Market report: Swell of optimism amid progress on China US trade deal
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There’s a swell of confidence at the start of the week. Hopes are high for significant deal between the US and China after fruitful weekend negotiations. The FTSE 100 has a spring in its step in early trade, with European bourses also seeing optimism spread. Progress was made on key sticking points for both countries and talks were extended as trade dominos fell into place. With more details about the outcome expected later, there’s optimism around that the spat between the world’s two largest economies won’t inflict as much damage globally as had been feared.
Trump appears keener to do a deal after a forecast from Goldman Sachs was released detailing that inflation, which he promised to bring down, could double by the end of the year, if fewer, cheaper goods arrive at US ports. US stocks are set for a rebound, after a flat close on Friday, with enthusiasm lifting as worries ease about the potential for stagflation to set in. Some of the optimism could wane, if concrete plan to reduce tariffs don’t emerge, and the ‘deal’ just heralds the start of a series of negotiations. However, the intention from both sides to come to an agreement is clear, and that should help keep up more positive momentum.
As fears about the pain a prolonged trade war could inflict on the global economy subside, investors seem keener to take more risks and are creeping out of safe haven shelters. Gold has hit a one week low, with the precious metal falling again after the positive outcome of the trade talks. Geo-political risk has also eased a little, with the ceasefire between India and Pakistan coming into force, despite reports of violations from both sides.
Air travel appears to have been immune to the trade turmoil unleashed by Trump on Liberation Day, and the sharp falls in stock markets. Even though it appeared to lead to a fresh crisis of confidence among businesses, it’s done little to dent demand for trips away. April marked the busiest week for Heathrow on record, with almost 7.1 million passengers heading through the hub. This was partly due to the timing of Easter, and rather than being unnerved by the trade war erupting, passengers seemed super-keen to take a break from the headlines, and head away on holiday. High levels of travellers came despite the disastrous fire at a substation which closed the airport. It appears that few plans were changed, despite the weekend disruption. Initial findings into what went wrong are expected to be released later this month. Travellers largely appear sanguine about the outage, with passenger demand this year is expected to exceed last year’s levels.
Brent Crude has headed above $66 a barrel as traders assess better prospects and energy demand in key markets, as trade truce emerges – given that the US and China are the world’s top oil consumers. As oil prices reach the highest level in almost two weeks, it’s helped propel shares of energy giants higher. Nevertheless, prices appear to be being held back by indications that OPEC+ member countries look set to unwind earlier output cuts and accelerate production next month.”