"Some will hope that President Trump is only raising the threat of tariffs to secure concessions from other countries. But his recent words, as well as his actions during his first term, suggest that he strongly believes in tariffs as a policy tool.
"The UK economy is less vulnerable to US tariffs than many others, especially China, Mexico, and Germany. But there could still be further spillovers to the UK from a longer period of high interest rates in the US, as the Fed responds to the additional pressures on inflation."
UK stocks have climbed as trading got underway on Wall Street for the first time since the inauguration of Donald Trump.
The FTSE 100 was 0.3pc higher and the FTSE 250 was up 0.4pc following figures showing a slowdown in Britain's jobs market, raising the case for interest rate cuts.
Traders appear largely unfazed by Mr Trump's raft of executive orders on immigration, energy policy and other issues.
The Dow Jones was up 0.6pc and the S&P 500 had gained 0.4pc, although the tech-heavy Nasdaq Composite was down 0.2pc.
The returning president also threatened 25pc tariffs on Canada and Mexico as early as February 1.
The price of Brent crude oil was down 1.2pc towards $79 a barrel as the threat of tariffs strengthened the dollar.
Jan Von Gerich of Nordea said: "We shouldn't get too carried away by this, the fact that he didn't start with tariffs doesn't mean that they won't come later.
"For the global equity market, I think it's all about Trump now."
Sir Sadiq Khan is poised to lead a Labour rebellion against Rachel Reeves over her backing for a third runway at Heathrow Airport.
Sir Sadiq is expected to make clear his opposition to Heathrow expansion as early as Wednesday, when he answers questions before the London Assembly.
It follows reports that the Chancellor will back the long-delayed runway as part of a scramble to revive the struggling economy, as well as supporting plans to double capacity at Gatwick and Luton.
Read how the Chancellor's plan to back third runway risks splitting the Cabinet over net zero opposition.
Wall Street's main indexes opened higher after Donald Trump signed swathes of executive orders on issues including energy and immigration.
The Dow Jones Industrial Average rose 40.8 points, or 0.1pc, at the open to 43,528.65.
The S&P 500 rose 17.5 points, or 0.3pc, at the open to 6,014.12​, while the Nasdaq Composite rose 104.2 points, or 0.5pc, to 19,734.39.
Oil and gas stocks in London have slumped after Donald Trump set out plans to ramp up fossil fuel production in the US.
Energy companies were down as much as 0.8pc across the FTSE 100 and FTSE 250 as they were dragged down by Shell and BP.
The President has laid out a sweeping plan to maximise US oil and gas production - including by declaring a national energy emergency, stripping away excess regulation and withdrawing the US from an international pact to fight climate change.
Mr Trump also promised to fill up strategic oil reserves and export US energy all over the world, following his pre-election pledge to "drill, baby, drill".
Meanwhile, US stock markets were on track to open higher after the President declined to announce trade tariffs on his first day in office.
Brokerage Goldman Sachs lowered its forecast for a universal tariff this year to 25pc from about 40pc seen in December.
In premarket trading, the Dow Jones Industrial Average and S&P 500 were up 0.4pc and the Nasdaq 100 had gained 0.5pc.
Rachel Reeves has said she expects to reveal multi-year spending plans for government departments in June.
The Chancellor told Treasury questions that the spending review will conclude on June 11 and she will then present departmental budgets to the House of Commons.
Ms Reeves has previously said the review will require government departments to find efficiency savings amounting to 5pc of spending, with the Treasury acknowledging this will mean "difficult" decisions.
Speaking in the Commons, Ms Reeves told MPs: "In December, I launched the second phase of our spending review where, for the first time in 17 years, every single pound of taxpayers' money will be investigated line-by-line to ensure it is being spent well.
"The spending review will set resource or day-to-day departmental budgets until 2028/29 and capital departmental budgets until 2029/30.
"On June 11, when we conclude the review, I will present departmental budgets to the House."
Rachel Reeves has sidestepped calls to say whether she supports the proposed third runway at Heathrow Airport.
