Wall Street rises as focus shifts to US-China trade talks

Stocks

Summary:

Wall Street rose for a third day as focus shifted to upcoming US-China trade talks. Optimism over tariff negotiations, earnings beats, and sector gains lifted major indexes despite lingering economic concerns.

Wall Street's main indexes rose on Friday, marking their third straight day of gains, as investors assessed fresh comments from President Donald Trump regarding tariffs on China ahead of a key weekend meeting between the two countries.

Futures had moved lower briefly earlier in the day after Trump said Beijing should open its market to the United States and that 80% tariffs on Chinese goods "seems right." The levies are currently at 145%.

Representatives from the world's two biggest economies are scheduled to meet in Switzerland over the weekend to discuss tariffs, with investors hoping the talks will salve a bruising trade war that has raised concerns over global economic growth and left markets, companies and the U.S. Federal Reserve in wait-and-watch mode.

"Anyone who thinks the deal is getting done at 80% is not seeing things clearly. You're going to see that they'll come to something more reasonable over time, but this was a step in the right direction," said Thomas Hayes, chairman at Great Hill Capital.

On Thursday, Wall Street's main indexes closed higher as investors cheered a trade deal struck between Britain and the U.S. - the first of its kind since Trump paused his initial tariffs last month.

Reuters reported India had offered to slash its tariff gap with the U.S. to less than 4% from nearly 13% now, in exchange for an exemption from Trump's tariffs, according to sources.

"We're going to see multiple deals with major nations and that's going to allow CEOs to get some more confidence that they can start to plan and possibly invest all that has been on hold," said Hayes.

At 09:45 a.m. ET, the Dow Jones Industrial Average rose 50.37 points, or 0.12%, to 41,418.82, the S&P 500 gained 15.49 points, or 0.27%, to 5,679.43 and the Nasdaq Composite gained 91.47 points, or 0.51%, to 18,019.61.

Energy, up 0.8%, led gains among the 11 S&P 500 sectors. Funds tracking consumer discretionary stocks outperformed in the week ended Wednesday, while financials were hit the most, according to data compiled by LSEG.

The S&P 500 and the Nasdaq are set for marginal declines this week, but are hovering near levels seen in late March, having recouped all the losses incurred in the aftermath of Trump's "Liberation day" tariff announcement last month.

Days after the Federal Reserve left interest rates unchanged, Governor Michael Barr said Trump's trade policies will likely lift inflation, lower growth, and raise unemployment later this year.

With the peak of the earnings season behind, about 76% of S&P 500 companies have surpassed profit expectations. But many have withdrawn their annual forecasts citing an uncertain trade environment.

Expedia slipped 8.8% after the online travel platform missed quarterly revenue estimates.

Trade Desk shares jumped 23.2% after the ad firm posted first-quarter revenue and profit above Wall Street estimates. Insulin delivery device maker Insulet jumped 18% after beating estimates for first-quarter profit on Thursday

Advancing issues outnumbered decliners by a 2.68-to-1 ratio on the NYSE and by a 2.01-to-1 ratio on the Nasdaq.

The S&P 500 posted three new 52-week highs and one new low while the Nasdaq Composite recorded 25 new highs and 39 new lows.

Source: Reuters

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Warren Takunda

Economic

China–U.S. Trade War

You wait three years for a trade deal and then two come along at once.

As of Monday, the UK hadn’t announced a free trade agreement since 2022, when Boris Johnson’s government signed one with New Zealand, ranked number 52 among global economies.

By the end of a week foreshortened by the bank holiday and which began with Donald Trump dropping a tariff bombshell on the British film industry, the government had unveiled a deal with India, as well as a more nebulous framework deal with the US, the fourth-largest and largest economies, respectively.

Sandwiched in between the two announcements was an interest rate cut from the Bank of England, making it cheaper for UK businesses to borrow money to invest in the growth that the Labour government is so desperately chasing.

Looking forward, opponents of tariff barriers are now crossing their fingers for a thawing of relations between the US and China, which would avert broader ripple effects depressing UK growth.

The US deal also appears to have left the way clear for Starmer to seek stronger economic ties with the EU, another potential lever to boost economic output.

Speaking on Thursday, after staging a transatlantic conference call with Trump, the prime minister hailed a “fantastic, historic day”.

But have the events of this week really moved the dial for UK plc and the prospects for Britain’s lacklustre economic growth?

David Henig, director of UK trade policy at the thinktank European Centre for International Political Economy, was a little more circumspect.

