Copper-led mining gains helps FTSE 100 to record high

• Copper-led mining gains helps FTSE 100 to record high.
• Brazil tariffs highlight longer-term price risks.
• FOMC minutes highlight risk of no further 2025 cuts.

European indices are pushing higher once again today, with the FTSE 100 leading the way in rising another 1% to hit fresh record highs. In a week that has been dominated by a raft of tariff announcements from Trump, European stocks have come back into favour as an alternative to US equities. Notably, despite June being dominated by the transition back into US equities, this week has seen a swift reversal back towards Euro stocks as news wires provide grounds for optimism for a potential trade deal between the EU and US.

Trump’s latest announcement of a 50% tariff on Brazil should come as a particularly concerning development, with the President’s justification of wanting to end the court case against ex-President Bolsonaro highlighting that he sees tariffs as a weapon to wield anytime he wants to get his way irrespective of trade relations. The concerning thing about this is that it indicates the potential for Trump to announce fresh tariffs throughout his entire term rather than simply a short-term period of volatility aimed at levelling up the playing field on trade. 

Notably it is the mining sector which has provided the main tailwind in early trade, with the likes of Rio Tinto (4%), and Anglo American (5%) enjoying a sharp surge thanks to Trump’s reiteration that he will enact a 50% copper tariff on 1 August. For the US this is a move aimed at removing their reliance on foreign producers for this key strategic material. However, with a record differential between the London and New York copper futures having built up this week, US consumers and businesses are facing up to higher prices in the coming years. After-all, it will take time for the lure of higher prices to feed through into new exploration and fresh mining operations. Whilst it may benefit the US economic stability over the long-term, there is a risk that we see input prices rise across electronics, construction, transportation, and industrial goods.

Looking ahead, US markets are expected to open in the red following yesterday’s FOMC minutes that saw a wide range of views over the direction of travel for rates. Whilst the dominant thought is that we should see rates cut later in the year, there are members that see it prudent to keep rates steady for the course of 2025. Ultimately with Trump seemingly ramping up tariffs on a daily basis, there is plenty of cause for concern over the potential for a resurgence in price pressures over the second half of the year. Should this lead to further hesitancy from the Fed, we could see rate sensitive stocks and gold take a hit.