FTSE 100 up and US stocks mixed as dollar and insurers take a tumble

LONDON – Global markets presented a fractured picture on Tuesday, with London’s blue-chip index posting solid gains while Wall Street struggled for direction, weighed down by a sharp sell-off in healthcare stocks. The US dollar tumbled to multi-month lows amid persistent trade policy concerns, even as a landmark trade agreement between the European Union and India provided a powerful counter-narrative to rising global protectionism.

The day’s trading underscored a complex environment for investors, who are simultaneously navigating sector-specific headwinds, major geopolitical shifts, and a pivotal week for corporate earnings.

Wall Street's Great Divide: Tech Optimism vs. Healthcare Woes

US indices were a tale of two markets. The Dow Jones Industrial Average was firmly in the red, while the tech-heavy S&P 500 flirted with record highs, highlighting a significant divergence in investor sentiment.

Dow Dragged Down by Insurance Giants

The primary anchor on the Dow was the healthcare sector, with insurance titan UnitedHealth (UNH) leading the decline.

• The Catalyst: UNH shares plummeted more than 15% in afternoon trading. While the company reported a quarterly profit that narrowly beat analyst expectations, the market focused instead on a disappointing policy announcement from the Trump administration regarding Medicare Advantage payment rates for the upcoming year. The proposed rate increase fell short of the more substantial hike Wall Street had priced in, signaling a potential squeeze on profit margins for insurers heavily involved in government-sponsored health plans.

• Sector Contagion: The negative sentiment quickly spread. Shares of UnitedHealth's peers also fell, reflecting fears that the less-than-generous reimbursement rates would become a sector-wide headwind. As a heavyweight component of the price-weighted Dow, UnitedHealth's steep decline exerted significant downward pressure on the entire index.

Tech Sector Eyes New Peaks

In stark contrast, the broader S&P 500 index was buoyed by a wave of optimism in the technology sector, putting it on track for a potential new closing high.

• Chipmaker Boost: The positive mood was sparked by upbeat news from key memory chipmakers, which signaled strengthening demand and pricing power. This news is often seen as a leading indicator for the health of the entire technology ecosystem, from personal computers to data centers and smartphones.

• "Magnificent Seven" on Deck: Investor optimism is also being fueled by anticipation for a string of crucial earnings reports from market-leading technology firms. "Magnificent Seven" members Meta (META), Microsoft (MSFT), and Tesla (TSLA) are all scheduled to release their quarterly results on Wednesday, with Apple (AAPL) to follow on Thursday. These reports will provide a critical health check on everything from digital advertising and cloud computing to electric vehicle demand and consumer electronics spending.

Dollar Tumbles Amid Trade Policy Jitters

The US dollar was a notable loser on the day, weakening significantly against its major peers.

The dollar index (DX-Y.NYB), which measures the greenback's strength against a basket of six other major currencies, fell 0.8%. This pushed the index toward its lowest level since September.

• Key Driver: The decline is being attributed to percolating worries among currency traders about the long-term risks associated with the Trump administration's unpredictable trade policy. The use of tariffs as a tool for geopolitical leverage has created an environment of uncertainty, diminishing the dollar's appeal as a stable safe-haven asset.

• Recent Threats: These concerns were amplified last week when President Trump threatened to increase tariffs on European Union imports amid a diplomatic spat over his bid to control Greenland. This followed a year of trade turmoil that has seen Washington impose significant tariffs on partners and rivals alike, rocking major economies and disrupting global supply chains.

Europe's Landmark Deal with India

While US trade policy created anxiety, the European Union and India delivered a major announcement that champions the cause of free trade.

European Commission President Ursula von der Leyen announced the conclusion of a historic free trade agreement after nearly two decades of intermittent negotiations. "We have concluded the mother of all deals," she posted on the social media platform X. “We have created a free trade zone of two billion people, with both sides set to benefit.”

A Pact of Historic Proportions

The deal represents a significant strategic and economic alignment between two of the world's largest economic blocs, standing in stark contrast to the rising tide of protectionism elsewhere.

• EU Benefits: The European Commission projects the agreement will double the EU's goods exports to India by 2032. This will be achieved by eliminating or drastically reducing tariffs on 96.6% of EU goods exported to India. Key European products set to gain improved market access include wine, chocolates, pasta, automobiles, and a wide range of industrial goods.

• India's Gains: The benefits are reciprocal. According to India’s Ministry of Commerce and Industry, the EU will eliminate or reduce tariffs on 99.5% of goods imported from India over a seven-year period, opening up a vast and wealthy market for Indian exporters.

• Geopolitical Context: The timing of the deal is notable. It provides a measure of stability and opportunity for both blocs at a time of significant global economic uncertainty. For New Delhi, it offers a crucial avenue for diversifying its trade relationships as it continues to grapple with 50% tariffs imposed by the United States last year.

The Path Forward: Earnings and Policy

As the week progresses, market focus will narrow on a few key catalysts that will determine the market's near-term direction.

• Earnings Spotlight: The performance and, more importantly, the forward guidance from Microsoft, Meta, Apple, and Tesla will be paramount. Weak results could halt the tech-led rally in its tracks, while strong numbers could propel the S&P 500 and Nasdaq to further records.

• Policy Watch: Traders and corporate leaders will remain on high alert for any further trade pronouncements from the White House. The dollar's trajectory and global risk sentiment are now intrinsically linked to perceptions of US trade policy stability.

• Economic Data: Beyond earnings, core inflation and growth data will continue to inform the Federal Reserve's thinking on monetary policy. The interplay between a weakening dollar, persistent inflation, and corporate health will shape the central bank's decisions in the months ahead.