The FTSE 100 started Monday’s session firmly higher before falling back as details of the US/China trade deal emerged.
US equity futures surged overnight, leading to a strong start for London’s leading index. However, trade became choppy after the terms of a 90-day deal between the US and China hit the wires and raised questions about positioning in the defensively oriented FTSE 100.
Under the terms of the interim agreement, tariffs on Chinese imports to the US will be reduced to 30%, and US imports to China will fall to 10%.
While this is a major improvement to the 145% tariff on Chinese imports and 125% on US imports, it will still make most goods much more expensive than before the Liberation Day announcement and threaten US economic growth.
That said, the willingness of China and the US to sit down and thrash out a deal is a major boost to risk sentiment and signals that further improvements to the terms of their trade relationship could be achieved in the coming months.
“The US-China tariff truce is a tactical pause, not a final deal but for markets, but it’s a meaningful de-escalation,” explained Lale Akoner, global market analyst at eToro.
“While the structural issues remain unresolved, the signal is clear: neither side wants to push trade tensions further. Slashing duties from 145% to 30% (US) and 125% to 10% (China) marks a dramatic de-escalation, likely aimed at calming markets and averting further economic drag.
“Still, follow-through matters more than headlines. The deal is still short on detail, and it’s unclear what an “acceptable” outcome looks like for either side.”
London’s leading index touched 8,646 in early trade on Monday – the highest point since Trump announced tariffs in early April – but turned negative shortly after the particulars of the US and China deal.
S&P 500 futures remained positive, but gave up ground in the wake of the announcement.
The FTSE 100’s China-focused stocks were at the top of the leaderboard with Glencore, Anglo American and Standard Chartered all surging more than 5%.
However, AstraZeneca weighed on the index with little progress on the plans for US tariffs on pharmaceuticals.
There were also big declines for precious miners Endeavour Mining and Fresnillo as gold prices tanked on the US/China deal.
The FTSE 100 outperformed other major global equity indices such as the S&P 500 during the worst of the trade-induced volatility, so it wouldn’t be a surprise to see the index underperform as deals are made and risk sentiment improves.