Market snapshot : investors are getting uncertainty in spades

Well-worn though the phrase may be, markets hate uncertainty, and there's plenty around right now. ii's head of markets analyses the latest stock moves both here and overseas.

7th March 2025 08:54

Richard Hunter from interactive investor

The constant changes of tack emanating from the White House on tariffs are beginning to test investors’ patience, not least because the differing messages have different implications for highly interconnected global markets.

In addition, the US has seen a recent run of weakening economic data, quite apart from any inflationary and recessionary fears that investors are harbouring following President Trump’s aggressive tariff actions so far.

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The results have been widespread, ranging from smaller companies where the Russell 2000 index has lost 7% this year as the threat of higher for longer interest rates impact on the borrowing costs needed to expand their businesses, to the previous mega cap tech market darlings. NVIDIA Corp (NASDAQ:NVDA) shares fell by a further 5.7% in a torrid session, leading the stock into a bear market of its own with the price now by 20% so far this year.

The Nasdaq index meanwhile is now down by 6.4% in the year to date, and has entered correction territory having fallen by 10% from its recent high. The other main indices are also feeling the heat, with the Dow Jones all but flat for the year and the benchmark S&P500 2.4% lower.

The next test of investors’ mettle comes with the release of the non-farm payrolls report later, where it is estimated that 160,000 jobs will have been added in February, as compared to 143,000 the previous month, with the unemployment rate remaining stable at 4%. The ability of this report to move markets could once more emerge if there is a wide deviation from the consensus, and investor trepidation may also be higher in any event since Federal Reserve Chair Powell will already have given an update on the state of the nation prior to its release.

Asian markets have also been unsettled by recent developments, especially with China having been singled out for particularly harsh treatment from the US, to which it has announced a number of retaliatory measures. Conflicting economic data added to the confusion overnight, with exports growing by 2.3% but with imports falling by 8.4% making it difficult to gauge how much those numbers will have been affected by companies bringing forward business prior to any tariff implementations.

The Nikkei index in Japan was equally weak, with a raft of selling within the tech sector, and most especially for those companies which have dual listings in the US such as Tokyo Electron and testing equipment manufacturer Advantest, where both had fallen sharply during the Wall Street session.

The UK market remains a tale of two halves, with the more domestically focused FTSE250 opening lower once more, taking its decline to 3% so far this year. The latest fall follows on from data showing that retail footfall growth slowed for the second consecutive month, even before the reverberations from the Budget take full effect over the coming months.

With more general market growth looking tepid at best, and with the potential of inflation returning, the likelihood of further interest rate cuts to bolster the economy remains highly uncertain.

The FTSE100 meanwhile is continuing to build on its perceived status as a haven destination, despite another weaker opening which mirrored investor exasperation elsewhere. Broker downgrades to Whitbread (LSE:WTB) and Rentokil Initial (LSE:RTO) International were headwinds, as were Polar Capital Holdings (LSE:POLR) and Scottish Mortgage Ord (LSE:SMT) whose exposure to US tech inevitably weighed on their share prices.

Melrose Industries (LSE:MRO) recouped a small fraction of its share price decline in the previous session following profit-taking despite a strong set of results. The index as a whole remains ahead by 5.8% so far this year and has been mostly shielded from the worst of developments elsewhere globally, which has led to some protracted buying interest.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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