Friday positive market vibes were brought by both the FTSE 100 (^FTSE) and European stocks as the day broke, inspired by the finalization of the US-China trade agreement. Howard Lutnick, the US commerce secretary, affirmed imminent plans of endorsement involving 10 significant trading partners, a consequence of President Trump’s tariff revision undertaken previously this year. The recently inked China-US agreement echoes the stipulations agreed upon last month in Geneva, encapsulating essential regulations for the trade of rare earth materials.
Trump, during a White House briefing, confirmed the signing with China but withheld additional specifics. The FTSE 100 index of London saw an increase of 0.3% in the earlier shares due to this development, directly benefiting mining heavy-hitters such as Rio Tinto (RIO.L) and Anglo American (AAL.L) who stood at the index’s peak. The German DAX (^GDAXI) mirrored this uptick, boasting an increase of 0.7%.
The opening bell signaled a healthy showing for the Parisian stock market as well, with the CAC 40 (^FCHI) rallying positively at an increased rate of 1.2%. Considerable contribution came from luxury retailer Kering (KER.PA), registering an impressive 3.5% climb motivated by the appointment of Luca de Meo, the previous Renault chief, as the organization’s newly assigned CEO. The pan-European STOXX 600 (^STOXX) charted a gain of 0.8%.
Adding to the positive wave, recent data published by the Society of Motor Manufacturers and Traders (SMMT) was welcomed with optimism. Market analysts and investors keenly evaluated the shift in automotive manufacturing. Commenting on the scenario, Russ Mould, the investment director at AJ Bell, shed a positive light on the subject.
Guggenheim Securities analyst Michael Morris expressed his continued trust in stock potential by maintaining a ‘buy’ rating and elevating his 12-month price estimate from $725 to $840. Morris, in a client memo circulated on Wednesday, testified to his faith in Spotify’s anticipated growth. His endorsement of the global streaming audio leader’s mid- and long-term growth potential remained firm.
Morris’s confidence was propelled by a plethora of factors including Spotify’s core pricing power, its conceivable tier growth, the extended delivery of varied audio formats spearheaded by audiobooks and podcasts, and the nascent commerce potential catalyzed by app store modifications. In tandem, a report by the Financial Times indicated Threadneedle Street’s response to demands advocating a reduction in its bond selling programme to mitigate potential hikes in borrowing costs.
Threadneedle Street’s strategic shift to bond purchases during quantitative easing bouts over the past 15 years was noted. Recent measures have seen the bank earnestly attempt to reduce its bond portfolio size, aligning the balance sheet with a more natural dimension, according to the Financial Times. The bank is poised to disclose its strategy for the subsequent 12 months of quantitative tightening come September.
Turning to the East, the Japanese stock market also saw a surge of investor confidence on Friday, putting months of trade-related apprehension to rest. The Nikkei (^N225) reclaimed its place above the 40,000 point watermark, a feat unseen since the outset of the year, culminating its trading day with an elevated finish at 1.4%. Anticipations of a potential rate cut in the US spurred an increase in Japanese stocks.
Stateside, stock futures experienced a swell following investors’ speculation that the US Federal Reserve may soon implement an interest rate reduction. Dow Jones Industrial Average (YM=F) futures experienced an uptick of 0.2% riding on this expectation. Similar small yet positive movements were seen in the futures attached to the S&P 500 (ES=F) and tech-driven Nasdaq 100 (NQ=F), both marking an increase of 0.2%.
Thursday’s trading session witnessed stocks rise, with the S&P 500 and Nasdaq narrowly missing new record highs. Investors, calibrating their expectations and cognizing the potential of an imminent Fed interest rate cut as probable as July, drove this upswing. A triggering event for this sentiment appears to have been the latest employment metrics presenting a downtrend.
The speculated rate cut has actually been fueling expectations since President Trump previously discussed his search for a successor to Jerome Powell, the current Federal Reserve Chair. Recent reports even suggest that Trump might be inclined to announce his chosen candidate sooner than later. This filled investors with renewed assurance that the Federal Reserve is likely to proceed with a rate reduction in the immediate future.