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Trump strikes first deal with major trading partner

US President Donald Trump announced on Thursday that the United States and the United Kingdom have reached a comprehensive trade agreement. The trade agreement is marking the first such deal since the imposition of new tariffs in early April. The agreement, which remains unsigned, promises increased market access for US exports and a reduction of non-tariff barriers by the UK. In other news, the Bank of England reduced its key interest rate, responding to sluggish economic growth and uncertainties surrounding US trade tariffs. In Asia, China’s stimulus measures, which includes interest rate cuts and liquidity injections, failed to inspire markets, while Chinese trade data came in stronger than anticipated. 

  • Date
  • Author Alessandro Fezzi, LGT Research Content & Publications
  • Reading time 5 minutes

US UK trade deal
© Shutterstock

US President Donald Trump announced on Thursday that the United States and the United Kingdom have reached a comprehensive trade agreement. This marks the first trade deal following the US's imposition of reciprocal tariffs in April. The agreement aims to strengthen economic and national security ties between the two nations.

Equity indices in New York on Thursday as investors anticipated easing tensions in the trade conflict. The Dow Jones Industrial Average climbed to its highest level since early April, closing 0.6% higher at 41,368.45 points. The S&P 500 gained 0.6% to 5663.94 points, while the Nasdaq 100 increased by 1% to 20,063.57 points. Market sentiment improved on the trade deal with the UK but was tempered by reports that President Donald Trump is pushing for higher taxes on the wealthiest Americans. The yield of the ten-year Treasury stands currently at 4.37%.

China reports surge in exports due to shipments to Asian countries

China's exports rose by 8.1% in April compared to the previous year, significantly surpassing expectations of a 1.9% increase, according to data released on Friday. The growth was driven by a 20.8% rise in shipments to Southeast Asian countries, which offset a 21% decline in exports to the US, impacted by new tariffs. Imports decreased by 0.2% year-on-year, in contrast to the anticipated 5.9% drop. Analysts suggest the surge may be temporary due to transshipment and pre-tariff contracts, with expectations of weakening trade data in the coming months.

Asia-Pacific markets were mixed on Friday as investors analysed China's April trade data. Uncertainty over US-China trade talks in Switzerland weighed on market sentiment. The Hang Seng index rose 0.1%, while the CSI 300 declined slightly. In Tokyo, the Nikkei 225 gained by 1.5% and in Seoul the Kospi remained flat.

Bank of England cuts interest rates

The Bank of England reduced its key interest rate from 4.5% to 4.25% on Thursday, responding to sluggish economic growth and uncertainties surrounding US trade tariffs. This move, supported by five of the nine policymakers, is expected to ease borrowing costs for consumers and businesses, though savers may see lower returns. The central bank highlighted that global trade policy uncertainties and new tariffs have weakened global growth prospects, although the impact on UK growth and inflation is expected to be smaller.

EU launches WTO dispute over US tariffs

The European Commission announced on Thursday that it will challenge the US's "reciprocal" tariff policy and duties on cars and car parts at the World Trade Organization. Concurrently, the EU has initiated a public consultation on countermeasures targeting USD 107.4 billion worth of US imports. These measures, which could affect a wide range of goods including agricultural products and spirits, are intended to be implemented if a trade agreement is not reached. The EU aims to uphold WTO rules and negotiate a beneficial deal for both sides.

European stock markets mixed on Thursday

European stock markets showed no clear tendency on Thursday, with the EuroStoxx 50 rising by 1.1%. Positive signals from US trade negotiations boosted EU markets, but major non-euro area markets declined. In Switzerland, the SMI closed 0.4% lower, with defensive heavyweights like Novartis and Roche declining due to potential US tariffs on pharmaceutical imports. On the other hand, Adecco shares surged nearly 12% following better-than-expected quarterly results, while Swisscom and Zurich Insurance faced declines after their earnings reports.

Corporate and economic calendar

Corporate news in focus: Quarterly earnings from Sonova and Commerzbank

Economic data in focus: Industrial production Italy (10:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.