UK's Trade Triumph: Breakthrough Deal Shifts Market Dynamics

The United States and Britain have forged a pivotal trade deal lowering tariffs and providing greater access to U.S. goods. The agreement impacts UK exports, particularly cars and steel, leading to stock market fluctuations, with midcaps gaining and blue-chips dipping amidst market reactions.

British blue-chip stocks ended lower on Thursday, contrasting gains in midcap stocks, as markets absorbed the implications of a new trade agreement between the United States and Britain. This latest development in global trade saw Britain lower its tariffs on U.S. goods to 1.8%, opening up markets, although a 10% tariff on UK imports remains.

In a move favoring British exporters, tariffs on British-made cars will fall from 27.5% to 10%, while the 25% tariffs on steel exports to the U.S. will be eliminated. Investment strategist Lindsay James of Quilter noted the agreement's potential benefits for key UK sectors, including automotive, auto parts, and aerospace engines.

Market movements following the deal included a 0.6% rise in the midcap FTSE 250 reaching a two-month high, while the FTSE 100 fell by 0.3%. Aston Martin shares surged by almost 14%, topping the midcap index, as aerospace and defence stocks also gained traction.

Rolls-Royce benefited from the trade agreement, with shares increasing by 3.7% after the U.S. announced a tariff-free entry for its engines and parts. Meanwhile, the BoE's expected interest rate cut revealed a divided opinion among policymakers, amid concerns over the tariff impact on economic growth.

IMI was the standout performer among blue-chip stocks, with a 5.1% increase, buoyed by a positive financial outlook for 2025. Meanwhile, Renishaw's decision to close an underperforming unit resulted in an 18.6% surge, leading gains in the midcap index.

(With inputs from agencies.)