FTSE 100 today: Pound slumps to $1.31, index dips over Trump's tariff move

European equities, including the FTSE 100, declined following President Trump's imposition of fresh tariffs, notably a 39% levy on Swiss goods which sent Watches Of Switzerland Group PLC shares down sharply. While the broader market reaction was relatively contained, several FTSE 100 constituents reported mixed Q2/H1 results: International Consolidated Airlines Group (IAG) posted strong operating profit and revenue growth, and Pearson saw gains on better-than-expected earnings. However, foreign exchange headwinds impacted Intertek Group's share performance and led Melrose Industries to lower its full-year guidance despite strong first-half operating profit.

Analysis

European equities faced downward pressure, with the FTSE 100, DAX, and CAC 40 declining after the U.S. announced new tariffs. The impact was most acute for companies with direct U.S. exposure, exemplified by Watches Of Switzerland Group PLC, whose shares fell 8.9% following a specific 39% levy on Swiss goods. Despite this negative macroeconomic catalyst, individual corporate earnings revealed a highly differentiated landscape. International Consolidated Airlines Group (ICAG) significantly outperformed, with a 35.4% surge in Q2 operating profit to €1,680 million, beating analyst estimates by 16% due to strong demand and lower fuel costs. Similarly, Pearson PLC (PSON) shares gained over 6% after reporting a 2% rise in underlying sales and profit, coupled with an optimistic outlook for accelerated growth. In contrast, foreign exchange headwinds emerged as a critical theme, negatively impacting several firms. Intertek Group PLC (ITRK) shares dropped over 8% as currency effects overshadowed its in-line EBITA and improved margins. Melrose Industries PLC (MRON) also lowered its full-year guidance due to FX, despite a 26% increase in first-half adjusted operating profit. Meanwhile, IMI PLC demonstrated resilience, maintaining its full-year guidance and improving its operating margin by 30 basis points to 18.2% despite a past cyber incident, reflecting steady operational control.

Key Decisions for Investors

• Given the imposition of new U.S. tariffs, investors should re-evaluate portfolio exposure to companies heavily reliant on U.S. sales, particularly in sectors targeted by levies like luxury goods.
• Scrutinize corporate guidance on foreign exchange, as currency movements are a key differentiating factor, benefiting firms like IAG while creating significant headwinds for Intertek and Melrose.
• Favor companies demonstrating strong operational execution and pricing power, such as IAG and Pearson, whose robust earnings and positive outlooks are providing a buffer against broader market volatility.
• Consider that despite a negative macro backdrop, bottom-up analysis is critical, as demonstrated by the divergent performance of FTSE 100 constituents based on company-specific fundamentals and resilience.