City Index remarked, "the broader tone is certainly calmer after a turbulent month. Still, traders remain wary of Trump’s tariff agenda and its potential drag on global growth, all while stoking inflation fears." This caution reflects the complex landscape that investors navigate in the wake of the Fed’s recent decisions and the global economic environment.
The US markets opened lower, with the Russell 2000 index experiencing a significant drop of 0.8% in initial trading. Stocks such as IBM saw a notable decline, falling by 5.4%. Meanwhile, President Trump expressed dissatisfaction with the Federal Reserve’s approach, arguing that rate cuts would better address economic needs as tariffs began to influence the market. "The Fed would be MUCH better off CUTTING RATES as US Tariffs start to transition (ease!) their way into the economy," he said in a social media post, declaring April 2nd as "Liberation Day in America"—a reference to when new tariffs are set to take effect.
In a more hawkish note, the Bank of England signaled a cautious approach to rate cuts. Paul Dales from Capital Economics noted that despite previously voting patterns favoring cuts, the current vote showed a stronger inclination to maintain rates, indicating worries about rising inflation rates projected to increase from 3.0% in January to 3.75% in Q3. Only one vote was cast for a rate cut this time compared to three during the last meeting, showcasing a possible shift in the MPC's attitude towards monetary policy.
A major deal on the day was initiated by Shaftesbury Capital, which sold a 25% stake in Covent Garden to Norway’s sovereign wealth fund. The sale was deemed "unequivocally positive" by analysts, as it illustrated solid valuations and solidified the company's cash position for upcoming ventures.
The Swiss National Bank also made headlines by cutting its key interest rate by 25 basis points to 0.25%. This adjustment aligns Switzerland with a trend of central banks taking an accommodative stance to counter rising inflation levels; however, experts believe this may be the last cut in the current monetary cycle.
Overall, the economic landscape appears to remain mixed. With challenges posed by new tariffs, ongoing inflationary pressures, and investor uncertainty, the market remains in a state of fluctuation. The complexity of international trade, coupled with domestic fiscal policies, further complicates projections for the coming weeks and months.
As the week progresses, investors will keep an eye on forthcoming economic indicators, especially as they assess the immediate impacts of both central bank decisions and international trade developments. In this environment, clarity may come after clearer signals emerge from policymakers and more stable economic conditions are established.
