Market snapshot: M&G leads UK rally but tariffs confuse Wall Street

Any investor relief proved to be short-lived as an appeals court reinstated the US tariff backdrop pending its own investigation.

While the markets may be reflecting the “as you were” developments, if anything this week’s courtroom drama has added another layer of uncertainty to what was already an unsettling series of events. It appears that the White House may have other avenues to explore to maintain the tariffs whatever the outcome, while at the same time it could find its negotiating hand weakened if foreign powers hold fire on any trade deals while the possibility of the tariffs being rescinded is still in play.

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In turn, businesses, consumers and even the Federal Reserve are left hamstrung, still unable to make any shorter term decisions until the clouds clear. There are some signs of a weakening jobs market and a slowdown in economic growth as a result in the world’s largest economy, as evidenced in the latest jobless claims and GDP data.

Next on the agenda is the Fed’s preferred measure of inflation, the Personal Consumption Expenditures index, where it is expected that there could be a marginal improvement in the headline number from 2.3% to 2.2%, with the core reading expected to remain unchanged at 2.6%. 

A relative highlight of the week has been the performance of NVIDIA Corp (NASDAQ:NVDA), showing that the AI theme is intact if a little bruised. The shares are now marginally ahead in the year so far following this week’s rally, as the company reported a 69% surge in revenue from the previous year and as top and bottom line growth breezed past expectations. Nonetheless, the effect of the tariffs injected some caution, with a hit of some $4.5 billion likely to be followed by a further $8 billion loss in the current quarter due to the restrictions on chip sales to China.

In the meantime, the main indices remain in something of a holding pattern in the year to date, with the Dow Jones now down by 0.8% and the Nasdaq by 0.7%, while the benchmark S&P500 is a marginal 0.5% ahead following some recent relief strength.

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Asian markets also gave up most of the gains which resulted from the initial court ruling in the US, with China in particular likely to have been a beneficiary of tariff reversals. However, the situation remains fluid and uncertain, leading to dips across the board as investors assess their options. In addition, the subsequent US dollar weakness has led to more strength in the Japanese yen, which weighed on the Nikkei 225 given that many of its exporter constituents will suffer from lower relative revenues.

In the UK, the premier index was peppered with a selection of buying interest across core sectors, with the insurers at the top of the tree following an announcement from M&G Ordinary Shares (LSE:MNG) that it would be forming a strategic partnership with Dai-ichi Life of Japan.

The deal involves Dai-ichi taking a stake of around 15% in the UK insurer and aims to deliver some $6 billion of new business to M&G over the next five years. The move will appeal to investors who are keen to see such cross-border tie-ups given the additional strength and diversity which such deals bring, and M&G shares popped by up to 8% following the news, with a positive read across to others in the sector.

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The news consolidates what is becoming something of a show of strength for the FTSE100, which has attracted investor attention amid the global turmoil this year given its relative resilience and stability.

The blue-chip index is now ahead by 7.1% in the year to date, bolstered by an additional 3.4% in average dividend yield, with the recent record high now just 1.4% away. Such proximity to the record level could well leave investors interested in chasing the index, which would represent a positive self-fulfilling outcome.