“It’s middling,” he said, referring to the combined effect of the week’s trade announcements. “None of this is economically transformational but was anything you could have done ever going to be?”

“It’s very Starmerish. It’s 1-0 to the Arsenal.”

Henig’s assessment, via a footballing analogy, is typical of the broader reaction from economists and businesses: positive but muted.

The impact on growth is “likely to be very small”, said Ben Caswell, senior economist at the National Institute of Economic and Social Research, but should fuel business confidence.

The FTSE 100 offers one bellwether of the mood among those with money riding on it. Two Trade Deals and a Rate Cut in One Week … Are Things Looking Up for UK PLC?_1

Two Trade Deals and a Rate Cut in One Week … Are Things Looking Up for UK PLC?_1

The Trump-Starmer announcement took place on Thursday as trading on the London market was nearing a close, giving investors relatively little time to digest it.

There were some obvious winners straight away.

Shares in luxury carmakerAston Martin soared as Trump confirmed that the tariff on UK vehicles, which was scheduled to rise to 27.5%, would instead be set at 10%.

That is also a fillip for the UK’s biggest car exporter, Jaguar Land Rover (JLR), whose Solihull plant was apparently chosen as the venue for Starmer’s press conference for that very reason.

In an interview with CNN on Thursday, the UK ambassador to the US, Peter Mandelson, suggested the deal had persuaded JLR to change its mind about planned lay-offs.

“This deal has saved those jobs,” he said. “That’s a pretty big achievement, in my view, and I’m very pleased that the president has signed it.”

The Society of Motor Manufacturers and Traders hailed the dissipation of a “severe and immediate threat”.

However, tariffs on UK cars will still be four times the 2.5% they were before Trump’s “liberation day” tariff frenzy, while the lower rate will only apply to the first 100,000 exports, effectively capping the flow of British marques into America at just below the 102,000 level achieved last year.

Rolls-Royce was another obvious beneficiary after UK negotiators secured an exemption for its engines, used on Boeing 787 passenger jets.

The fragile British steel industry also appears likely to benefit from a cooperation agreement, although details are sketchy at present. Trump also signalled preferential treatment for the UK’s pharmaceutical industry, which exports £8.8bn a year to the US.

On Friday morning, after investors had slept on it, firms with a US presence continued to make gains.

“The FTSE 100 top risers’ list was full of UK-listed stocks that do business in the US, such as retailer JD Sports, rat catcher Rentokil and industrial groups Smiths [Group] and Spirax,” said Russ Mould, investment director at stockbroker AJ Bell. Two Trade Deals and a Rate Cut in One Week … Are Things Looking Up for UK PLC?_2

Two Trade Deals and a Rate Cut in One Week … Are Things Looking Up for UK PLC?_2

However, more than 280 UK-listed companies have so far issued warnings about the impact of tariffs, according to investment firm Bowmore Wealth Group.

Most of those are still facing up to the reality of a 10% tariff on exports to the US that didn’t exist just six months ago, or the collateral damage from the wider continuing trade war.

Source: Theguardian

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Michelle

Economic

Commodity

Gold Eyes Resistance as Dollar Weakens and Trade Talks Loom

Gold prices moved higher Friday, holding just above the short-term pivot at $3318.50, a level that could determine whether XAU/USD reclaims the $3351.08 threshold or retreats toward deeper support levels. The week has seen choppy trading, with sentiment split between geopolitical risk and profit-taking after last month’s record high at $3,500.20.

At 11:31 GMT, XAU/USD is trading $3325.27, up $19.29 or +0.58%.

Dollar Weakness Gives Gold Temporary Tailwind

Daily US Dollar Index (DXY)

A softer U.S. dollar provided a modest lift to gold, with the Dollar Index (DXY) slipping 0.3% on Friday. While the greenback is still up on the week—thanks in part to optimism around a limited U.S.-UK trade agreement and fading Fed rate cut bets—the short-term dip made gold more appealing to foreign currency holders. Despite the minor pullback, stronger dollar trends have weighed on gold for most of the week, acting as a headwind and capping rallies.

Geopolitics and Trade Tensions Keep Bids Under Gold

Investor focus is shifting to the U.S.-China trade discussions set for the weekend in Switzerland. The possibility of reduced tariffs on Chinese imports has buoyed some optimism, but broader tensions—especially fresh military activity between India and Pakistan—are keeping gold supported as a geopolitical hedge. Central bank demand, tariff concerns, and financial uncertainty remain key undercurrents in the market, although strong rallies are being met with increased profit-taking.

