Introduction: Growth fears grip markets
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The Trump Bump has turned into the Trump Slump, as rising fears of a US recession rocked the markets yesterday.
Monday was a dark day on Wall Street, where the S&P 500 fell 2.7%, the Dow Jones dropped 2%, and the tech-heavy Nasdaq dropped 4%, with losses among the major tech companies.
Investors dashed for save-haven assets after the US president refused to rule out that his policies would lead to a recession, or rising prices.
Instead, he told Fox News in an interview aired last weekend that there would be a “period of transition.”…..
The slide means that the jump in asset prices after Trump’s election win last November has been wiped out.
Hopes of a ‘Trump put’ have also taken a knock. This is the hope that the US president might take action to prop up share prices if the markets suffered a sharp decline.
[UPDATED: a put option gives you the opportunity to sell an asset at a particular price].
Michael Brown, senior research strategist at Pepperstone, explains:
I think it’s pretty clear, at this stage, that the idea of a ‘Trump put’ is stone dead – or, at least, that the strike price of said put is much, much lower than had previously been envisaged. Trump’s weekend refusal to rule out a recession this year is just the latest evidence of this, coupled with both Treasury Secretary Bessent, and Commerce Secretary Lutnick, having both ‘rolled the pitch’ for a slowdown in recent weeks.
The Admin are, for now, doubling down on the idea of ‘short term pain, for long term gain’, in the hope that macro headwinds can be blamed on the Biden Admin, and that Trump & Co will be able to claim credit for the economic, and market, turnaround that would likely follow. While I see how this might be politically expedient, juicing the economy just in time for the midterms, it’s rather economically incoherent, particularly for an Oval Office which claims to be more focused on Main Street, than on Wall Street.
After its worst day of the year, Wall Street is expected to open a little higher when trading resumes at 1.30pm GMT.
That might bring some calm to Europe’s markets, after a choppy session in Asia-Pacific markets overnight.
Investors are also poised for the latest US economic data, covering small business confidence and job vacancies, for a healthcheck on American growth.
The agenda
Key events
UK housebuilder Persimmon grows profits
Julia Kollewe
UK housebuilders are giving the London stock market some support this morning.
Shares in Persimmon, one of Britain’s biggest housebuilders, rose after it reported better-than-expected profits for 2024.
The shares climbed by 4.4%, but are still down by 11% over the past year.
The builder’s underlying profit before tax increased by 10% to £395m last year, as it completed 7% more homes than in 2023, a total of 10,664. The average selling price rose by 5% to £268,499, roughly £13,000 higher than in 2023. Persimmon took a one-off charge of £34.4m to pay for removing combustible cladding and other fire-related remediation work.
In the current order book, prices are up by 3% compared to last year and sales rates have improved, which means its order book for private homes is 27% ahead of last year at £1.15bn.
Persimmon, which owns the upmarket Charles Church brand, along with brick, tile and timber frame factories, is targeting up to 11,500 completions this year, including more affordable homes. Last year, it delivered 1,589 new homes to housing associations, down from 2,241 the year before, at an average selling price of £161,916, up 6% year-on-year.
Persimmon has been acquiring land worth £1.55bn over the last three years. It has invested in its sales and marketing platforms, resulting in a 34% increase in website visitors and 26% growth in enquiries over last year.
Along with seven other major housebuilders, Persimmon is under investigation by Britain’s competition watchdog for suspected breaches of competition law, namely exchanging competitively sensitive information. That investigation has been extended until May.
Richard Hunter, head of markets at interactive investor, said:
“It is perhaps a little early to be calling a full recovery, but it is also fair to say that some of the previous headwinds are showing signs of turning into tailwinds.
While affordability has been and could yet continue to be an issue, the recent interest rate cut clearly sparked the mortgage market into life, especially for first-time buyers where Persimmon has had a traditionally higher exposure. The imminent changes to stamp duty could also have brought some buying activity forward, although it remains to be seen whether that impacts the numbers on the remainder of the year.”
The sell-off that swept markets yesterday, and onto Asia-Pacific trading floors earlier today, appears to be abating.
The pan-European Stoxx 600 index is now flat, while the UK’s FTSE 100 index is only down 7 points (-0.08%).
Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
“UK markets have managed to find some footing after yesterday’s global market selloff, with the FTSE 100 broadly flat at the open.
Markets are jittery and volatility seems like the only certainty while the White House pushes hard to usher in a new era, seemingly happy for stock markets to be collateral damage.
UBS raises odds of a US stagflationary or cyclical downturn
Swiss bank UBS has warned there is an increased risk that the US economy suffers a downturn, hitting stock markets.
UBS has updated its House View scenario, and now sees a 30% chance of a “stagflationary or cyclical downturn” in the US, up from 25% at the end of last month.
The chances of an upside scenario, in which the US enjoys strong growth and equity makets rally, has been trimmed to 20%, from 25%.
The base case, in which there is growth despite “an aggressive tariff policy,” remains a 50% prospect.
Mark Haefele, chief investment officer at UBS Global Wealth Management, explains:
“In our base case, to which we attach a 50% probability, US economic growth is likely to moderate compared with last year but remain positive.
While we treat the economic data and the words of the Trump administration seriously, enacting and sustaining policies which contribute to a potentially protracted slowdown in the US economy in hope of better growth or economic dynamics in the medium to long term would require a shift from an approach which has so far focused on achieving quick success.”
Euro rises over $1.09
The euro has climbed over $1.09 against the US dollar, for the first time since Donald Trump’s election victory.