The Government has made economic growth one of its key ambitions and the Chancellor is preparing a sweeping endorsement of airport expansion.
Liberal Democrat MP Sarah Olney (Richmond Park), speaking at Treasury questions, said: "Residents in my constituency of Richmond Park will have been extremely concerned to read the news this morning that the Chancellor plans to announce next week the expansion of Heathrow.
"I'd like to invite her to tell us, yes or no, on the floor of the House, whether or not the Government backs expansion at Heathrow."
Ms Reeves replied in the Commons: "I'm not going to comment on leaks.
"What I would say is this Government is absolutely committed to growing our economy and making this a great place for businesses to invest and trade in."
The UK's main stock indexes were mixed after data showing signs of weakness in Britain's economy and the return of Donald Trump as US president.
The blue-chip FTSE 100 was flat, trading just below its intraday record high of 8,542.59 points set on Monday. The FTSE 250 was up 0.3pc.
Global stocks were sluggish a day after Mr Trump's inauguration, as investors digested the president's plans for trade relations and tariffs.
Sterling dropped 0.7pc against the dollar after data showed payroll numbers declined at their fastest pace since the pandemic in December.
Traders are pricing in an 92pc chance of an interest rate cut from the Bank of England next month, with a second reduction by August and a 53pc chance of a third cut by the end of the year.
Lloyds Banking Group rose as much as 5.2pc to lead gains on the FTSE 100 after reports that Rachel Reeves has launched a bid to shield car-loan providers from multibillion-pound payouts under a landmark legal case.
Banks across the FTSE 350 were up as much as 1.3pc.
The Budget, the election and the conflict in the Middle East were a "tipping point for many businesses", a law firm has said as official figures showed a surge in court-ordered insolvencies last year.
Addleshaw Goddard partner Tim Cooper said: "2024's insolvencies have been driven by another year of high costs and a series of political, economic and geopolitical events which have taken a toll on businesses in England and Wales.
"Members have told us that the election, the Budget and the conflict in the Middle East have all led to increases in enquiries and requests for advice and support, and this reflects how these unexpected shocks can be and have been the tipping point for many businesses after years of battling harsh trading conditions."
Overall, company collapses in England and Wales fell last year, with some 23,872 companies going out of business in 2024, down 5pc on the previous year.
Despite the drop year-on-year, the number of insolvencies was far higher than most of the last decade, and remains at levels last seen during the 2008 financial crisis.
Meanwhile, compulsory liquidation ordered by the courts rose 14pc to 3,230 the highest total on record since 2014, according to figures from HMRC.
Administrations, an accounting process used when especially large companies hit the wall, rose 2pc.
David Hudson of business consultancy FRP said it was "notable" that administrations had risen, adding: "These typically involve the largest firms and have the biggest impact in terms of jobs and supply chains."
The pound has dropped further against a rebounding dollar as Donald Trump continued to talk tough on tariffs.
The US President did not immediately impose tariffs on imports on his first day back in the White House but told reporters he was considering import tariffs of around 25pc on Canada and Mexico by February 1, challenging suggestions his trade policy may be more gradual.
The dollar fell sharply on Monday after Trump's first day included no specific news on tariffs, lifting sterling and other currencies.
The pound was last down 0.7pc against the dollar on Tuesday at $1.224, having jumped 1.3pc on Monday, its biggest daily jump since November 2023.
The pound was down 0.1pc against the euro, which is worth 84.6p.
Francesco Pesole of ING said: "Expect a lot of headline-related noise this week, with action in the crosses based on tariff threat perception."
Investors in Britain's bond market want the Government to sell less long-term debt following the recent surge in Treasury borrowing costs.
Traders said there was "strong support" for a reduction in the number of gilts being to be sold in the next financial year compared to current levels.
Minutes from annual consultation meetings held on Monday showed most investors were pushing for shorter-term bonds, which would carry less risk if bond yields keep rising.
Traders said there was waning demand for long bonds from pension funds.
