LIVEBUSINESS LIVE: BoE cuts base rate; UK-US trade deal; Next shines

A Bank of England rate cut and US trade deal wasn't enough to lift the FTSE 100 today, with the index closing down 0.32 per cent at 8,351.6.

Details are emerging on the UK-US trade deal.

Under the new package:

• The 25 per cent levies on cars will be eased with a quota of 100,000 a year at a lower rate of 10 per cent. That will roughly cover the UK's annual exports;
• The 25 per cent tariffs on steel exports to the US will be reduced to zero;
• There will be reciprocal access to markets for beef, but the UK government insisted food standards will not be compromised;
• British-made Rolls Royce engines will be excluded from tariffs but the UK will buy £10billion worth of Boeing aircraft;
• Britain is also hoping to head off the threat of an assault on the pharma sector, but conceded that 'work will continue' on that front;
• The Digital Services Tax is 'unchanged' as a result of the agreement, according to Downing Street, despite speculation of concessions

British car makers had feared the worst from Trump's tariffs but have gained important respite in the US-UK trade deal, with 100,000 cars allowed per year at a 10 per cent rather than 25 per cent rate.

The Society of Motor Manufacturers and Traders welcomed this.

Mike Hawes, SMMT chief executive, said: 'The agreement announced today to reduce tariffs on UK car exports into the US is great news for the industry and consumers. The application of these tariffs was a severe and immediate threat to UK automotive exporters so this deal will provide much needed relief, allowing both the industry, and those that work in it, to approach the future more positively.

'Government has recognised the importance of the automotive industry to UK exports and the wider economy and has worked quickly and tirelessly with US counterparts to strike an agreement. We hope that it will lead to broader and deeper cooperation that reduces barriers to trade still further, charting a path to economic growth for both nations.'

Just before close, the FTSE 100 was 0.33% down at 8,530.71.

Meanwhile, the FTSE 250 was 0.48% higher at 20,433.61.

How low will interest rates go?

Today’s 0.25 per cent Bank of England base rate cut was considered a nailed-on certainty but the question of where rates will end up in this cycle is a matter of hot debate.

A prominent Northern Irish software developer has agreed to be acquired by a US private equity business in a deal valuing the group at £542million.

FD Technologies revealed on Wednesday that it was in 'advanced discussions' with Boston-based TA Associates regarding a potential £24.50 per share bid.

Steve Ryder, senior portfolio manager at Aviva Investors:

'We expected a cautious commitment to further easing due to the uncertainty around the NIC impact. Instead, the statement was undeniably more hawkish with the main surprise being the vote split with two members calling for unchanged rates, and one calling for a 0.50% cut.

'Our base case has been for quarterly cuts into the summer before more clarity on inflation and activity data slowing would open up a scenario for the BOE to move to sequential cuts.

'The US trade tariff announcement has now increased the uncertainty for the UK and today's statement has reduced the chance of a consecutive cut in June. We still see the risks to activity data as to the downside and therefore a lower terminal rate than is currently priced.'

Warren Buffett, the world's most famous investor, thrives on a diet of Coca Cola, McDonald's breakfasts and Dairy Queen ice cream.

At 94 and going strong, this clearly has done the man they call the Sage of Omaha no harm.

British engineering firms Dowlais and Renshaw have each warned investors that profits will come under pressure this year as US tariffs spark upheaval across global supply chains.

Both firms say they will pass costs onto customers in efforts to manage the impact, demonstrating the potential for levies to drive inflation pressure throughout the economy.

Managing director at RBC Capital Markets Anthony Codling:

'The two key drivers of housing affordability are house prices and mortgage rates. A fall in mortgage rates leads to an increase in mortgage capacity, as the cost of servicing a mortgage falls, the size of the mortgage you can afford rises. If homebuyers can borrow more, they most likely will.

'At current rates we estimate that a 100bp cut in mortgage rates has a similar impact on affordability as a 10 per cent fall in house prices.

'Mortgage rates may be one of the few beneficiaries of uncertainty on the outlook for global trade.

'Tariffs and global trade are only likely to impact homebuyer activity if it leads homebuyers and home movers to have concerns about job security; such concerns tend to act as a brake on big ticket expenditure'

Neil Birrell, chief investment officer at Premier Miton Investors:

'An interest rate cut would normally be the main headline of the financial day, but a trade deal with the US is expected and that will be the focus.

'As the rate cut was all but known, attention was around policy guidance and that’s tricky at a time of such uncertainty.

'That really goes to show the scale of the uncertainty that exists amongst a key group, namely the actual setters of policy. It’s going to be difficult to make a call on future policy on the back of that.'

