London pre-open: Stocks seen lower as investors mull Trump tariff plans

London stocks were set to fall at the open on Tuesday following a mostly downbeat session in Asia, after Donald Trump announced plans to impose tariffs against Canada, Mexico and China.
The FTSE 100 was called to open around 37 points lower.

Trump said that from 20 January, he will impose a 25% tariff on all goods coming from Mexico and Canada as he looks to clamp down on illegal immigration and drugs, and an additional 10% tariff on China.

Stephen Innes, managing partner at SPI Asset Management, said: "This bold declaration shatters any lingering hopes that the new Treasury Secretary, Scott Bessent, might usher in an era of moderation."

On home shores, investors will be mulling the latest BRC-NielsenIQ Shop Price Index, which showed that shop prices in the UK continued to decline in November, but the rate of deflation slowed, signalling a potential shift in inflationary trends.

Prices fell 0.6% year-on-year during the first week of November, a slight increase from October's 0.8% deflation and marginally above the three-month average of -0.7%.

Annual shop price growth remained at its lowest since September 2021.

"November was the first time in 17 months that shop price inflation has been higher than the previous month, albeit remaining overall in negative territory," said British Retail Consortium chief executive Helen Dickinson.

"Food prices increased for fresh products such as seafood, which is more vulnerable to high import and processing costs, especially during winter.

"Tea prices also remained high as poor harvests in key producing regions continued to impact supply."

Dickinson said that while coffee prices experienced a momentary dip, price rises were imminent as global coffee prices approached record highs.

"In non-food, while many retailers unwound some of their discounting, there are still many bargains across fashion and furniture," she said.

"Customers looking to upgrade their electricals were able to pick up some great deals in early Black Friday sales."

Non-food prices remained in deflation territory, recording a 1.8% year-on-year drop in November, compared to a 2.1% fall in October.

The figure, which aligned with price trends last seen in mid-2021, was slightly better than the three-month average of -2.0%.

"With significant price pressures on the horizon, November's figures may signal the end of falling inflation," Dickinson added. "The industry faces £7bn of additional costs in 2025 because of changes to Employers' National Insurance Contributions, business rates, an increase to the minimum wage and a new packaging levy."

Dickinson said retail already operated on "slim margins", adding that the new costs would "inevitably" lead to higher prices.

"If the government wants to prevent this, it must reconsider the existing timelines for the new packaging levy, while ensuring any changes to business rates offer a meaningful reduction for all retailers as early as possible."

Food inflation also showed signs of easing, slipping to 1.8% in November from 1.9% the previous month.

That marked the lowest annual rate since November 2021 and was below the three-month average of 2.0%.

Within the category, fresh food inflation edged higher to 1.2% from October's 1.0%, consistent with the three-month average.

By contrast, ambient food inflation fell sharply to 2.7% in November from 3.1% in October, marking its lowest level since February 2022 and dipping below the three-month average of 3.0%.

Mike Watkins, head of retailer and business insight at NielsenIQ, said shoppers were still being cautious by "shopping savvy" for essentials and holding back discretionary spend, meaning the lower level of inflation should help sentiment ahead of Black Friday promotions.

"And with lower inflation than this time last year, many food retailers are extending offers and discounts to help sales momentum in December."

In corporate news, electrical retailer AO World lifted full-year forecasts after a surge in interim earnings.

The company said it now expected adjusted profit before tax of £39m to £44m, compared with the previous range of £36m to £41m. Interim profits for the six months to 30 September rose 30% to £17m despite a tough summer hit by lower pricing and weak demand for cooling products.

Compass Group reported a 10.6% improvement in full-year revenue to $42.2bn, with underlying operating profit rising 16.4% to $2.998bn, supported by a 30-basis-point improvement in its operating margin to 7.1%.

The company said it invested $2.6bn in growth initiatives through the 12 months ended 30 September, while returning $1.5bn to shareholders through dividends and buybacks, and maintaining a strong balance sheet with net debt at 1.3x EBITDA.

Looking ahead, Compass said it expected high single-digit profit growth in 2025, driven by organic revenue growth above 7.5% and further margin progression.