Rachel Reeves stepped in to soothe stock market jitters on Tuesday amid signs that the punishing global sell-off triggered by US trade tariffs was starting to ease.
The chancellor told parliament she had spoken to Andrew Bailey, the governor of the Bank of England, who confirmed “markets are functioning effectively and that our banking system is resilient”.
Reeves argued again that a trade war “is in nobody’s interest”, confirming that the UK was seeking to negotiate a new deal with the US and that she would meet the US Treasury secretary, Scott Bessent, “shortly”.
Britain was also working with international allies to “reduce the barriers to trade right across the world”, Reeves said, having met her counterparts in Canada, Australia, Ireland, France, Spain and the European Commission in recent days. She is due to hold talks with the Indian government on Wednesday.
Reeves’s comments came as stock markets in the UK and across the EU entered positive territory in morning trading on Tuesday. Some investor optimism has returned after heavy falls as a result of Donald Trump’s “liberation day’” tariff announcements last Wednesday.
London’s FTSE 100 index of blue-chip stocks was 152 points higher, up 2%, at 7854. Germany’s Dax was 1.5% higher while France’s CAC jumped by 1.4%. The pan-European Stoxx 600 index rose 1.7%.
On the FTSE, Rolls-Royce and BAE Systems were the biggest risers, both up about 6%.
Reeves declined to back Lib Dem calls for the government to launch a “buy British” campaign. “In terms of buying British, I think everyone will make their own decisions. What we don’t want to see is a trade war, with Britain becoming inward-looking,” she said.
Investors are hoping the market could stabilise as reports have emerged that Bessent will lead trade talks with Tokyo, in a sign that the Trump administration will be open to negotiating on tariffs.
The news drove a modest rebound in Asian markets overnight, led by Japanese stocks. Tokyo’s Nikkei index recovered by 5.6%, while Hong Kong’s Hang Seng index rose by 1.6% after its steepest drop since the 1997 Asian financial crisis on Monday.
South Korea’s Kospi index closed up 0.5% after it pared back an earlier gain of as much as 2.3%.
However, Taiwan’s benchmark, the TWII, ended the session down 5%, after its worst daily fall on record on Monday. The country is heavily dependent on chip exports and was hit with a 32% duty by the US.
Despite some of the rebounds, there remains a heightened level of uncertainty among investors in Asia. The Chinese government said it would “fight to the end” if the US continues to escalate the trade war, after Trump threatened additional 50% tariffs if Beijing did not reverse its own 34% reciprocal tariff.
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The Chinese commerce ministry vowed to “resolutely take countermeasures”, adding that China “will fight to the end if the US side is bent on going down the wrong path”.
In Europe, the European Commission said on Monday it had offered the US a “zero-for-zero” tariff deal on cars and industrial goods weeks before Trump launched his trade war. The EU commissioner for trade, Maroš Šefčovič, said the EU remained open for talks but it would not “wait endlessly”.
Matt Britzman, a senior equity analyst at Hargreaves Lansdown, said: “Investors are waking up to a positive sight for once, with markets opening higher across a broad range of European indices.
“However, this should hardly be seen as the end of the trouble, especially with President Trump showing no signs of easing his stance on perceived trade imbalances, having doubled down on China.”
Bessent said on Tuesday that the US held an advantage over China. He told CNBC: “I think it was a big mistake, this Chinese escalation, because they’re playing with a pair of twos.
“What do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us, so that is a losing hand for them.”
Britzman said signs of US-Japan trade talks offered a “glimmer of hope”. “The sooner deals are reached, the quicker companies and investors can gain some clarity on the lay of the land,” he said.
Elsewhere, the investment bank Goldman Sachs forecast that Brent crude oil could fall below $40 (£31) a barrel in late 2026 in an “extreme scenario” of a global slowdown in GDP and a full unwind of Opec+ production cuts.
Oil prices hit a four-year low on Monday to less than $64 a barrel but ticked up by 0.1% on Tuesday.