Volkswagen Slumps as Trump Targets Mexico-Sourced Auto Imports

Volkswagen is under pressure after Trump’s new auto tariffs, with 43% of its US sales sourced from Mexico. European auto stocks dropped sharply, with the automobiles and parts index hitting a seven-week low, and the euro briefly touching a three-week low before rebounding. The European Commission plans to assess the impact of the tariffs while investors await potential reciprocal measures next week.

Equities

The FTSE 100 rose 0.3% on Wednesday, supported by a rally in energy shares after Chancellor Rachel Reeves trimmed the government’s spending plans. Investors took some comfort from the reduced fiscal pressure, although the budget watchdog revised down growth forecasts and warned of higher borrowing and inflation. The FTSE 250 index also added 0.3%.

Shell gained 2.4%, benefiting from a rise in oil prices and broader strength in the energy sector, which was the day’s top performer. North Sea oil and gas producer Ithaca Energy surged 9.6% after announcing restructuring plans and forecasting a rise in production in 2025. Ocado jumped 16.3% following an upgrade from J.P. Morgan, which raised the company’s rating to “overweight” from “neutral”.

Vistry dropped 7.3% after the housebuilder opted to skip its final dividend payment due to a fall in profits. Utilities stocks, including Severn Trent and United Utilities, were lifted by bond market sentiment, rising 1.3% as investors responded to the reduced gilt issuance planned by the Debt Management Office.

In the US, markets ended the day lower as concerns over incoming automotive tariffs weighed on sentiment. The S&P 500 fell 1.12% to 5,712.20, while the Nasdaq dropped 2.04% to 17,899.02. The Dow Jones Industrial Average declined 0.31% to 42,454.79. Technology stocks led losses, with the information technology sector down 2.46%.

Nvidia slid nearly 6%, while Broadcom fell 5%, dragging the semiconductor index lower by 3.3%. Tesla dropped 5.6% as uncertainty mounted around the potential cost impact of new tariffs. General Motors also lost 3.1%. Investors are awaiting more details after President Trump hinted that reciprocal tariffs would be formally announced next week, with expectations of increased vehicle prices and pressure on supply chains.

Barclays lowered its S&P 500 year-end forecast to 5,900 from 6,600, citing uncertainty around tariffs and broader economic challenges. GameStop rallied nearly 12% after its board approved holding bitcoin as a treasury reserve asset. Dollar Tree rose 3.1% as it advanced discussions to sell its Family Dollar business for around $1 billion.

Forex & Commodities

The euro rose 0.3% to $1.0786 on Thursday, having earlier touched a three-week low of $1.0733 following US President Trump’s announcement of a 25% tariff on imported cars and light trucks. The move kept trade war concerns high, although reaction in currency markets remained relatively limited. The dollar index, which tracks the greenback against six peers, fell 0.33% to 104.29 after hitting a three-week high in the previous session. The yen was slightly stronger at 150.17 per dollar, while the Mexican peso weakened 0.5% to 20.21 per dollar. The Canadian dollar was steady at 1.4261.

Sterling gained 0.26% to $1.2919, recovering from a 0.45% drop the previous day, as traders digested the spring budget update from Chancellor Rachel Reeves. Her decision to trim government spending plans reassured bond investors. Meanwhile, data showed that UK inflation slowed to 2.8% in February from 3.0% in January, undercutting forecasts of 2.9%.

Gold edged up 0.3% to $3,028.65 per ounce, supported by concerns about Trump’s reciprocal tariffs expected next week. US gold futures were up 0.5% to $3,036.10. Goldman Sachs raised its year-end forecast for gold to $3,300, citing stronger ETF inflows and central bank demand. Spot silver rose 0.1% to $33.73, while platinum and palladium fell 0.4% and 0.5%, respectively.

Oil prices slipped as traders assessed the impact of US tariffs. Brent crude fell 22 cents to $73.57 a barrel, and WTI was down 23 cents to $69.42. Analysts said the US threat of tariffs on buyers of Venezuelan oil, along with recent declines in US crude inventories, continued to support prices.