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Late market roundup: UK-India trade deal helps offset Wall Street woes

London stocks closed mostly higher on Tuesday, although the FTSE 100 was only marginally in the green, after the UK reached a ‘landmark’ trade agreement with India.

The FTSE 100 index ended up just 1.07 points at 8,597.42. The FTSE 250 rose 111.98 points, 0.6%, at 20,352.49, and the AIM All-Share climbed 2.59 points, 0.4%, at 710.34.

The blue-chip index has risen for 16 trading days in a row, a record, since closing at 7,679.48 on April 9.

The Cboe UK 100 ended down 0.1% at 856.73 on Tuesday, the Cboe UK 250 rose 0.4% at 17,841.28, and the Cboe Small Companies gained 1.3% at 15,596.25.

The UK on Tuesday agreed a free trade agreement with India, its biggest such deal since leaving the EU, after negotiations relaunched in February following US tariff threats.

‘Today we have agreed a landmark deal with India - one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business,’ UK Prime Minister Keir Starmer said in a statement.

His Labour government added it is ‘the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU’.

India’s Prime Minister Narendra Modi described the deal as ‘ambitious and mutually’ beneficial.

Diageo climbed 1.8%, with the UK saying that Indian tariffs on whisky and gin will be cut over the next decade.

Diageo has a significant exposure to the Indian market via its majority shareholding in United Spirits, a drinks company listed in Mumbai.

In European equities on Tuesday, the CAC 40 in Paris and the DAX 40 in Frankfurt both closed 0.4% lower.

German lawmakers voted for conservative leader Friedrich Merz to become chancellor Tuesday in a second-round vote after he suffered a shock defeat in the initial ballot.

In the second round he won 325 votes in the 630-member assembly, with 289 voting against, attaining an absolute majority.

Marion Muehlberger, economist and political analyst at Deutsche Bank Research, said: ‘With the election of Friedrich Merz as German Chancellor, the Bundestag has set a decisive course today.

‘As long as the new government now quickly implements its 100-day programme with the urgently needed relief for the German economy, the fact that it took two attempts to elect the chancellor will quickly fade into the background.’

The pound was quoted higher at $1.3368 late on Tuesday afternoon in London, compared to $1.3296 at the equities close on Friday. The euro stood higher at $1.1348, against $1.1341. Against the yen, the dollar was trading lower at JP¥142.86 compared to JP¥144.36.

In New York, the Dow Jones Industrial Average was down 0.4%, the S&P 500 lost 0.3% and the Nasdaq Composite was 0.5% lower.

Michael Brown at Pepperstone said: ‘I remain of the view that the ’sell America’ trade has more room to run, with US assets set to underperform [rest of the world] peers, amid the erosion in institutional credibility, and erratic nature of policymaking from the Trump administration, which will both provide ample encouragement for institutional investors, and reserve asset allocators, to continue to trim their US exposures, while also not being in any rush whatsoever to come back.’

On Tuesday, the two-day Federal Open Markets Committee meeting kicks off with a decision on interest rates to be announced at 1900 BST on Wednesday.

Along with most commentators, Barclays expects the FOMC to keep policy rates unchanged ‘amid elevated uncertainty, tariffs, rising inflation expectations and a deterioration in household and business sentiment, and [Fed Chair] Powell to signal the FOMC is in no rush to cut rates.’

On Thursday, the Bank of England will deliver its interest rate call with a 25 basis points rate cut expected.

Bank of America predicts a 8-1 vote split, with Swati Dhingra expected to press the case for a larger 50bp cut.

‘Encouraging progress in domestic inflation, lower energy prices and emerging downside growth and inflation risks from tariffs support a 25bps cut in May and faster cuts later in the year (we now expect four cuts this year).

‘But lower financial stability risks, better growth starting point, caution ahead of national insurance contribution rise and uncertainty on inflation impact of tariffs imply that a larger 50bps cut is unlikely, in our view,’ BofA commented.

In London, BP was up 1.3% after reports suggested that Shell was considering a bid for the oil major.

On Saturday, Bloomberg reported that Shell was evaluating a potential acquisition of BP, though it’s waiting for further stock and oil price declines before deciding whether to pursue a bid.

Bloomberg sources said any final decision will likely depend on whether BP stock continues to slide.

Shares of BP have fallen 30% in the last 12 months.

Shell was down 1.8% on Tuesday.

UBS explained that a BP/Shell combination would create a global energy major with an upstream production of close to five million barrels of oil per day, liquified natural gas sales volumes of more than 90 million tonnes, and a much larger retail presence, especially in the US?market.

‘In short, Europe would have an energy major able to compete on scale with the US?majors,’ UBS said.

But RBC calculated that a deal, assuming a 20% take-out premium coupled with some ‘healthy’ forecast synergies, would be dilutive to earnings per share over 2025 to 2027.

‘In short, we struggle with the maths here,’ RBC said, adding that it sees BP’s ‘all-in debt profile’ as something of a ‘poisoned chalice for an acquirer’.

Brent oil was quoted higher at $62.58 a barrel late in London on Tuesday, from $61.07 late Friday. Gold was higher at $3,396.32 an ounce against $3,249.91.

The latest jump in the gold price supported the FTSE 100’s Endeavour Mining and Fresnillo, up 5.2% and 4.6% respectively.

Marks & Spencer topped the blue-chip decliners, down 4.7%, amid the ongoing fall-out from the cyber attack which has halted its online business.

A M&S ’insider’ told Sky News it could be ‘months’ before the retailer fully recovers from the attack and that the company had no plan for such an incident.

Deliveroo rose 2.1% after it agreed a £2.9 billion takeover by Doordash.

The cash offer from San Francisco-based DoorDash is worth 180 pence per Deliveroo share.

Deliveroo Chief Executive and Co-Founder Will Shu said: ‘DoorDash and Deliveroo are like-minded organisations with a shared strategic vision and aligned values.’

‘The enlarged group will have the scale to invest in product, technology and the overall consumer value proposition,’ he added.

AB Foods fell 1.1% after it said it is in talks with the owner of Hovis as it mulls options for its Allied Bakeries division.

Last week, the London-based food processing and clothing retailing business said it was ‘evaluating’ strategic options for Allied Bakeries as it continues to face a ‘very challenging market.’

On Tuesday, AB Foods confirmed press reports that it is in discussions with Endless LLP regarding a potential transaction.

‘We are evaluating strategic options for Allied Bakeries,’ the firm said in a statement.

Endless LLP, the Leeds-based private equity company, owns bakery brand Hovis.

Allied Bakeries owns the bread brands Kingsmill, Allinson’s, and Sunblest. It also produces own-label bakery ranges for major UK supermarkets.

Wednesday’s economic calendar has the US interest rate decision and eurozone retail sales data.

Wednesday’s local corporate calendar has first-quarter results from bookmaker Flutter Entertainment.

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