It comes as Rachel Reeves battles to keep investors on side following a surge in borrowing costs, which have raised doubts about her ability to meet her fiscal rules without cutting public spending or raising taxes.
The 10-year gilt yield was little changed today at 4.67pc but the benchmark for Treasury borrowing costs has surged 53 basis points higher over the last three months after the Chancellor plans in the Budget to increase spending by £70bn a year over this parliament.
Compulsory liquidations of UK companies hit a decade-high last year following a late surge in the wake of Rachel Reeves's record tax raid in the Budget, official figures show.
The courts ordered 3,230 companies to stop trading in 2024 because they could not pay their debts, up by 14pc year-on-year and the highest total on record since 2014, according to figures from HMRC.
This followed a surge in December, when the number of monthly compulsory liquidations hit 273, up 53pc year-on-year.
British businesses have been hammered by high interest rates and the cost of living crisis, with the total number of company insolvencies in 2023 surpassing 25,000, the highest total since 1993.
Overall company insolvencies fell by 5pc in 2024 to 23,872 as inflation cooled and the Bank of England started to cut interest rates.
But the jump in compulsory liquidations shows warning signs are flashing red again, as companies grapple with the fallout from Chancellor Rachel Reeves's record tax-raising Budget in October.
This included a £25bn increase in employer National Insurance contributions, which business groups have warned will hammer profits and hiring.
Shadow business secretary Andrew Griffith said the lates jobs figures "show a worrying trend".
Payrolls jobs slumped at the fastest pace since the pandemic in December, two months after Rachel Reeves announced her £25bn National Insurance raid on employers.
Mr Griffith said: "Trash talking business confidence, more red tape on job creators and the Budget's 'jobs tax' mean that as sure as the sun rises in the east, employment is now falling.
"I feel for young people desperate for work who find the door slammed in their faces due to Labour's plans."
After payrolls slumped at the fastest pace since November 2020, Work and Pensions Secretary Liz Kendall said:
Today's figures are more evidence that we must Get Britain Working, which is why this Government is relentlessly focused on driving up opportunity and driving down barriers to success in every part of the country.
The British Chambers of Commerce (BCC) cautioned there were already "warning lights" on the jobs market as the latest figures showed unemployment rising, vacancies falling and the biggest drop in payrolled workers since the height of the pandemic.
Deputy director of public policy Jane Gratton said:
The labour market continues to be challenging for many businesses, with wage growth continuing to rise as firms compete for skilled workers. This is a concern as they face a significant rise in employment costs in April.
Among the enemies targeted by US President Donald Trump in his inaugural speech was a foe familiar to anyone who has ever been shopping.
"I will direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices," the president said.
The White House issued a statement that "all agencies will take emergency measures to reduce the cost of living".
It was perhaps a response to mounting warnings that the bulk of the president's flagship policies of tariffs and tax cuts are widely expected to push up inflation and pose a hammer blow to hopes of interest rate cuts.
Read how the new president's flagship promises are about to start having real-world consequences for the global economy.
The value of the pound dropped after official figures showed the number of people on payrolls slumped at its fastest pace since the pandemic.
Sterling was down 0.5pc against the dollar to $1.226 as traders increased bets on interest rate cuts as data showed a weakening in Britain's jobs market.
The pound was little changed against the euro, which is worth 84.5p, as money markets implied there will be two rate cuts this year, with a 51pc chance of a third reduction.
Anna Leach, chief economist at the Institute of Directors, said: "Our data shows that, despite some recovery in December, employer hiring intentions remain around lows reached in 2020.
"The significant increases in employer NI, the forthcoming increase in the minimum wage and concerns over the cost of employment rights continue to sap demand for workers.
"With the economy likely to have flatlined over the second half of 2024, the labour market is softening sharply."
Rachel Reeves's Budget and the return of Donald Trump to the White House have hit growth and will make the Bank of England "more cautious" about interest rate cuts, economists have said.
Unemployment rose to its highest level since May just as wages grew at their fastest pace in six months in the three months to November.
