Stocks stage cautious recovery on hopes Trump will negotiate tariffs

Global stocks rallied after another tariff-induced slump in the previous session, as cautious investors sought evidence the US may be willing to negotiate.

Optimism is being driven by news US Treasury Secretary Scott Bessent will lead trade negotiations with Tokyo, helping Japan’s Nikkei index to outperform peers in early trading.

But market sentiment remains frail, with the so-called ‘fear index’ – the Vix – spiking over the 60 mark overnight for only the second time since the pandemic.

Chinese officials have responded to additional 50 per cent levies announced last night by warning the world’s second largest economy would ‘fight to the end’ if the US insists on waging a trade and tariff war.

The FTSE 100 closed up 208.45 points at 7910.53., while the FTSE 250 finished up 583.96 at 18349.15.

In the US, the S&P 500, Dow Jones and Nasdaq were all posting 2 per cent gains by the close of the session in Europe.

Europe’s Stoxx 600, which fell 4.5 per cent on Monday, was up 3 per cent.

Last night, the Nikkei led gains at 6 per cent, as Asian stocks rallied from one-year lows hit in the previous session.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: ‘Volatility remains the only certainty at this point.

‘Company earnings are just around the corner, which may provide a welcome distraction.

‘However, management teams are facing a tough patch, with difficult decisions ahead on how to navigate the tariff storm.

‘Expect a lot of cautiousness, and possibly even a lack of quarterly guidance in some cases, as uncertainty takes centre stage.’

Buying the dip?

Markets whipsawed on Monday after an erroneous report by CNBC that President Donald Trump was considering a 90-day pause on tariffs briefly saw risk assets rally aggressively.

Once denied, markets fell back sharply, demonstrating the highly volatile trading environment.

Darius McDermott, managing director at Chelsea Financial Services, said: ‘Buying the dip’ is a well-known tactic, but the risk now is that prices could still fall further.

‘The only thing that is for sure is that uncertainty has peaked, and markets hate uncertainty. Without a policy reversal, volatility could escalate – and with Trump claiming a mandate for these actions, that remains a real risk.’

He added that ‘true safe haven’ assets are ‘extremely difficult’ in a sell off, with Government bonds currently the only ‘real refuge’.

McDermott said: ‘For investors who believe now could be the time to buy the dip in UK equities, Artemis UK Select could be an attractive option.

‘The fund has outperformed the wider UK market across multiple time periods – and after the recent sell-off, entry points look compelling for the long term investor. However, there is still substantial uncertainty.’