The single currency is up three-quarters of a cent against the dollar to $1.0905, its highest since 6 November, the day after the US presidential election.
The euro has been on a tear in recent weeks.
At the start of February, it slipped to near-parity with the US dollar on fears that Donald Trump would impose painful tariffs on European imports.
But the euro has surged since European leaders backed a huge increase in defence spending which could also spur growth, and support domestic economies.
A European spending splurge could take some pressure off the European Central Bank to keep cutting interest rates.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explains:
In the traditional currency space, the USD selloff has somewhat slowed yesterday, but the dovish shift in Fed expectations and hawkish shift in other central bank expectations – like the European Central Bank (ECB) expectations for example on the thinking that the ECB must slow down rate cuts to temper the impact of massive government spending – continue to keep the outlook for the US dollar negative compared to major peers.
European markets have opened a little higher, with Germany’s DAX and France’s CAC both up 0.4% in early trading.
FTSE 100 opens in the red
London’s stock market is open, and stocks are a little lower.
The FTSE 100 index of blue-chip shares has dropped by 21 points, or 0.25% – a small drop.
Travel and hospitality stocks are leading the fallers, with British Airways owner IAG down 5%, budget airline easyJet off 2.6%, and InterContinental Hotels losing 2.1%.
Across other Asia-Pacific markets, South Korea’s KOSPI index is down 1.1% and Australia’s S&P/ASX 200 has lost 0.9%.
Stephen Innes, managing partner at SPI Asset Management, reports:
While the panic button hasn’t been hit just yet, market sentiment remains fragile as Wall Street’s once-bullish bets are being tempered by escalating fears that aggressive tariffs and sweeping government spending cuts could derail U.S. growth.
China’s stock market has shrugged off US recession fears.
The CSI 300 index dropped 1% at the start of trading, as Asia-Pacific stock markets wobbled.
But stocks have recovered, pushing the CSI 300 – which includes the largest companies on the Shanghai and Shenzhen Stock Exchanges – up by 0.3% by the close.
Nikkei closes in the red
Japan’s stock market has fallen today, although it’s recovered somewhat from an early tumble.
The Nikkei index has closed down 0.65% today, having earlier hit a six-month low as US recession fears spooked traders in Tokyo. At one stage, it was down 1.7%.
The Japanese yen has hit a five-month high against the US dollar, as investors look for a safe place for their money.
With fears of a tariff-driven slowdown in US economic growth rattling the dollar, and US stocks, the yen hit ¥146.55 per dollar, its strongest since last October.
The dollar is down more than 7% from a six-month high – ¥158.8 – it hit in January against the yen, suggesting the US currrency is losing some of its safe-haven appeal.
Chris Weston, head of research at broker Pepperstone, explains:
“Historically, the dollar outperforms when we get a solid rise in volatility, but when the U.S. economy and U.S. equitymarket are the central point of concern, this is now limiting the attractiveness of the dollar.”
US dollar near four-month low
Fears over the economic impact of the Trump White House have hurt the US dollar in recent sessions.
This morning, the dollar is down 0.2% against a basket of major currencies, close to the four-month low it hit last Friday.
The greenback, like the US stock market, has lost all the gains it enjoyed after Trump’s election win.
Initially, investors had bet that Trumpian policies such as tariffs and a clampdown on immigration would be inflationary, leading to higher US interest rates and thus a stronger currrency.
Now, though, attention has turned to risks that growth will be sapped, requiring lower interest rates to stimulate the economy…..
Introduction: Growth fears grip markets
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The Trump Bump has turned into the Trump Slump, as rising fears of a US recession rocked the markets yesterday.
Monday was a dark day on Wall Street, where the S&P 500 fell 2.7%, the Dow Jones dropped 2%, and the tech-heavy Nasdaq dropped 4%, with losses among the major tech companies.
Investors dashed for save-haven assets after the US president refused to rule out that his policies would lead to a recession, or rising prices.
Instead, he told Fox News in an interview aired last weekend that there would be a “period of transition.”…..
The slide means that the jump in asset prices after Trump’s election win last November has been wiped out.
Hopes of a ‘Trump put’ have also taken a knock. This is the hope that the US president might take action to prop up share prices if the markets suffered a sharp decline.
[UPDATED: a put option gives you the opportunity to sell an asset at a particular price].
Michael Brown, senior research strategist at Pepperstone, explains:
I think it’s pretty clear, at this stage, that the idea of a ‘Trump put’ is stone dead – or, at least, that the strike price of said put is much, much lower than had previously been envisaged. Trump’s weekend refusal to rule out a recession this year is just the latest evidence of this, coupled with both Treasury Secretary Bessent, and Commerce Secretary Lutnick, having both ‘rolled the pitch’ for a slowdown in recent weeks.
The Admin are, for now, doubling down on the idea of ‘short term pain, for long term gain’, in the hope that macro headwinds can be blamed on the Biden Admin, and that Trump & Co will be able to claim credit for the economic, and market, turnaround that would likely follow. While I see how this might be politically expedient, juicing the economy just in time for the midterms, it’s rather economically incoherent, particularly for an Oval Office which claims to be more focused on Main Street, than on Wall Street.
After its worst day of the year, Wall Street is expected to open a little higher when trading resumes at 1.30pm GMT.
That might bring some calm to Europe’s markets, after a choppy session in Asia-Pacific markets overnight.
Investors are also poised for the latest US economic data, covering small business confidence and job vacancies, for a healthcheck on American growth.