Pattern Shift Hints at “Sell the Rally” Strategy

Daily Gold (XAU/USD)

Technically, the May 1 low at $3201.95 tagged the major retracement zone of $3228.38 to $3164.23, satisfying a typical “buy the dip” setup. However, with a lower top now in place at $3435.06, gold appears to be transitioning into a “sell the rally” mode. If bulls fail to clear $3351.08, price risks sliding back into the retracement zone, with deeper support eyed at the 50-day moving average of $3130.40. This zone could become the next value area for longer-term buyers.

Gold Prices Forecast: Bearish Near-Term, Support Eyed Below $3200

With the market trading below a lower high and failure to decisively reclaim $3351.00, the near-term outlook for gold leans bearish. A close below $3318.50 would expose the $3228.38–$3164.23 retracement zone, with a further test of the 50-day MA at $3130.40 likely if sellers stay in control.

While safe-haven flows and trade risks support the broader bid, the technical setup now favors rallies being sold until a fresh breakout is confirmed. Traders should brace for a deeper pullback before renewed upside is considered.

Source: Kitco

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Glendon

Economic

Forex

U.S. tariffs are not likely to have a "dramatic" effect on Britain's economy and the Bank of England should not neglect longer-term domestic pressures that might push up on inflation, BoE Chief Economist Huw Pill said on Friday.

Pill, who voted against Thursday's quarter-point BoE rate cut, said he understood the BoE's "gradual and careful" approach to future rate cuts as requiring it to be agile and alert to changes in the economy that might require a different approach.

"The analysis in the baseline forecast does not suggest that there's a dramatic shift in the behaviour of the UK economy on the back of these trade announcements and trade uncertainties," Pill said in a presentation to businesses.

On Thursday, the BoE said the impact of tariffs "should not be overstated" and was likely to lead to a 0.3% hit to the size of Britain's economy over three years and reduce inflation by 0.2 percentage points in two years' time.

That was based on U.S. tariffs in effect on April 29, before a deal was announced on Thursday which should see a reduction in high tariffs on U.S. imports of British cars and steel, though a lower 10% tariff on most other goods will stay.

Governor Andrew Bailey said earlier on Friday that this deal was "good news" , relatively speaking, but still left tariffs higher than they had been previously.

Pill said the central bank would not allow the uncertainty over tariffs to distract it from returning inflation - set to rise to 3.5% later this year - back to its 2% target.

"There are other forces - and maybe more long-lasting and underlying forces in the UK economy itself. Fergal (Shortall, BoE director of monetary analysis) emphasised the dynamics in pay and wages, and I think correctly so (which) certainly we should not neglect," he said.

British wages are growing at an annual rate of around 6%, roughly double what most BoE policymakers think is a sustainable pace. On Thursday the BoE forecast private-sector wage growth would slow to 3.75% by the end of the year.

Source: TradingView

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Warren Takunda

China–U.S. Trade War

Economic

There are decades where nothing happens, and then there are weeks where decades happen. The past few weeks have certainly fallen into the latter category, with remarkable intensity.

Since Donald Trump’s Liberation day announcements, stock markets have made a round trip. After an initial collapse we saw one of the strongest and fastest rebounds in recent history.

For the moment, things seem to have calmed down. Still, we are clearly not out of the woods yet. Or to put it in market terms: expect volatility to persist.

This volatility originates from both the geopolitical and economic domains. As Neil Howe so eloquently argues in his book "The Fourth Turning Is Here," a fourth turning is unfortunately a period marked by wars and geopolitical tensions — an era in which extremist parties, both from the left and the right, gain strength, while the centre becomes smaller, weaker and increasingly powerless to make the decisions that, in the end, everyone knows must be made.

It is also a point in history during which sitting presidents, parties, and governments of any colour, shape or ideology are typically voted out.

The second big source of uncertainty and volatility originates from the economic sphere and is closely related to the first one. In a fourth turning, globalisation is under pressure. In our book "The New World Economy in 5 Trends," Koen De Leus and I discuss not deglobalisation but multi-globalisation.

China, a pole of economic and military power

We are no longer looking at a unipolar world solely centred around the US. Say hello to the multipolar world in which China is rapidly becoming a pole of economic and military power. Meanwhile, the old continent is struggling to speak with one voice and remain relevant.

Just to say that the economic volatility that we are witnessing is closely related to the geopolitical fragmentation. Not so long ago, when the world was still truly globalised, we had one global business cycle. All the major blocks tended to move together on the waves of global expansion and global contraction.

