UK ‘the golden child of Europe’ as stocks rally in London; US goods trade deficit widens as tariffs backfire – as it happened

After another hectic week, it’s time to wrap up with a quick recap.

Thousands of UK customers suffered online banking problems today, with reports of trouble accessing internet and app services.

Lloyds, its Halifax and Bank of Scotland divisions, plus Nationwide, First Direct and TSB all reported problems with their online banking systems.

And after a day of work, five of the services have been restored – with TSB still reporting ‘intermittent’ problems with its internet and mobile banking.

Stock markets have been buffered by trade war worries, with heavy losses in Asia-Pacific markets overnight.

But the UK’s FTSE 100 has avoided the gloom, gaining 0.6% today, with analysts hopeful Britain can avoid being hit by new US tariffs, and could strike a trade deal with the US.

The existing threat of tariffs on imports from China, Canada and Mexico are worrying investors, and may also have driven a surge in imports to the US last month. The US trade in goods deficit widened sharply in January, seemingly as businesses tried to stock up on raw materials, parts and finished products before tariffs come in.

More encouragingly, the US PCE inflation index has eased a little.

In other news:

After a shaky start, Britain’s blue-chip share index has closed higher tonight, outpacing other European indices.

While trade war fears hit markets across the Asia-Pacific region, and on continental Europe, the FTSE 100 share index has closed 0.6% higher in London tonight, up 53.5 points at 8809 points.

That’s only 11 points short of the record high set by the FTSE 100 earlier this month.

Investors appear to be hoping that Britain can avoid incurring new tariffs imposed by Donald Trump, following Keir Starmer’s successful trip to the White House yesterday, where the US president suggested the two countries could agree a free trade deal.

Kathleen Brooks, research director at XTB, points out that the UK has one advantage – it doesn’t run a large trade surplus with the US, adding:

Combined with Trump’s fondness for the UK, and another invitation for a state visit at Buckingham Palace, this means that the UK is now the golden child of Europe. This is reflected in the UK’s asset prices: the FTSE 100 is higher on Friday as hopes grow for a quick trade deal with the US. The UK is also expected to avoid tariffs, after a successful trip to the US by PM Kier Starmer. The FTSE 350 is also resilient and is rising today, whereas European indices are mostly a seas of red.

The pound is the most resilient performer vs. the USD so far this week, while UK bonds have underperformed US bonds this week (US Treasury yields have fallen by more than UK Gilt yields), UK Gilts are performing well vs. the rest of Europe.

In contrast, Germany’s DAX was down 0.15% in late trading, and France’s CAC index was slightly lower.

As we covered this morning, stocks slumped in China, Japan and South Korea overnight after Trump declared new 10% tariffs on Chinese imports would be imposed next week.

Another sign of economic angst – Homebuyers in the US canceled purchase contracts at a record pace last month.

About 14.3% of sales agreements fell through in January, up from 13.4% a year earlier and the highest level for the month in data going back to 2017, according to data from brokerage Redfin Corp reported by Bloomberg.

It suggests economic and political uncertainty gave buyers cold feet.

Bloomberg adds:

House hunters face an ever-growing list of pressures, from high mortgage rates and prices to concerns about how trade wars and federal government cutbacks may ripple through the economy. The high rate of cancellations casts a pall over prospects for the key spring sales season, which is just getting underway.

The surge in US goods imports in January (see earlier post) is a sign that Trump policy ‘negatives’ are outweighing the ‘positives’, warns ING.

James Knightley, ING’s chief international economist, fears that the White House’s focus on policies such as tariffs, and cuts to government departments, mean the US economy has started 2025 on a weak footing.

Knightley is also concerned by today’s data showing that US consumer spending fell last month.

He tells clients:

At the start of the year there was optimism that President Trump’s policy mix of light-touch regulation and lower taxes would turbo charge growth in an already solid looking economy. However, there has been little progress made on the ‘positives’ for growth – tax cuts and deregulation. Instead, the administration has been focusing on policies that yield ‘negative’ outcomes. Government austerity, as being initiated by DOGE, is prompting concerns in both the public and private sectors about job security and also entitlements while already financially-stressed lower- and middle-income households are not seeing any relief in the form of the lower prices they were promised. There is possibly also a growing awareness that tariffs will put up costs even more.

Another headwind for 1Q GDP growth has come from the advanced January goods trade report, which showed the merchandised trade gap widening to a record deficit of $153.3bn in January from $116.6bn in December. This is clear evidence that importers have tried to front run tariffs with imports surging 11.9% MoM. Industrial supply imports jumped from $67bn in December to $89.3bn in January with consumer goods imports jumping $6bn to $78.2bn. Interestingly automotive didn’t move much. Exports rose 2% MoM, but this did follow a 3.8% drop in December.

Over in the technology world, Microsoft is shutting down Skype, the once-pioneering calling and messaging service.

Fourteen years after buying Skype for $8.5bn, in its biggest-ever acquisition, Microsoft is shutting it down and migrating users to its Teams app.

Jeff Teper, president of Microsoft 365 collaborative apps and platforms, told CNBC:

“We’ve learned a lot from Skype over the years that we’ve put into Teams as we’ve evolved teams over the last seven to eight years.

“But we felt like now is the time because we can be simpler for the market, for our customer base, and we can deliver more innovation faster just by being focused on Teams.”

This is the end of an era, really. Skype, which was founded in 2003, was a major player in the voice-over-internet-protocol (VoIP) world, allowing users to make phone calls for free over the internet.

But the service has dwindled, as MS has prioritised Teams, as was illustrated when Skype didn’t benefit from the surge in demand for video group chats in the pandemic.