Market headlines - the art of the deal

Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US and Asia.

Key market events

🤝 UK-US Trade Deal 

• The US struck their first trade deal since 'Liberation Day' with the UK, strengthening bilateral ties and providing support for the automotive, agriculture, and steel and aluminium sectors. 

✂️ UK rates cut to 4.25% 

• The Bank of England’s Monetary Policy Committee voted 5–4 to reduce rates by 0.25%. Notably, two members pushed for a larger 0.5% cut, while two others preferred no change – highlighting a divided view on the path ahead.

📊 US holds rates 

• The Federal Open Market Committee cited a stable unemployment rate and a solid economy as key factors in making the decision. However, it also flagged that the risk of higher inflation and higher unemployment have risen. 

🏦 China unveils further stimulus 

• The People's Bank of China announced a 0.5% cut to the Required Reserve Ratio this week, while the government pledged an additional 300 billion yuan for the tech sector. 

🗣️ US-China trade talks 

• Trade negotiators from the world’s largest economies are set to meet in Geneva this weekend, aiming to ease tensions and potentially roll back retaliatory tariffs.

Short weeks after a bank holiday often feel like they fly by - and markets have been moving just as quickly. Since President Trump’s election, momentum around trade and economic policy has rarely slowed, and this week has been no exception.

There’s been a flurry of important announcements: from fresh trade deals to new rounds of monetary and fiscal stimulus, and plenty of speculation over the next steps. There’s renewed hope, with yesterday’s trade announcement between the UK and US showing a path forward from 'Liberation Day'. That has fostered optimism towards the upcoming trade talks between the US and China, which will be seen as key for de-escalation.

But there’s also reason for some caution, with Trade Secretary Jonathan Reynolds admitting that thousands of UK workers may have been days away from job losses in the absence of a deal. As fantastic as yesterday’s news is for the UK, it highlights the risks associated with tariffs and the potential global implications if there aren’t more widespread agreements soon. As US Fed Chair Jerome Powell commented this week, the risks of higher inflation and higher unemployment have risen.

It's for moments like this that we advocate the benefits of diversification and spreading risks across asset classes, regions, and investment styles.

Chart of the week - cheaper oil for Asia

Source: JP Morgan, May 2025

The chart above shows the average year-on-year percentage change of oil prices in local currency terms of China, Indonesia, South Korea, Malaysia and Thailand. While crude prices have fallen significantly in dollar terms this year, the decline has been even more pronounced in Asia due to the stronger currencies in the region.

Lower energy costs are particularly important for these countries as Asia is a net importer of oil, so cheaper prices this year have meaningfully contributed to lower inflation with most countries now below target.

This has prompted central banks in the region to cut rates, as we have seen this week from the Peoples Bank of China (PBoC), supporting growth in their economies. In a moment of strife for the world’s largest equity market, as the US wrestles with the impact of the trade war, this highlights the opportunities that can be found elsewhere and the benefit of diversifying exposure across countries.

FTSE dips, but not all gloom

• UK stocks retreated yesterday following a mixed reaction to the US trade deal. Rolls-Royce and Melrose Industries benefitted from improved export conditions. The FTSE 250 also found support, with rate-sensitive and domestically focused businesses benefiting from the Bank of England’s rate cut.

S&P swings

• US markets were divided. Media and streaming stocks fell on fears of a potential 100% tariff on foreign-made films. Meanwhile, rising oil prices gave energy stocks a lift, and crypto and fintech sentiment improved following Coinbase’s acquisition of crypto derivatives exchange Deribit.

Hang Seng soars

• Hong Kong-listed shares rallied this week ahead of upcoming US and China trade talks. Beijing stimulus and support for the tech industry boosted risk assets, with reductions in both the Reserve Ratio Requirement and the Standard Lending Facility rate.

Oil recovers

• Trade deal optimism lifted brent crude prices, however pressures remain on the supply side as the Organization of the Petroleum Exporting Countries (OPEC+) nations target increased production and speculation builds over a US-Iranian deal.

Solid gold

• The precious metal retreated in response to the UK-US trade deal, after reaching a two-week high on Tuesday. Safe-haven demand continues amidst trade tensions and the threat of stagflation.

Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 8th May 2025.

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