Time to wrap up….

Activity across the UK’s private sector has accelerated this month, easing some pressure on chancellor Rachel Reeves ahead of the spring statement on Wednesday.

The latest UK PMI Composite Output Index shows private sector growth is running at a six-month high in March, helped by strong growth in the services sector.

But manufacturing contracted, as rising global economic uncertainty and fears of US tariffs hit demand for British goods.

Donald Trump has calmed investors’ nerves, by suggesting he could take a targeted approach to the new tariffs inked in for 2 April.

However, the US president has also surprised markets by announcing new ‘secondary tariffs’ on Venezuela’s oil and gas exports.

The Irish government has warned that the country could lose up to 80,000 jobs if Donald Trump launches a trade war with the EU, and has hit back at accusations by the US that Ireland is operating a “tax scam”.

In other news…

Sales of new Tesla cars slumped in Europe last month in the latest indication of a potential buyer backlash over Elon Musk’s high profile and controversial behaviour since becoming a leading figure in Donald Trump’s administration.

The UK’s transport secretary has said she would “struggle to sleep” if she had been running Heathrow airport, amid reports that its chief executive slept during the early hours of an unfolding crisis on Friday.

Hundreds of hospitality companies have called on the UK’s competition watchdog to investigate the energy market amid fears that small businesses may have been overcharged.

The oil price is up 1% this afternoon, as traders digest the new ‘secondary tariff’ on Venezuela’s energy exports announced by Donald Trump today.

Brent crude has risen to $72.83 per barrel, the highest since 3 March.

Traders will be calculating that Venezuela’s oil and gas customers may scramble to buy supplies from elsewhere, to avoid incurring a 25% tariff on their exports to the US.

Trade data earlier this month shows that China was the largest market of Venezuela’s oil, receiving some 503,000 bpd, Reuters reported.

The US was the second largest receiver with 239,000 bpd, followed by Europe with 69,200 bpd and India with 68,000 bpd.

Venezuela’s political ally Cuba received some 42,000 bpd of crude and fuel.

The US, though, has been cutting its links – and has ordered Chevron to wind down their activities in Venezuela.

Newsflash: Donald Trump has announced a new “secondary tariff” on countries which buy oil and gas from Venezuela.

In a post on his Truth Social site, the US president says he is imposing the levy because Venezuela has “purposefully and deceitfully” sent tens of thousands of criminals to the US.

Trump writes:

Among the gangs they sent to the United States, is Tren de Aragua, which has been given the designation of “Foreign Terrorist Organization.” We are in the process of returning them to Venezuela — It is a big task!

In addition, Venezuela has been very hostile to the United States and the Freedoms which we espouse.

Under Trump’s new ‘secondary tariff’, any country that purchases oil and/or gas from Venezuela will be forced to pay a tariff of 25% on all its imports to the US.

All documentation will be signed and registered, and the Tariff will take place on 2 April, Trump adds, declaring it will be “LIBERATION DAY IN AMERICA”.

[Reminder: tariffs are paid by the company or consumer importing goods, not by the exporter].

The US dollar is having a solid day, and has crept up to its highest level in over two weeks against a basket of major currencies.

This has pulled the Japanese yen down to ¥150.0, its weakest level since 3 March, while the euro has dropped to $1.079, its lowest since 7 March.

Confidence among US businesses is falling this month, as companies grow increasingly cautious about the economic outlook, a new survey shows.

The latest poll of purchasing managers across American companies has found that confidence in the outlook has deteriorated further this month.

Business expectations for the year ahead have dropped to their second-lowest since October 2022, with companies reporting worries about customer demand and the impact of some of Donald Trump’s administration’s policies.

The S&P Global Flash US PMI report shows that manufacturing output fell into decline this month with new orders growth coming close to stalling in the goods-producing sector.

US factories also reported fewer instances of output having been boosted by the “front-running” of tariffs (where customers place more orders than usual, to avoid having to pay new levies if the US trade war escalates).

The report says:

However, export sales showed the smallest decline for nine months thanks to rising orders in particular from Canada, Germany and other EU countries, hinting at some further efforts to fulfil orders ahead of tariff implementation.

But while manufacturing shrank, output growth in the services sector picked up – from a 15-month low in February.

And that led to faster growth in the wider economy – the flash US PMI Composite Output Index has risen to a three-month high of 53.5, from February’s 51.6.

That could calm fears that the US could be slipping into a recession.