Rob Wood of Pantheon Macroeconomics said he expects interest rates to be cut next month but the the Monetary Policy Committee (MPC) would "shift their guidance in a more cautious direction, suggesting three rate cuts in total this year".
He said: "Most of the labour market data are too unreliable for the MPC to take seriously. They will instead be looking at broad trends.
"On that score, unemployment is likely rising gradually and the labour market loosening. That suggests interest rates are in restrictive territory, which gives the MPC room to cut Bank Rate further.
"We expect them to cut rates 25bp in February. But that loosening labour market is still generating very strong wage growth, suggesting that structural changes in the labour market have raised the inflation-neutral unemployment rate.
"The MPC recently concluded the labour market was now in balance -- neither tight nor loose -- but strong wage growth challenges that.
"Pay is rising far too fast to return sustainably to the target soon. Pay growth and rising inflation suggest the MPC will have to be cautious, looking to only three rate cuts this year, rather than the four they implicitly suggested last November."
The surge in wages as companies reduce their number of staff "muddies the picture" for the Bank of England over whether it can cut interest rates, according to the Resolution Foundation.
The let-leaning think tank's principal economist Nye Cominetti said: "Britain's jobs market has been in decline throughout the second half of last year, mirroring the UK's wider economic performance, with the number of employees have fallen consistently since May.
"But these sobering economic trends have yet to materialise in workers' pay packets. After decades of stagnation, 2024 was strong - real wages had already risen by a healthy 2.2 per cent by November last year - making it stronger the best year for wages since 2005.
"This unexpectedly strong pay growth could just turn out to be a blip, or reflect an unmeasured productivity gain. The more likely explanation though is that private sector workers are trying harder to catch up with the public sector, and rebuild their pay packets after the high inflation of the past three years.
"This is great news for workers, if they can get a job. But it's less welcome for the Bank of England as it muddies the picture over whether or when to reduce interest rates."
The FTSE 100 edged higher despite figures indicating companies were cutting jobs in the wake of Rachel Reeves's Budget tax raid.
The UK's blue-chip index was up 0.2pc to 8,533.66 while the midcap FTSE 250 gained 0.3pc to 20,539.32.
The rise in wages leaves the "spectre of stagflation" lingering over the economy as companies prepare to put up prices in response to rising labour costs, according to economists.
Average earnings rose from 5.2pc to 5.6pc in the three months to November, with the trend expected to continue as companies pass on the costs of the Chancellor's £25bn hike in employer National Insurance and the minimum wage, coming into force in April.
Jack Kennedy, economist at jobs site Indeed, said: "Sticky wage growth remains a key concern for the Bank of England.
"Though lower-than-expected inflation in December raised hopes of a near-term interest rate cut, the Bank is unlikely to deviate from its gradualist approach while wage growth remains high, despite indications the economy stalled in late-2024.
"The spectre of stagflation lingers, with businesses still to absorb April's increase in labour costs as a result of the Budget, which is likely to drive some combination of price increases and cost reduction measures.
"Even if warnings of layoffs don't come to pass, hiring faces stiff headwinds and, anecdotally, some firms are looking to reduce permanent headcount through attrition."
Luke Bartholomew, deputy chief economist at Abrdn, added:"The big test for the labour market remains how firms will respond to the increase in National Insurance and the National Living Wage this spring.
"So far, surveys seems to suggest both weaker hiring intentions and the possibility of another round of price and wage increases."
The Bank of England will cut interest rates next month as Budget fears outweigh a rise in wage growth, according to economists.
Money markets indicate there is still a 90pc chance that the Monetary Policy Committee (MPC) will lower the Bank Rate from 4.75pc to 4.5pc in February.
Thomas Pugh, an economist of RSM UK, said: "The MPC is still on track to cut interest rates in February, despite the jump in wage growth, excluding bonuses, to 5.6pc in November.
"However, pay growth is still far higher than is consistent with 2pc inflation, which will keep the committee cautious.
