London Quik Take – 12 August - China tariffs delayed 90 days, US inflation report key to markets’ next move

TACO? We got the answer to the first of our five questions facing the market this week: Donald Trump again extended the trade truce with China, kicking his swinging reciprocal tariffs down the road another 90 days. The move keeps tariffs at 30% for Chinese goods and 10% for US goods, avoiding a rise to 145% and 125%.

Markets were well primed for this move, so it was a bit ‘meh’ on Wall Street yesterday as the S&P 500 and Nasdaq flirt with all-time highs. But it nevertheless seemed to buoy the mood in Asia overnight as the Topix and Nikkei 225 in Tokyo both hit record highs, while oil pushed up a bit from its weakest level in almost two months amid chatter about this Trump-Putin meeting in Alaska reducing the likelihood of supply disruption and sanctions. Wall Street had finished a little lower on the session Monday as traders braced for the upcoming US inflation report later today. The Reserve Bank of Australia cut rates as expected. The announcement on pausing tariffs on China also lifted the mood early in Europe as the FTSE 100 traded about a quarter of a percent higher and DAX and CAC also rose.

Stagflation: wages up, vacancies and payrolls down. UK employment data is, as expected, painting a picture of weakness in the labour market and the broader economy. The unemployment rate held steady at 4.7%, whilst vacancies and payrolled employees fell again. The rate of unemployment is the worst in 4 years. Sterling and the Bank of England need to wake up to the pressures in the labour market. It’s only going to get worse as the effects of tax hikes bleed through. Little wonder then that the recruiter Page reported a 13% decline in UK revenues in the first half.

US CPI data today is the big one as this will drive expectations around the Fed’s next move in September. The latest indicator we have is that the headline CPI rate will move up 0.2% on a monthly basis, up 2.8% annually. Core CPI will rise at a faster 0.3% clip month-on-month and 2.9% year-on-year. The report comes ahead of the Fed’s meeting in Jackson Hole on 21-23 August, which will likely set the tone for the September rate decision. I feel that at 3% inflation the Fed is not going to cut despite markets pricing about 90% chance of it doing so.

Companies

Bellway – completions up 14.3%, revenues up 17% but notes softer market conditions this year.

Entain – upgrading after BetMGM performance to full-year group earnings before nasties (EBITDA) of £1.1bn-£1.15bn. 

C3 AI plunged 30% - the company reported on Friday that it expects revenue between $70.2 million and $70.4 million for its fiscal first quarter 2026, down from $87.2 million in revenue during the same period a year earlier. Thomas Siebel, the firm’s CEO, declared the results were “completely unacceptable.”

Intel’s CEO is a “success”, Trump said, just a few days after calling on him to resign. Shares rose 3.5%. Nvidia and AMD ticked a tiny bit lower after it was reported the White House would take a 15% cut of chip sales to China, a kind of export tariff. He also said he would consider a deal to allow Nvidia to sell a scaled-back version of Nvidia’s most advanced Blackwell chip to China, if Nvidia “takes 30-50% off of it”. 

And finally...

Finally, on gold and the possibility of a Ukraine ceasefire...I talked about this yesterday as part of a broader look at the market implications from ‘peace not war’. Trump said he’s keen to get Ukraine and Russia round the table. (He’s also clarified that gold bars won’t be subject to tariffs, which had upset the usual dynamic between spot gold prices in London and futures in New York).

Here is BofA on the subject, very much rhyming with my view.

“Gold-binger: peace not war = gold bearish, but we remain gold “bingers”; peace not war is gold bearish, but everything else very gold & crypto bullish…need to hedge Trump need for boom & bubble into mid-term elections (46% Trump job approval close to lows), gold wins in 2020s decade of inflation (geopolitical isolationism, immigration control, state intervention, less central bank independence), US dollar debasement = gold up, and rising market expectations that central banks (only “owners” of gold = 20% global FX reserves) will be forced to revalue gold reserves to reduce domestic debt burden v positive gold.”