Marion Amiot, chief UK economist at S&P Global Ratings:

'The real time data is likely to continue to provide a mixed picture to policymakers on both, demand and price pressures.

'Currently, the labor market is cooling, but wage growth remains high and economic activity has showed strength at a time when confidence has deteriorated.

'With inflation set to rebound in the April release, the Bank will monitor carefully how this shapes firms’ pricing and employment decision, along with the aftermath of the global trade wars on UK economic activity.'

Here's what the BoE says informed MPC members' voting intention:

Uncertainty surrounding global trade policies has intensified since the imposition of tariffs by the United States and the measures taken in response by some of its trading partners.

There has subsequently been volatility in financial markets, and market-implied policy rates have moved lower. Prospects for global growth have weakened as a result of this uncertainty and new tariff announcements, although the negative impacts on UK growth and inflation are likely to be smaller.

The Committee remains focused on returning CPI inflation sustainably to target in the medium term. In deciding the appropriate degree and pace of monetary policy adjustments required to achieve this, the Committee has considered a range of possibilities for how domestic inflationary pressures could evolve, as well as the broader circumstances that could necessitate varying the course of policy.

The Bank of England’s Monetary Policy Committee has voted to cut base rate by 25 basis points to 4.25 per cent.

The cut was approved by a slim majority of 5–4. Two members preferred to reduce Bank Rate by 50bps to 4 per cent, while two members voted for a hold at 4.5 per cent.

The Bank of England's latest interest rate decision is due at 12.02pm, reflecting a slight delay to normal publication time to mark VE Day events.

London-listed stocks are trading higher ahead of the Bank of England's base rate decision, with news that US President Donald Trump would announce a trade deal with Britain boosting investor sentiment.

The previous session had brought an end to a record 16-day winning streak for the globally focused FTSE 100, powered by strong first-quarter earnings and optimism over easing global trade tensions.

IMI is the the top performer, gaining 4.7 per cent, after the specialist engineering company reaffirmed the financial year 2025 outlook.

InterContinental Hotels Group has added 3 per cent after the Holiday Inn owner said it is on track to meet the full-year consensus profit estimate.

Renishaw has jumped 15.8 per cent to the top of the FTSE 250 after the engineering firm said it will shut down loss-making drug delivery operations and introduce a surcharge to pass on additional costs brought on by US tariffs.

On the flip side, the healthcare index led the losses for the second consecutive day, down 2 per cent.

Some 280 UK-listed companies have now issued warnings over tariff related risks since Donald Trump’s announcement on 2 April, according to analysis by Bowmore Wealth Group.

The tariffs included a 10% baseline for all countries per cent, with 60 countries hit with additional ‘reciprocal’ tariff rates

UK companies could suffer not just from a hit to their US sales but also from supply chains issues caused by retaliatory tariffs or trade restrictions.

Businesses that have so far reported that they are at risk from US tariff increases include HSBC, Rolls Royce, Aston Martin, and Halfords.

Jonathan Webster-Smith, chief investment officer at Bowmore, said:

'Many of the UK’s largest companies have been forced to alert their investors that profits could be at risk. But clearly the scale of the hit to profits is up in the air.”

'The markets are now hopeful that the US is reversing the worst of its tariffs but the whole affair has been a real blow to the concept of American exceptionalism and that US equities will always outperform.'

Hackers have ramped up attacks on Britain with incidents doubling in recent months, the UK’s cyber security agency said.

‘Hostile nation states’ led by China, Russia, Iran and North Korea are believed to be at the forefront of malign online activity, along with groups using ransomware to extort money.

Matt Basi, managing director of London Capital Group:

'Traders have positioned themselves for a Bank of England rate cut of at least 25 basis points today, as markets seek a much needed boost to the UK economy.

'With a cut already heavily priced in, some have even suggested the committee could go further and opt for a deeper 0.5% reduction in light of pressure caused by tariff uncertainty.

'We expect Bailey to keep his options open for further cuts later in the year, given that geopolitical/economic news cycles now appear to be a weekly phenomenon.'

Paddy Power owner Flutter has cut expectations for its US business this year after shouldering punter-friendly US basketball results in the first quarter.

Flutter, which also owns Betfair, told shareholders it saw US earnings grow by more than sixfold to $161million over the first three months of the year, which the New York-listed group credited to 'strong operating leverag

e'.

The typical home rose in value by just under £900 in April, according to the latest figures from Halifax.

The mortgage lender revealed that house prices rose by 0.3 per cent last month meaning that year-on-year the average property is up 3.2 per cent.

Jeff Brummette, chief investment officer at Oakglen Wealth:

'A base rate cut looks nailed on but what will be most significant is the Banks’ future guidance.