"Meanwhile, the tick up in the unemployment rate to 4.4pc suggests firms were very cautious of hiring in the wake of the Budget.
"There is growing evidence that firms have effectively pressed pause on hiring post-Budget.
"Employment rose by just 36,000 in the three months to November, growing by just 13,000 on the month, and the unemployment rate ticked up from 4.3pc to 4.4pc."
He added that while a rate cut in February is a "sure bet" strong wage growth "will keep the MPC cautious through this year".
Wage growth rose at a faster pace than expected, official figures show, outstripping inflation by 3.4pc.
Average regular pay surged to 5.6pc in the three months to November, up from 5.2pc and ahead of analyst projections of 5.5pc.
ONS director of economic statistics Liz McKeown said: "Pay growth picked up for a second consecutive period, again driven by strong increases in the private sector.
"Real pay growth, which excludes the effects of inflation, increased slightly.
"The number of employees on payroll, drawn from tax data, fell in the three months to November."
She added: "Alongside this, the number of vacancies fell again, for the 30th consecutive period, although the total number remains slightly above its pre-pandemic level."
The number of people in jobs slumped in December amid fears over Rachel Reeves's record tax-raising Budget, according to official tax data.
Payrolled employment dropped by 47,000 last month to 30.3m, the steepest fall since the pandemic.
The decline - which tracks the number of workers in the Pay As You Earn income tax system - follows a drop of more than 32,000 in November.
It raises fears that the Chancellor's £25bn National Insurance raid on employers in October has undermined businesses' willingness to take on more workers.
There were 740,000 job vacancies available in December, according to the Office for National Statistics, down from 858,000 in October, on the eve of the Budget.
The unemployment rate edged up to 4.4pc in the three months to November, while pay growth on the year accelerated to 5.6pc, led by a 6pc rise in the private sector.
However economists said this is likely to be a short-term phenomenon, predicting that weak demand for workers will prompt the Bank of England to cut interest rates from 4.75pc to 4.5pc next month.
"Wage growth is expected to return closer to levels consistent with the inflation target this year, despite the recent increase," said Yael Selfin, chief economist at KPMG UK.
"The rise in business costs due to the Budget measures should have a cooling effect on labour market activity and make higher wage settlements less likely. As a result, it is anticipated the Bank of England will opt for an interest rate cut next month, and two further rate cuts in 2025."
Thanks for joining us. The number of people on payrolls in Britain slumped at its fastest pace since the pandemic in the wake of Rachel Reeves's £40bn tax raid in the Budget, official figures show.
The Office for National Statistics said there were 47,000 fewer payrolled employees in December, which was the steepest drop in more than four years.
Asian shares were mixed in a muted reaction to the inauguration of Donald Trump as the 47th President of the United States of America.
US markets were closed Monday for the Martin Luther King Jr. Day holiday. U.S. futures rose and oil prices declined.
Some analysts said the inauguration would inject optimism into global markets, while others said the threat of higher tariffs might hurt sentiment.
Trump's release of an "America First Trade Policy" memo after he took office Monday indicated no immediate action on raising tariffs, possibly alleviating immediate concerns about threats of double-digit tariffs on all imports. However the plan calls for a broad reassessment and overhaul of US trade policy.
Worries about the effects of Trump's policies on China have eased somewhat as both sides have pledged to work to improve relations.
Stephen Innes, managing partner at SPI Asset Management said: "In a twist that calmed nerves across global markets ... President Trump revealed he would not, contrary to expectations, roll out new tariffs immediately."
Tokyo's Nikkei 225 index gained 0.2pc to 38,999.12.
Hong Kong's Hang Seng index jumped 0.9pc to 20,102.22, in part lifted by embattled Chinese property developer Country Garden, whose shares jumped 23.7pc after it got a reprieve on its deadline for working out an agreement with its creditors.
The Shanghai Composite index edged 0.1pc lower to 3,241.57.
Australia's S&P/ASX 200 gained 0.7pc to 8,402.40. South Korea's Kospi rose less than 0.1pc to 2,521.21.