The FTSE 100 reached a new all-time high on Wednesday, buoyed by optimism that the United States’ trade agreement with Japan could lead to similar deals with other major trading partners. London’s blue-chip index rose by 0.5% to close at a record 9,080 points, marking a significant milestone in the resurgence of UK stocks throughout 2025.
The index has climbed over 10% this year, surpassing 9,000 points for the first time last week. Analysts attribute this strong performance to a combination of historically low valuations attracting value-seeking investors and the index’s defensive components benefiting from ongoing geopolitical uncertainties affecting the global economy.
This positive sentiment extended to other major indices, as financial markets reacted favourably to the US-Japan agreement aimed at reducing tariffs on Japanese goods entering the US. The deal, announced by US President Donald Trump and Japanese Prime Minister Shigeru Ishiba, reduced the planned tariffs from 24% to 14%.
In exchange, Japan committed to a $550 billion (£407 billion) investment in the US economy, a move President Trump described as “the largest trade deal in history”. The Japanese Nikkei index also surged, closing up over 3.5%, with carmakers like Toyota seeing significant gains.
The optimism surrounding the US-Japan deal sparked similar rallies across Europe’s major stock exchanges. Alongside the FTSE 100’s gains, France’s CAC 40 rose by 1.4%, while Germany’s DAX increased by 0.8%. Laith Khalaf, head of investment analysis at AJ Bell, remarked that the deal brought “some good vibes to markets”, although the long-term impact of tariffs remains uncertain.
According to the Financial Times, the European Union is reportedly close to finalising a similar agreement with the US, potentially reducing the bloc’s export tariffs to America to 15%. However, Deutsche Bank cautioned that traders might be underestimating the risk of tariffs escalating globally after Trump’s negotiation deadline on 1 August. Jim Reid, a market strategist at Deutsche Bank, warned that the threat of increased trade levies persists for several large economies, including Brazil and Canada, and highlighted the potential for higher sectoral tariffs, such as a 50% levy on copper.