Chris Williamson, chief business economist at S&P Global Market Intelligence, says:

“A welcome upturn in service sector activity in March has helped propel stronger economic growth at the end of the first quarter. However, the survey data are indicative of the economy growing at an annualized 1.9% rate in March and just 1.5% over the quarter as a whole, pointing to a slowing of GDP growth compared to the end of 2024.

“Near-term risks also seem tilted to the downside. Growth is concentrated in the service sector as manufacturing fell back into decline after the frontrunning of tariffs had temporarily boosted factory output in the first two months of the year. Similarly, some of the March upturn in services was reportedly due to business picking up after adverse weather conditions had dampened activity across many states in January and February, which could prove a temporary bounce.

Williamson also warned that business confidence in the outlook has “darkened”, mainly due to growing worries over negative impacts from recent policy initiatives from the Trump White House.

he says:

Most widely cited were concerns about the impact of Federal spending cuts and tariffs. A key concern over tariffs is the impact on inflation, with the March survey indicating a further sharp rise in costs as suppliers pass tariff-related price hikes on to US companies. Firms’ costs are now rising at the steepest rate for nearly two years, with factories increasingly passing these higher costs onto customers.

Chinese auto giant BYD has overtaken Tesla for sales last year, as it continues to dominate the electric car markets.

Shenzhen-based BYD revenue of 777bn yuan ($107bn) for the 12 months to 31 Deceber 2024, beating forecasts of 766m yuan.

That means BYD brought in more sales than Tesla, which reported total revenues of $97.69bn for 2024.

Bloomberg has more details:

BYD also sells about the same number of EVs as Tesla — 1.76 million in 2024 versus 1.79 million — but, when all of its other passenger hybrid car sales are included, it’s much larger. BYD’s total deliveries last year climbed to 4.27 million, almost as much as Ford Motor Co.

BYD has forecast it can sell between 5 million to 6 million vehicles this year. It’s already off to a strong start, with sales in the first two months of 2025 up 93% year-on-year to 623,300 units.

For the last quarter of 2024, BYD reported a record net profit of 15bn yuan ($2.1bn).

BYD has been making strides into Europe with its entry-level Dolphin and its more premium Seal car, having become China’s largest manufacturer of electric cars.

BYD made a stir last week by reporting that it has developed a new charging system that would make it possible to charge an EV as quickly as it takes to refill with petrol.

Back in the UK, houses across England and Wales have become less unaffordable than at the height of the pandemic.

The Office for National Statistics has reported that housing affordability in England and Wales returned to its pre-pandemic levels last year.

New data today shows that the median average home in England, at £290,000, cost 7.7 times the median average earnings of a full-time employee (£37,600) in 24.

In Wales the average home (£201,000) was 5.9 times annual earnings (£34,300).

The ONS explains:

Affordability in England and Wales in 2024 has returned to its pre-coronavirus (COVID-19) pandemic levels after a sharp increase between 2020 and 2021 (worsening affordability); median house sales prices have increased by 1% since 2021, while average earnings have increased by 20%.

The report also found:

• In 2024, 9% of local authorities (LAs) (27) had homes bought for less than five times workers’ earnings on average and were therefore deemed affordable; this is the highest proportion since 2015, but well below that at the start of the series in 1997 (88% of areas).

• Housing affordability improved in 289 of the 318 LAs in England and Wales (91%) and worsened in 28 (9%) since 2023.

• The most affordable LAs in 2024 were Blaenau Gwent (with a ratio of 3.8), Burnley (3.9) and Blackpool (3.9); the least affordable was Kensington and Chelsea (27.1, which was about seven times less affordable).

• Between 2019 and 2024, 4 of the 10 largest increases in affordability ratios (worsening affordability) were in the East Midlands, while the 10 largest decreases in affordability ratios have all occurred in LAs in London

Novo Nordisk, the Danish drugmaker, has been unseated from its position as Europe’s most valuable company.

The firm behind obesity and diabetes injections Wegovy and Ozempic has been overtaken by German software firm SAP for market capitalisation.

Reuters has calculated that at 9am, SAP had a market cap of $340bn, slightly more than Novo Nordisk.

SAP produces a range of business application software, and has benefitted from forecasts that its cloud business will benefit from the artificial intelligence boom.

SAP’s shares are up 10% so far this year, and up almost 40% over the last 12 months.

Novo Nordisk became Europe’s largest company in September 2023, due to strong demand for its weightloss drugs.