'Given the recent NICs rise, hiring slowdown and rising prices, it is possible policymakers will provide more solid guidance for future easing, provided inflation stays under control - but President Trump’s tariffs continue to cause enormous uncertainty and may keep the bank cautious.

'The front end of the yield curve should continue to perform the best, with a steepening of the curve to be expected.'

Next has upgraded annual profit guidance for the second time in two months after unseasonably warm weather drove higher sales in the first quarter.

The retailer told shareholders on Thursday is had benefited from recent demand for summer clothes, while in-store footfall has also fared well.

It expects sales in the second half to come under pressure as the impact of April's hike in employer's national insurance 'will begin to filter through to the wider economy'.

The world’s biggest jeweller Pandora will reshuffle its supply chain as uncertainty over Donald Trump’s tariffs rages.

Chief executive Alexander Lacik said it will start sending products from its Thailand factory to Canada and Latin America, rather than from a warehouse in the US.

The boss of Barclays has promised not to announce any more branch closures this year or next in a boost for the High Street.

Chief executive CS Venkatakrishnan, known as Venkat, made the pledge as he faced questions at the lender’s annual general meeting from shareholders over its shrinking presence in towns and cities.

Ozempic maker Novo Nordisk has cut its sales and profit forecasts amid a surge in copycat weight-loss drugs.

The Danish pharmaceutical giant, which also makes Wegovy, fell victim to ‘compounding’ – a practice in the US that allows pharmacies to produce replicas.

Prime Minister Keir Starmer will provide an update on trade talks with the US later today.

'Talks on a deal between our countries have been continuing at pace and the Prime Minister will update later today,' a Government spokesperson told Reuters.

British engineering firm Renishaw has narrowed its full-year sales and profit outlook, and said it will introduce a surcharge to pass on the additional costs brought on by US tariffs.

The US makes up about 20 per cent of Renishaw's global revenue, and the company has factories in the UK, Ireland and India.

'Under the current regime our products imported into the USA are either impacted by aluminium and steel tariffs or subject to the 'reciprocal' tariff regime,' the company said in a statement.

Meanwhile, British auto parts supplier Dowlais said it expects full-year performance to be toward the lower end of its forecast, citing increased economic uncertainty stemming from recent US tariffs.

US President Donald Trump's tariffs have sparked weeks of instability in the auto industry, prompting automakers to revise forecasts, shift production plans, and temporarily shut down plants.

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

'Next continues to deliver for investors, with yet another profit upgrade continuing its hot streak.

'Sales over its first quarter were well ahead of expectations, nearly double the group’s forecasts.

'In the UK, both online and in-store sales powered higher at mid-single digits. There had been some weakness from in-store sales of late, but it looks like the better weather has convinced shoppers to head to stores to try before they buy. Next remains cautious about the outlook for future footfall, and in-store growth is expected to return to being broadly flat over the rest of the year.

'Much of the overperformance over the period has been put down to warmer weather, which has pulled forward demand for summer-weight clothing.

'Alongside some tough comparable numbers and Next’s expectations that National Insurance increases will begin to weigh on the economy, sales guidance for the rest of the year has been maintained for now.'

Next has upgraded full-year guidance for the second time in two months after first quarter full-price sales rose by a better-than-expected 11.4 per cent, with a spell of warm weather boosting demand for summer ranges.

The retailer, often seen as a useful gauge of how British consumers are faring, is now forecasting a year to January 2026 pre-tax profit of £1.08billion, up from previous guidance of £1.066billion.

It made £1.011billion last year, topping £1billion for the first time.

However, Next warned of uncertainty ahead.

It said: 'As we mentioned in our March guidance, we are more cautious about sales in the second half because the comparative numbers (in Autumn Winter 2024) were much stronger. 

'In addition, we believe that the full effects of this April's National Insurance increases will begin to filter through to the wider economy in the second half.  For completeness, we have shown the two year growth (versus 2023/24) in the right hand column in grey.'

US President Donald Trump will announce a trade deal with the UK later today, according to reports.

Trump touted a 'major' upcoming agreement with a 'big and highly respected country' on social media late on Wednesday.

The New York Times and Politico reports that Britain will be the trade partner revealed by the President.

Trump is expected to announce the deal at a 10:00am local time (1400 GMT) news conference in the Oval Office at the White House.

Sterling initially climbed as much as 0.5 per cent before paring gains to be up 0.2 per cent in response.

The Bank of England’s Monetary Policy Committee will later today reveal its latest decision on the direction of UK interest rates.

Financial markets expect the MPC to opt for a 25 basis point base rate cut from 4.5 to 4.25 per cent as the bank steps up efforts to reinvigorate an increasingly sluggish British economy.