Rachel Reeves is facing a crisis the morning after unveiling her Spending Review, as new figures have suggested that the UK economy shrank by more than 0.3% in April. It comes after the Chancellor increased national insurance contributions for employers, and trade tensions following the US President Donald Trump’s rollout of global tariffs. Industrial production fell 0.6%, an improvement from the prior month, but down 0.3% compared to a 0.7% fall in March. The index of services was down 0.4% month on month, which was worse than expected after a 0.4% gain in March.
Yesterday, stock prices in London ended higher after the US and China negotiators announced a “framework” agreement, while the US consumer inflation print was also softer than expected. The FTSE 100 index closed up 11.27 points, 0.1%, at 8,864.35. The FTSE 250 ended up 39.08 points, 0.2%, at 21,428.54, and the AIM All-Share closed up 2.51 points, 0.3%, at 768.83.
The FTSE is at +1.13 (0.013%) at the time of writing, according to Google’s tracker.
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‘Downbeat mood’ as US tariffs leave more countries ‘bracing for punishment’
Renewed tariff threats from the US unsettled investors this morning, leading markets to “react badly”.
Hargreaves Lansdown’s Matt Britzman explained: “There’s more of a downbeat mood in play as tariffs are once again the talk of the town and countries brace for punishment if they don’t play ball with the US.
“The Trump/Bessent good cop–bad cop routine is in full swing. Trump is saying nations can ‘take it or leave it’ when it comes to tariff deals on offer. But Treasury Secretary Scott Bessent is offering a carrot in the form of potential extensions to the 90-day pause on reciprocal tariffs for those willing to negotiate. Markets have reacted badly nonetheless, and there’s a sea of red across Europe this morning, but the FTSE 100 is escaping the worst for now.”
Pound weakens against dollar and euro
The pound traded at $1.3536 at 9am, down from $1.3556 at the previous close, while it also weakened against the euro, with the euro rising to £0.8511 from £0.8476.
FTSE 100 edges higher
By 8:45am, the FTSE 100 had risen 2.86 points to 8,867.21, showing modest gains in early trading.
FTSE 100 edges higher (Image: Getty)
UK 10-year gilt yield falls to five-week low
The UK 10-year gilt yield fell to 4.538% – its lowest level in five weeks – after data showed the UK economy shrank more than expected in April.
Gilt yields represent the return investors demand to hold UK Government bonds, and are closely watched as a benchmark for borrowing costs and investor confidence in the economy.
Despite the weak data, experts at Trading Economics said the Bank of England is still expected to keep interest rates steady at next week’s meeting.
Oil prices hit two-month high
Shares in Shell and BP rose this morning as oil prices climbed. Brent crude topped $70 overnight before easing back to around $69 – levels not seen since early April.
The rally in crude comes amid heightened tensions between the US and Iran, fuelling fears of potential supply disruptions in the Middle East, according to analyst Matt Britzman at Hargreaves Lansdown.
FTSE dips
The FTSE has just dropped by −1.43 (0.016%).
Seconds later it went up again to +0.080 (0.00090%).
Then it it gained ground further to +0.25 (0.0028%).
GDP figures
The Office for National Statistics (ONS) published new GDP figures today for April.
The headline figure is that monthly real gross domestic product (GDP) is estimated to have fallen by 0.3% in April 2025, following growth of 0.2% in March 2025.
Real GDP is estimated to have grown by 0.7% in the three months to April 2025, compared with the three months to January 2025, largely driven by growth in the services sector in this period.
Monthly services output fell by 0.4% in April 2025, following growth of 0.4% in March 2025, and was the largest contributor to the fall in GDP in the month; but grew by 0.6% in the three months to April 2025.
Production output fell by 0.6% in April 2025, following a fall of 0.7% in March 2025, but grew by 1.1% in the three months to April 2025.
Construction output grew by 0.9% in April 2025, following growth of 0.5% in March 2025, and grew by 0.5% in the three months to April 2025.
FTSE latest
The FTSE 100 is at +2.90 (0.033%), according to Google’s tracker.
Its previous close was 8,864.35.
It opened at 8,864.35.
Welcome to our blog
Welcome to our live blog as the markets react to Rachel Reeves’ Spending Review and this morning’s figures regarding the UK economy.
We will bring you the latest thoughout the morning.