But last August, Novo Nordisk cut its annual profit expectations after posting weaker-than-expected sales of Wegovy. It also faces the threat of tariffs, especially if Donald Trump continues his push to take control of Greenland from Denmark.

The Bank of England has launched the 2025 Bank Capital Stress Test for the seven largest and most systemic UK banks and building societies.

The stress test will assess whether UK banks have enough capital to survive a financial crisis.

This year’s test will model a “severe global aggregate supply shock” that leads to deep recessions in both the UK and globally.

This scenario includes:

• UK GDP falls by 5% in the early part of the scenario;

• World GDP falls by 2%;

• UK unemployment almost doubles to a peak rate of 8.5% in the third year of the scenario, similar to the peak level experienced in the global financial crisis.

• World trade falls by 20%;

• Oil and gas prices rise sharply;

• Inflation peaks at 10% before falling back to the 2% target by the end of the scenario;

• Bank Rate is increased to a peak of 8% and is then lowered over the scenario as inflation returns to the target;

• UK residential property prices fall by 28%.

The results will be published in the fourth quarter of this year.

The banking sector has generally passed previous stress tests. In 2023, the UK’s largest banks were strong enough to weather a £125bn financial hit during a severe economic downturn, while in 2021 the UK’s top eight banks could withstand a near tripling of national unemployment, a sharp fall in property prices and a large economic contraction.

But back in 2014, the Co-operative Bank failed the test, while Lloyds Banking Group and Royal Bank of Scotland only just scraped through.

UK private sector output growth has climbed to a six-month high. in March, in a pre-Spring Statement boost for chancellor Rachel Reeves.

While British manufacturing output is sliding this month, the services sector is growing at a faster rate.

This services rebound has lifted the UK PMI Composite Output Index, which tracks activity in the economy, up to 52.0, the highest since last September, up from 50.5 in February.

S&P Global, which compiles the PMI report, says that service sector growth was bolstered by renewed improvements in both domestic and overseas sales.

But manufacturers were hit by “severe headwinds”, including rising global economic uncertainty and potential US tariffs.

The report says:

Weak international demand resulted in the fastest decline in manufacturing export sales since August 2023. Moreover, manufacturers reported the steepest downturn in production volumes for nearly one-and-a half years.

Here are the details:

• Flash UK PMI Composite Output Index: 52.0 (Feb: 50.5). 6-month high.

• Flash UK Services PMI Business Activity Index: 53.2 (Feb: 51.0). 7-month high.

• Flash UK Manufacturing Output Index: 44.6 (Feb: 47.3). 17-month low.

• Flash UK Manufacturing PMI: 44.6 (Feb: 46.9). 18- month low.

The report also shows that private sector employment is fallling in March for the sixth month running.

Companies cited business restructuring, investments in automation and the non-replacement of leavers in response to rising payroll costs – a sign that Reeves’s increase to employers’ national insurance rates, and the minimum wage, is hitting workforce levels.

Chris Williamson, chief business economist at S&P Global Market Intelligence said:

“An upturn in business activity in March brings some good news for the government ahead of the Chancellor’s Spring Statement, offering a respite from the recent flow of predominantly downbeat economic data. However, just as one swallow does not a summer make, one good PMI doesn’t signal a recovery.

The signal from the flash PMI is an economy eking out a modest expansion in March, consistent with quarterly GDP growth of just 0.1%, but with employment continuing to be cut thanks to concern over costs and the uncertain outlook. Confidence is still running close to January’s two-year low.

Williamson cautions that the improvement is also being driven by only small pockets of growth, notably in financial services, with consumer-facing business and manufacturers continuing to struggle against headwinds both at home and abroad.

He adds:

These headwinds include the additional costs imposed on businesses in the Budget, low confidence among businesses and households, and sluggish demand at home and abroad, the latter linked to heightened geopolitical uncertainty resulting from US tariff policies.

Worryingly, these headwinds are likely to grow in force as higher National Insurance contributions come into effect in April, coinciding with the anticipated review of US tariff policy on 2nd April, the latter having the potential to further subdue global economic growth and dampen UK trade.”

Happy news: the eurozone’s factory sector has returned to growth this month, perhaps thanks to a rush to beat new US tariffs.

S&P Global’s poll of purchasing managers from across Europe’s private sector has found that manufacturing production has increased for the first time in two years, even though new orders fell again.

Here’s the details (where any reading over 50 shows growth):

• HCOB Flash Eurozone Composite PMI Output Index at 50.4 (February: 50.2). 7-month high.

