The UK’s flagship index, the FTSE 100, along with other European stock market indices, experienced an uptick on Friday due to investor positivity regarding the recently ratified trade agreement between the UK and the US. Over the weekend, representatives of the US and China are expected to engage in negotiations in Switzerland, which is seen as an initial move towards resolving the prevailing trade tensions. The combined diplomatic effort put forth by US President Trump and Keir Starmer, from Washington and Solihull, respectively, has kindled a faint spark of hope in the equity markets.
The timing of these events appearing to align with VE day celebrations seemed to tacitly highlight the enduring alliance between the US and UK. Although details of the agreement were only made known later in the day, causing the FTSE to take a hit, the market mood showed signs of recovery the following morning.
This came to light as China announced an unexpected yearly surge in its exports for the month of April, recording an 8.1% increment as opposed to the previous month’s figure of 12.4%. However, exports to the US fell by over 20% following the implementation of harsh tariff hikes by the American President.
In the early trading hours, London’s FTSE 100, Germany’s DAX and the CAC index in Paris indicated promising figures, showing upward movements of 0.5%, 0.7% and 0.8% respectively, with the DAX even exceeding its peak levels recorded in March. Meanwhile, the STOXX 600, which represents a comprehensive picture of European shares, also depicted a 0.5% rise.
On the other side of the Atlantic, Wall Street also signaled a positive beginning to the day with S&P 500, Dow and Nasdaq futures demonstrating a climb into positive territory. Concurrently, the GBP marked a slight gain, as it was 0.1% up against the dollar, with the exchange rate standing at 1.3264.
In a separate development, International Airlines Group, the parent entity of British Airways, announced that it was the company purchasing Boeing planes worth $10bn from the US. This disclosure came after President Trump stated on the preceding Thursday that an anonymous British firm had secured the deal.
Further details in IAG’s latest financial report indicate an order placement for 53 aircraft, projected to fulfill long-haul fleet requirements for the medium run.
However, the trade agreement between the US and UK has been met with criticism as it is perceived as underwhelming by the shadow business and trade secretary. Andrew Griffith expressed his dissatisfaction on BBC Radio 4’s Today programme, stating that the agreement failed to uphold any mutual recognition between the two parties.
Andrew Bailey, who is at the helm of the Bank of England, expounds that a bolstered trading relation with the European Union could prove advantageous. These comments come right after the trade deal between the US and the UK was solidified, with Starmer acting on behalf of Britain.
According to Bailey, it is essential that the UK leaves no stone unturned in preventing any potential harm to its connection with Europe, which continues to be the UK’s biggest comercical associate.
Moving towards Asia, where the first round of the US-China convocation is scheduled for the upcoming weekend, the stock markets displayed a largely positive scenario. Japan’s Nikkei registered a gain of 1.6%, along with Hong Kong’s Hang Seng index showing a 0.3% increment.
However, the Shanghai Composite in China closed with a 0.3% downturn at the end of the session. This occurred subsequent to the release of data showcasing a decline in Chinese trade with the US for April, despite a favorable performance in exports overall. Overall exports to the US, one of China’s most important trade partners, depreciated by 17.6% within the month.
Back in the US, Wall Street demonstrated a solid performance, as it closed with major indices including the S&P 500, the Nasdaq, and the Dow Jones registering increases of 0.6%, 1.1%, and 0.6% respectively. This financial upturn coincided with the UK and US finalizing their trade accord— a negotiation which tripled American tariffs on Britain from 3.4% to 10% while, conversely, the UK reduced its own tariffs from 5.1% to 1.8%.
Specifically notable is that tariffs on vehicles will be cut down to 10%, within the agreed auto quota of 100,000 units, which amounts to a significant victory for the British automotive sector which exported slightly over 100,000 cars to the US in the previous year. Moreover, the UK will be entirely exempt from steel and aluminium tariffs, which were hiked to 25% back when Trump instigated his trade dispute in February. In bond market, the yield on benchmark 10-year US Treasury notes climbed to 4.381% from 4.274% a day earlier.