The FTSE 100 surged in early trade on Monday after the US and the EU announced a trade deal, removing a significant uncertainty for investors as Trump’s self-imposed August 1 deadline looms. However, sometimes in markets, it’s better to travel than to arrive.
Despite London’s leading index touching an all-time intraday record high in the early minutes of Monday’s session, the rally faded, and the FTSE 100 has turned negative at the time of writing.
After the US struck a deal with Japan and reports broke regarding plans to kick the China tariff deal down the road by another 90 days, the EU deal was the last major trade agreement driving investor concern.
The agreement to settle on 15% tariffs for most EU goods entering the US is a welcome relief for traders who were keen to see a deal done, regardless of the rate, to draw a line under impending trade wars.
The markets can now refocus on company earnings and global growth. But these may not be as rosy as the recent rally suggests.
“Well, it certainly helps to firm up the bull case for equities, which was already a pretty resilient one anyway,” said Michael Brown Senior Research Strategist at Pepperstone, when commenting on the EU/US trade deal.
“Clearly, the direction of travel remains towards a cooler and calmer tone on trade, with deals continuing to be done, and the tail risk of ‘no deal’ outcomes now being priced out.”
Brown continued to highlight a busy week for US corporate earnings, which includes mega-cap technology shares, and may be seen as a risk to equities.
The risks beyond trade negotiations undoubtedly played a factor in the fading rally on Monday as investors prepared for a raft of risk events, including the NFPs on Friday.
In London, GSK and AstraZeneca were the biggest positive contributors to the index in terms of the number of points on Monday, following encouraging updates on drug development.
“AstraZeneca and GSK have been busy advancing their development portfolios, giving investors more reasons to be optimistic about future earnings,” explained Russ Mould, investment director at AJ Bell.
“AstraZeneca’s Imfinzi drug got priority review status for treatment of patients with certain stages of gastric cancer. It expects a decision from the US regulator in the final three months of 2025. GSK struck a deal to develop up to 12 medicines with Hengrui Pharma.
GSK rose 1.2% while AstraZeneca added 0.8%.
It was 50:50 between FTSE 100 gainers and losers on Monday, which was reflected in an index that was trading largely flat to marginally negative at the time of writing.
BT was the FTSE 100’s top faller after a major shareholder reduced their stake in the company. BT shares were down 3%.