• HCOB Flash Eurozone Services PMI Business Activity Index at 50.4 (February: 50.6). 4-month low.

• HCOB Flash Eurozone Manufacturing PMI Output Index at 50.7 (February: 48.9). 34-month high.

• HCOB Flash Eurozone Manufacturing PMI at 48.7 (February: 47.6). 26-month high

Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, says:

“Just in time with the beginning of spring we may see the first green shoots in manufacturing. While we should not be carried away by a single data point, it is noteworthy that manufacturers expanded their output for the first time since March 2023. It’s also encouraging, that the index output has risen for three months straight. This is complemented by a much softer fall in new orders and employment.

One could pour some cold water on this development arguing that it’s the temporary tariff-related import boom from the US which has driven the improvement in manufacturing. However, given the will of Europe, to invest heavily in defense and infrastructure – in Germany a corresponding historical fiscal package has been approved only last week – hope for a more sustained recovery seems well founded.

The price development in the services sector, which is very much under scrutiny of the ECB, will be well received by the doves of the monetary authority. Both input costs and selling prices are rising at a slower pace compared to recent months.

Lower input cost inflation points to less pressure from wages which are a key ingredient of input costs in the labour intensive services sector. Meanwhile, in manufacturing, price increases for both selling and purchasing remain moderate, helped along by declining energy costs.

Japan’s private sector output is falling this month for the first time since last October, a new poll has found, and at the fastest rate in three years.

The latest poll of purchasing managers at Japanese companies shows that manufacturers were hit by worsening demand, while services companies suffered from labour constraints

Overall new orders fell for the first time in nine months, while sales in March were notably also dampened by elevated prices.

Investors are more concerned than three months ago about the threat from Donald Trump’s trade war, a new poll by Deutsche Bank has found.

The survey of 400 people found that the perceived tariff risk has gone up so far this year.

On a scale of 0 to 10, where 0 means ‘No additional tariffs’ and 10 means ‘An extreme tariff regime’, 38% of those who took part in the poll plumped for at least 7 – a level that would mean Trump delivering on his pledges during the election campaign.

That’s up from 18% who chose 7, 8, 9 or 10 in December.

It still means that 62% of respondents reckon Trump will put in sustained tariffs that are softer than his campaign pledges.

Deutsche’s global markets survey polled financial professionals from around the world, and also found:

• European equities are aggressively favoured over the US over the next 12 months but over 5 years this flips back heavily in the US’s favour. So US exceptionalism is expect to return after a continued lull in 2025.

• Germany is expected to grow at 1.2% on average over the next 5 years with a peak 10yr Bund rate of 3.7% over this period.

• The US recession risk over the next 12 months is seen at 43% on average but the distribution of responses was very wide.

• A surprisingly huge majority think this US administration actively want a weaker dollar.

Stocks have opened higher in London, lifted by those hopes that Donald Trump will show flexibility when he announces new global tariffs next month.

The FTSE 100 share index is up 0.5%, or 42 points, at 8688 points, which recovers most of Friday’s losses.

Mining stocks are leading the rally, with Anglo American (+3.9%), Antofagasta (+3.3%), Glencore (+3%) and Rio Tinto (+2.5%), benefitting from hopes that ‘Liberation Day” might be less damaging to the world economy than feared.

A sector upgrade by JP Morgan is also helping the miners.

A war of words has broken out between Heathrow and National Grid over the fire which brought the London airport to a standstill on Friday.

The chief executive of National Grid sparked the row by claiming that Heathrow Airport had enough power from other substations despite Friday’s shutdown.

Following criticism that the power network lacked resilience to cope with the fire at one substation, at North Hyde, John Pettigrew has revealed that two other substations were “always available for the distribution network companies and Heathrow to take power”.

Pettigrew told the Financial Times:

“There was no lack of capacity from the substations. Each substation individually can provide enough power to Heathrow.”

But Heathrow, which had more than 1,000 flights cancelled on Friday, insists it’s not as simple as that.

A Heathrow spokesperson says:

“As the National Grid’s chief executive, John Pettigrew, noted, he has never seen a transformer failure like this in his 30 years in the industry. His view confirms that this was an unprecedented incident and that it would not have been possible for Heathrow to operate uninterrupted. Hundreds of critical systems across the airport were required to be safely powered down and then safely and systematically rebooted. Given Heathrow’s size and operational complexity, safely restarting operations after a disruption of this magnitude was a significant challenge.

