The FTSE 100 and stocks across Europe experienced a rise on Friday as markets responded to the recently initialed trade agreement between the United Kingdom and the United States. This weekend, officials from the US and China are scheduled for a discussion in Switzerland, which might represent the initial steps toward settling their ongoing trade disagreements. The combined diplomatic endeavor unfolded by President Trump and Keir Starmer from their respective locations in Washington and Solihull, has sparked a subtle wave of hope among stock markets.
The Brexit and VE Day commemorations have coincided in a way that appears to reinforce the long-held ‘special relationship’ between the allies, America and Britain. Even though the specifics were only disclosed late into the previous day, failing to stop the FTSE from recording a decline, the mood among investors seemed more optimistic on the following morning.
In other economic news, China has revealed that its exports for April exceeded expectations, growing annually by 8.1%, down from 12.4% in the preceding month. However, due to the effect of significant tariff hikes imposed by the US President, exports to the United States witnessed a drop of over 20%.
As markets opened, indices around Europe climbed. London’s key index, the FTSE 100, reported a 0.5% rise. Elsewhere, Germany’s DAX surpassed its record high from March with a 0.7% gain, while the CAC in France advanced by 0.8%. The pan-European STOXX 600 also saw a 0.5% increase.
Anticipating a day of positive trading, the futures market for S&P 500, Dow, and Nasdaq all showed an upturn. The pound showed resilience against the US dollar, recording a 0.1% rise, with the exchange rate standing at 1.3264.
International Consolidated Airlines, parent company of British Airways, has been disclosed as the purchaser of Boeing planes worth $10bn. This follows a statement made by President Trump the previous day, revealing that an unnamed UK company had secured a deal, but without naming the company involved.
IAG, in its most recent set of financials, stated that it has placed an order for 53 aircraft. These purchases are intended to meet requirements for its medium to long term, long-haul fleet.
However, criticism has been mounted against the new US-UK trade agreement. The deal has been branded “quite disappointing” by Andrew Griffith, the shadow business and trade secretary. Speaking on BBC Radio 4’s Today programme he said the deal provides no mutual recognition between the US and the UK.
Griffith urged the government to return to the negotiating table and strive for ‘a comprehensive agreement’. Adding another perspective, Andrew Bailey, the governor of the Bank of England has stated that better trading ties between Britain and the EU would indeed be ‘beneficial’.
Bailey’s statement came in the aftermath of the trade agreement signed by Sir Keir Starmer and Donald Trump. The governor emphasized the necessity for the UK to strive to maintain productive relations with Europe, reminding that the EU continues to be Britain’s most significant trading partner.
As the weekend readied for the start of US-China talks, overnight stocks in Asia mostly undertook an upward trajectory. Japan’s Nikkei index increased by 1.6%, while Hong Kong’s Hang Seng index saw a 0.3% rise.
Meanwhile, the Shanghai Composite fell by 0.3% by the end of the day due to newly released data showing a slump in Chinese trade with America in April despite total exports exceeding predictions. In fact, exports to America, one of China’s primary trading partners, decreased by 17.6% during the course of the month.
On the American side of the Atlantic, Wall Street ended the previous day on a positive note with key indices showing signs of growth. The S&P 500 rose by 0.6% and the Nasdaq, laden with technology stocks, grew by 1.1%. Similarly, Dow Jones experienced an increment of 0.6%.
This encouraging close happened simultaneous to the US-UK trade agreement where the US increased its tariffs on Britain from 3.4% to 10%, whereas the UK reduced its tariffs from 5.1% to 1.8%. A significant change was noted in car tariffs, which are now limited to 10% for a stipulated quota of 100,000 vehicles.
This development is viewed as a significant victory for the industry considering that last year British manufacturers exported slightly more than 100,000 cars to the US. The deal also completely exempts the UK from steel and aluminium tariffs, previously elevated to 25% following the initiation of the trade war by President Trump in February.
In financial markets, the yield on the benchmark 10-year US Treasury notes showed an increase to 4.381% from 4.274% the day before, indicating investors’ outlook towards the market’s future.