UPDATE 1-FTSE 100 closes higher as Trump tariff report lifts European markets

Updates with market close

Jan 6 (Reuters) - The UK's FTSE 100 inched up on Monday, joining a broad rally in European stocks after a report hinted at measured tariffs under a Donald Trump presidency, while ratings downgrades weighed on heavyweights Rolls-Royce and Unilever.

The blue-chip benchmark .FTSE rose 0.3% at market close, while the pan-European STOXX 600 .STOXX jumped 0.9%.

Trump's aides are exploring tariff plans that would be applied to every country but would only cover critical imports, the Washington Post reported. However, Trump denied the report, saying it incorrectly said his tariffs would be pared back.

"Today's bounce is a reminder to investors that they are now living in a Trump-dominated world. Once the new president is installed on 20 January, we can expect a lot more days like today," said Chris Beauchamp, chief market analyst at online trading platform IG.

Weighing on the index, Unilever ULVR.L dropped 2.5% after RBC downgraded the consumer goods group to "underperform" from "sector perform," while Rolls-Royce RR.L fell 2.6% after Citigroup downgraded its rating on the engineering company to "neutral" from "buy".

The more domestically focussed FTSE 250 midcap index .FTMC was up 0.1%.

A survey showed British business activity growth slowed to a crawl in December and employers cut staffing at the fastest rate in almost four years, on a continued decline in corporate morale after the government's budget.

The FTSE 100 rose nearly 6% in 2024, its fourth successive yearly advance, as the mood was improved by two interest rate cuts by the Bank of England during the year.

However, implications of Finance Minister Rachel Reeves's October budget and the potential policies of incoming U.S. President Donald Trump have kept investors on edge.

This week's centrepiece for global markets would be the December U.S. nonfarm payrolls report due on Friday, a crucial metric in gauging the Federal Reserve's interest rate path for 2025.

Trading volumes is also likely to improve this week as most market participants return after their New Year holidays.

(Reporting by Shashwat Chauhan and Sruthi Shankar in Bengaluru; Editing by Vijay Kishore)

((Shashwat.Chauhan@thomsonreuters.com;))

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