Market report: Footsie flat as London hosts China-US trade talks and WPP boss resigns
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There’s caution at the start of the week, as trade talks get underway in London to try to stem a bigger trade war erupting between the world’s largest two economies. The UK has a new role as an intermediary between a belligerent US and an unyielding China. While Xi Jinping’s administration has shown determination not to bow down to Trump’s tariff intimidation, having already been forging deeper trading relationships with other nations, there are hopes that both sides will want to agree on a deal. China’s flexed its muscles by restricting the export of rare earth minerals, vital for so many industries, including car production. The possibility of enabling US companies to have greater access to these essential metallic elements might help move the dial. But even as talks get underway, there’s a huge amount of uncertainty around about the outcome of other trade disputes. Keir’s Starmer’s reputation as a dealmaker is still being tested, as the UK-US trade deal still appears to be up in the air, with the finer details yet to be agreed.
Nevertheless, as hopes rise for a possible US-China breakthrough in London, limiting the fall out for the global economy, Brent Crude has largely clung onto gains made last week, only dipping slightly. Stocks on Wall Street are also expected to make steady gains, following on from a positive close on Friday, pushing the index over the psychologically important 6,000 mark. Focus is switching to the US CPI inflation data out on Wednesday, with hopes that there won’t be quite so much upwards pressure on prices, after Trump pressed pause on the most onerous tariffs.
There could still be volatility to come, given that the quick-fire trade commentary from the White House, now includes threats to tax international investors in US assets, if they are based in a nation, with perceived inequitable tax practices. While it’s not clear the what the full extent of these sweeping new proposals would mean for international investors, it’s spread another note of alarm about unpredictable policy and is further damaging the US reputation for stability. This is showing up in fresh dollar weakness, losing further ground against a basket of currencies. The pound has edged higher, trading near a three-month high against the greenback. It’s up 11.5% against the dollar since the start of the year. While some of this strength may come from expectations the Bank of England may not cut rates so swiftly this year, it’s also due to confidence falling in the dollar as a safe haven amid the tariff turmoil.
The epic fall out between Trump and his former right hand man Elon Musk shows little sign of being resolved. Despite calls for clear heads, Trump appears to be doubling down on ostracising Musk, given his rants on social media against the President. Trump has again talked of ‘consequences’ for the Tesla founder, whose wider business interests, including Space X, rely on many billions of dollars of Federal spending. While there is speculation that Elon Musk’s attitude could open the door to more criticism from big tech names, some will also see it as a warning of the retribution which could be handed out by the administration if Trump is crossed.
On the London market, WPP’s shares have fallen back, as uncertainty has been unleashed by a change at the top of the company. Mark Read is to step down as CEO after seven years. It’s been far from an easy ride during his tenure, with revenue declining 1% last year and set to be super-sluggish this year. WPP is now facing a more formidable foe in French rival Publicis, which has now overtaken the British company as the world’s largest agency group. Even though it’s clear there needs to be a big dose of more energy and focus at WPP to help it rediscover its mojo, nerves can be frayed if a company is seen as rudderless. While a search is underway for a new CEO, it comes at a tricky time, with efforts to future-proof the business not progressing as quickly as hoped.”