In this world, central banks’ action would sometimes differ a bit in an amplitude, but generally the direction would be the same. Today, it is not so hard to envision the US and the European economies to grow at a different pace and central banks as a consequence conduct and all together different policy.

Also, China will, depending on the policies conducted, grow at a different speed. Japan is finally exiting more than four decades of deflation and its interest rates are on the rise, while in most other parts of the world they are coming down.

We should look at this new economic reality in terms of tectonic plates. The blocks are no longer moving at the same speed in the same direction. Instead, the plates are shifting unpredictably at different speeds.

It’s no wonder that we'll see collisions, leading to massive volatility in currency and interest rate markets as a logical consequence.

In this world, volatility will be more the rule than the exception. The main conclusion of our book “The new world economy in 5 trends” is that after the COVID-19 pandemic, we have moved into a new economic paradigm in which both interest rates and inflation will be structurally higher than from 1982 until the pandemic.

It all comes and goes in waves, it always does. And a huge wave is coming. The drivers of this totally new environment are the massive debts, aging of the population, multi-globalisation (including a new arms race) and climate change.

Innovation may play a mitigating role and may in an extreme scenario be even powerful enough to counter the four other forces.

Investors should focus on real assets

All of this has deep and profound consequences for investors. Even though volatility will be huge, holding too much cash is not an option as inflation will eat up its purchasing power.

Above all, investors should focus on real assets like equities, real estate, wine and gold and silver, for which the bull market has only just has begun. The same goes for the commodity space. We are only in the very first inning of the largest commodity bull market in time due to massive supply shortages that we foresee.

For companies, it means that they should put in place hedging techniques for navigating a world of higher interest rates, higher inflation and higher and more volatile commodity prices.

Countries have a unique opportunity to outperform in a fourth turning, at least for those who understand the rules of the new game. Those who don’t will have a hard time keeping the bond vigilantes off their backs.

Maybe in 30 years’ time we will look back on today as both the start of the European Renaissance and the end of US Exceptionalism. This would bode well for both the euro and European equities.

However, it will not be a walk in the park. The road that the old continent will have to travel to be once again a voice on the world stage will be long, hard and winding.

Source: Euronews

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Michelle

Economic

Forex

U.S. President Donald Trump’s tariff agenda is likely to push up inflation, weigh on employment, and dent growth later this year, according to Federal Reserve Governor Michael Barr.

Should prices and unemployment begin to rise, the rate-setting Federal Open Market Committee may be in a more difficult position as it assesses its next policy moves, Barr added in prepared remarks to the Central Bank of Iceland on Friday.

"The size and scope of the recent tariff increases are without modern precedent, we don’t know their final form, and it is too soon to know how they will affect the economy," Barr said.

The statement was the first Barr, who stepped from his prior role as Fed Vice Chair for supervision in February but stayed on as a Fed Governor, has delivered on monetary policy in roughly a year.

However, Barr argued that, given progress in corralling inflation back down to its 2% target level and the overall economy’s "strong starting point", the Fed’s monetary policy is in a "good position to adjust as conditions unfold". In the first quarter, U.S. gross domestic product contracted due largely to the spike in imports, although consumer spending and labor market indicators remained resilient.

Earlier this week, the central bank left interest rates on hold at a range of 4.25% to 4.5%, but flagged that risks to inflation and the job market are increasing. Fed Chair Jerome Powell later suggested that these risks were likely linked to Trump’s sweeping tariffs, adding that it was "not at all clear" what the appropriate response for interest rates should be in response to the tariff uncertainty.

In early April, Trump unveiled punishing levies on dozens of U.S. trading partners, saying the moves were necessary to reshore lost manufacturing jobs and bolster government revenues. However, he later instituted a 90-day pause to the duties on most of these countries, claiming it would give officials more time to negotiate a slew of individual trade agreements.

On Thursday, Trump and U.K. Prime Minister Keir Starmer announced a trade deal between the U.S. and Britain, bolstering hopes that the White House could secure aggrements with other nations. Talks are due to take place in Switzerland this weekend between U.S. and Chinese officials, with Trump suggesting that heightened levies of at least 145% on Beijing will eventually be lowered.

Source: Investing

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Adam

Economic

As Trump administration officials prepare to meet with Chinese officials in Geneva this weekend, it’s tempting to believe the momentum from the United Kingdom trade deal announcement on Thursday will carry over. Don’t hold your breath.

