Market report: Positive trade vibes sends FTSE 100 towards record highs
Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘’A mood of cautious relief is spreading after the long weekend, amid hopes for more fruitful trade negotiations between the United States and its global partners. There are no post bank holiday blues for the London market, with the Footsie in striking distance of the record high reached in February. More positive vibes are pulsing about the outlook for the global economy, with hopes that more scores can be etched on the doors of trade talks.
US futures point to a higher open on indices, as optimism spreads after the holiday break. Trump once again has pressed the pause button, this time on proposed 50% tariffs on imports from the European Union, which caused nervousness at the end of last week. The Dax and CAC 40 had already gained ground on Monday, after the extension to talks was announced with the European Commission. Still, plenty of uncertainty remains about the exact outcome in the raft of ongoing negotiations with nations around the world. Japan is also holding out for a deal to eliminate tariffs, with the proposals for a huge US-Japanese joint wealth fund looking set to be a potential bargaining chip in the talks. The idea floated is for the fund’s structure to potentially be a blueprint for other countries to create closer investment ties with the US, but it seems to be very early days for the concept.
As expectations rise for further trade deals to be inked in the coming months, worries about global growth have eased a little. This has helped keep oil prices steady, given there should be higher demand for energy, if trade deals mean factories, cargo ships and trucks can keep shifting goods. But there’s unlikely to be a dramatic shift higher in crude prices given the uncertainty. Eyes will turn to an OPEC+ meeting later this week, and it’s expected that members will agree higher production targets, which will also keep supplies higher on global markets.
Stacking the grocery basket with fresh produce is becoming pricier in the UK, making it more difficult for shoppers feeling the pinch. Food price inflation is back in the trolley, and perishable goods are the main driver, with steak in particular rising in price. According to the British Retail Consortium, food price inflation rose to 2.8% in May from 2.6% in April. But across the sector as a whole, prices fell 0.1%, indicating it’s still been tough for many chains. There’s been plenty of discounting around, as shops put on promotions, particularly for electronic goods, to shift stock before any impact of Trump’s tariffs. Prices have continued to fall for fashion and furniture but some of the discounting appears to have been easing off. The risk ahead is that as companies absorb higher payroll costs due to increased National Insurance contributions, prices could head higher, but given the highly competitive supermarket sector, and the pressure to keep shoppers loyal, sharp increases may only be limited to certain ranges.’’