In line with our airline partners, our objective was to reopen as soon as safely and practically possible after the fire. The emergency services and hundreds of airport colleagues worked tirelessly throughout Friday to ensure the safe reopening of the airport. Their success meant that over the weekend, we were able to focus on operating a full schedule of over 2500 flights and serving over 400,000 passengers.

Lessons can and will be learned, which is why we fully support the independent investigation announced by the Government yesterday.”

Keir Starmer has been warned against “appeasing” Donald Trump as he considers reducing a major tax for US tech companies while cutting disability benefits and public sector jobs.

His chancellor, Rachel Reeves, confirmed on Sunday that there were “ongoing” discussions about the UK’s £1bn-a-year digital services tax that affects companies including Meta and Amazon.

She expressed optimism that Trump’s 25% tariffs on British steel could be removed in any deal, but did not deny there could be changes to the digital services tax, which the US has lobbied against. “You’ve got to get the balance right,” she said.

While any changes would not take place in this week’s spring statement, the Liberal Democrats warned Labour was “in danger of losing its moral compass” and it would be “tantamount to robbing disabled people to appease [Elon] Musk and Trump”.

Financial markets have made an optimistic start on Monday with U.S. stock futures rising and the dollar firm, Reuters reports.

S&P 500 futures are up about 0.7% in the Asia session and Nasdaq 100 futures have risen by 1%.

European futures were up 0.3% earlier today, with the UK’s FTSE 100 index on track to rise 0.25%.

Samer Hasn, senior market analyst at XS.com, says:

US stock indexes are poised for a positive opening amid optimism about the possibility of de-escalating trade tensions between the United States and China and moving toward negotiations. This could reduce the risk of a broader trade war after the two economic powers’ mutual escalation, which has caused uncertainty in the markets.

Republican Representative Steve Daines, a pro-Trump Republican, visited China and met with Premier Li Qiang on Sunday. This visit marks the first visit by a US political figure to China since Trump took office earlier this year. It also represents an important step that paves the way for the next meeting between the Chinese and US presidents, according to Daines.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

A new week begins with some familiar worries, as global markets brace for the US to intensify its trade war next month.

US President Donald Trump has declared April 2 will be “Liberation Day” for the US, when he will unveil so-called “reciprocal tariffs” on other countries who he perceives to be giving the US a bad deal on trade.

This has the potential to significantly widen the scope of the tariffs which Trump has been imposing on allies and rivals alike since returning to the White House.

But, hopes are building that the scope of Liberation Day be narrower than has been feared.

Late last week, Trump hinted that he could take a flexible approach. Speaking the Oval Office, he said:

“I don’t change. But the word flexibility is an important word. Sometimes it’s flexibility. So there’ll be flexibility, but basically it’s reciprocal.”

That has created some ambiguity, which optimistic investors may cling to.

White House offficials have told Bloomberg that some nations or blocs will be spared these reciprocal tariffs, and that – currently – Trump is not planning to announce separate, sectoral-specific tariffs at the Liberation Day event.

This could also cheer markets today, where stocks have been hurt in recent weeks by the threat of trade conflict, and fears of a US recession.

Last week, Treasury Secretary Scott Bessent said Trump’s reciprocal tariffs will focus on particular nations deemed most responsible for unfair commercial practices. He dubbed them the “dirty 15”, because these 15% of countries account for “a huge amount of our trading volume.”

Those practices could include non-tariff barriers including domestic-content production rules, testing regulations, or value-added tax (VAT) on sales to consumers.

Kathleen Brooks, research director at XTB, say the latest news regarding reciprocal tariffs is “mildly positive for risk sentiment” today.

She explains:

US and European equity futures are pointing to a stronger open as traders react to news that reciprocal tariffs will not be implemented all at once. The tariffs for April 2^nd are now likely to be less sprawling and not a fully global event. They are also expected to exclude sector-specific tariffs on autos, pharma, and chip makers, which may spur some relief rallies later on Monday.

But is a delay to tariff announcements merely kicking the can down the road, rather than a softening in Trump’s approach to tariffs? There have been comments from officials this weekend, which suggests that tariffs will not be as bad as some expect, and they will only target countries that run large trade surpluses with the US.

We’ll also get the latest surveys of purchasing managers from across the US, the UK and the eurozone today, which may show the impact of tariff fears…

The agenda

• 9am GMT: Flash Eurozone PMI report for March

• 9.30am GMT: UK PMI report for March

• 12.30pm: United States Chicago Fed National Activity Index

• 1.45pm GMT: US PMI report for March