“I’m keeping my expectations in check. Tariffs are high. Tensions are high. It’s easier to impose tariffs than to unwind them,” said Wendy Cutler, a former US trade negotiator who is now vice president of the Asia Society Policy Institute.

President Donald Trump despises trade deficits — a situation when the US buys more from another country than it sells. In his view, it’s a sign that America is being “ripped off” and treated unfairly. (Economists are much less convinced of his argument.)

Since China is the world’s second-largest economy and a manufacturing supercenter, it’s perhaps unsurprising that, across all trading partners, the US ran the largest trade deficit with Beijing last year, at nearly $300 billion.

Trump has therefore levied the steepest tariffs on China, with rates starting at a whopping 145% for most products. China responded by slapping a minimum tariff of 125% on most US goods. Both countries’ economies are poised to take massive hits from the trade war, and bruises are already beginning to appear on both sides.

Investors and many businesses and consumers from both countries are eager to see the situation improve and are holding out hope that the weekend talks, which mark the first official dialogue between top US and Chinese government officials during Trump’s second term, will help. But it could quickly turn south, too.

Trump’s deal with the UK is hardly a great starting point for trade talks with China

Cutler anticipates that Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer, who are meeting with Chinese Vice Premier He Lifeng on Saturday, will bring up the UK trade deal to show that “their policy is working” and also that other countries “have concerns with China.”

Never mind that the scant details of the UK deal reveal it’s a relatively small win — if one at all. And it was also an agreement that was relatively easy to reach.

It helps that the UK had much less to negotiate down, with tariffs on its exports starting at 10% — which, even after the “deal,” remain at those levels. Some cars from there are getting a slight break on tariffs, and the Trump administration seemed to imply other carveouts are on the table. Another positive: The US ran a $12 billion trade surplus with the UK last year.

“It’s basically balanced trade,” Cutler told CNN. China, meanwhile, is “a different animal.”

The best possible outcome

Hardly anyone believes this first round of talks will bring US and Chinese tariffs back to where they were before Trump’s second term. That includes Bessent, who told Fox News earlier this week: “My impression is that this weekend’s discussions will focus on de-escalation rather than a significant trade agreement.”

Trump even outright said he wouldn’t consider lowering tariffs to get China to the negotiating table on Wednesday. But on Thursday, citing unnamed sources, the New York Post reported that the Trump administration was considering plans to cut tariffs on China to as low as 50% as soon as next week.

In that regard, it’s a positive sign that Trump said on Thursday he wasn’t considering levying even higher tariffs on Chinese goods. “You can’t get any higher. It’s at 145, so we know it’s coming down,” Trump said in the Oval Office after announcing the UK trade deal.

Bessent’s comments about de-escalation stood out to Susan Shirk, a research professor at the UC San Diego School of Global Policy and Strategy and director emeritus of its 21st Century China Center.

“What that suggests is that this decoupling, this extreme level of tariffs, is going to move in the direction of coming down either to zero or to some minimal level on both sides,” Shirk said.

Chinese President Xi Jinping and his administration, she said, are acting in a more disciplined manner compared to previous talks with the US. That suggests to her that “they’re not likely to mess it up.”

“They’re skeptical of Trump, and so they’re going to be very careful, which I think puts the right kind of pressure on President Trump,” she said.

Shirk said she’s hoping China demonstrates how “they are making a good faith effort to reduce the flood of exports going not just to the United States but all these other countries.”

In Cutler’s view, the best possible realistic outcome of the weekend talks would be if both sides leave with “a process for further engagement,” she said. Chief among those would be getting the ball rolling on a call between Trump and Xi.

Trump suggested he’d consider speaking with Xi on Thursday depending on how the weekend talks go.

The worst possible outcome

In contrast, the sky is the limit for how bad these talks could go and the actions both governments could take as a result. Both Cutler and Shirk agreed one of the worst-case scenarios would mirror the 2021 talks Biden administration officials held with Chinese officials in Alaska.

That quickly became disastrous for both sides as officials had a very public spat with one another using harsh rhetoric in front of a slew of journalists invited to cover what was initially intended to be brief opening remarks.

“The worst thing that could happen is kind of a big blowup, and the media is there to report it,” Shirk said.

“That’s exactly the type of meeting one wants to avoid,” said Cutler, who also served as acting deputy USTR in the Obama administration.

Alaska repeats aside, the worst possible outcome, she said, is for the US and China to “stake out their hard-line positions and not find common ground to move forward,” which would open the door for even higher tariffs to be imposed.