Key points

• Stocks jump as US lowers tariffs on China

• US to cut tariffs on Chinese goods to 30% from 145% for 90 days

• China will lower its tariffs on US goods to 10% from 125% for 90 days

• FTSE climbs to 8,600, S&P 500 back to levels before Liberation Day

• Pharma stocks hit by Trump comments on lowering prices

• De-escalation in Pakistan-India tensions offer further boost to risk assets

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Stocks are soaring on Monday as the US and China have struck a trade deal after productive talks in Switzerland. We’d heard overnight that the two countries had made “substantial progress” on trade talks, which helped lift the mood but seemed fairly innocuous. This morning we got a bit of a surprise and a jolt higher as the de-escalation seemed better than just about anyone could hope for. There are some other measures still in place, but basically the US will cut tariffs on Chinese goods to 30% from 145% for 90 days, while China will lower its tariffs on US goods to 10% from 125% for 90 days.  

This is buying time for a more comprehensive deal – allows for time for the process and ‘mechanism’ in the words of Treasury Secretary Bessent to take place. But he also stressed that strategic rebalancing of the global economy is still underway, although “neither side want a decoupling”, which is the sort of commentary the market is going to lap up. But it is not true – the US is absolutely trying to decouple. 

Do equities move on this further? This is likely to be the point of maximum good news on trade, so now we can refocus on the fundamental economic data. Key US inflation figures are due tomorrow. We also have UK employment data coming tomorrow.  

The FTSE 100 jumped 0.7% while the DAX extended its push from its record high by almost 2%.  

The FTSE was led higher basic resources as the China trade de-escalation story boosted sentiment about the global economy, Chinese economy, metals and miners. The China trade news sent Glencore, Antofgasta and Anglo American all up around 7% to the top of the FTSE, while Asia-exposed Standard Chartered leapt 6%. A jump in oil prices underpinned 2-3% gains for index heavyweights BP and Shell.  

But London was relatively underperforming European and US equity markets off the back of the announcement - partially because it's been an area of relative safety amid the volatility, implying less material upside from this good news on trade story - and it's being held back by some softness in pharmaceutical stocks after US President Trump claimed that he could lower drug prices in the US by 30% to 80% by requiring that the US pay the same price for drugs as the countries that pay the lowest price for the drug elsewhere in the world. European pharmaceuticals were rocked by this with Novo Nordisk -8.5%, AstraZeneca -5.5%, GSK -4.5%, Roche -4.4%, Sanofi -6%. 

US futures kicked up with the S&P 500 gapping up and trading about 3% higher ahead of the cash equity open, with it set to open above 5,800. The big surge for risk assets sent gold down 3% back to test the $3,200 level we saw hold a couple of weeks ago. Oil prices surged on the pro-risk, pro-growth sentiment from the trade deal, with front month WTI jumping from around $61 to above $63. 

Back to the more mundane and we have a number of results from London this week.

Major FTSE earnings this week (11-16 May)

Imperial Brands – first half results (14 May)

Volume is seen declining about 3.9%, with total sales growth seen +2.1%, with next-generation products maybe up by a third. Trades at discount to global tobacco sector average and offers dividend +buyback yield of 12%.

3i Group – FY 2025 results (15 May)

Solid performer over the last month in the post-Liberation Day rally. Investors will look for updates on sale processes for MPM and Audley Travel, which it delayed due to market volatility. Also look for commentary on cross-border US businesses.

Aviva – Q1 trading update (15 May)

Headwinds from natural disasters but pricing trends are improving. UK motor insurance prices are a strong suit. Key is the integration of Direct Line, which is expected to close in the middle of the year. Investors will be looking for potential upgrade to consensus forecasts on earnings accretion from the deal.

ITV Q1 trading update (15 May)

Profits more than doubled in 2024 but revenues were –3% as growth in ad revenues was offset by decline in studios. Q1 revs seen flat and ad revenues lower. Look for a) commentary on UK ad space given the macro backdrop with market forecasting quite a big decline in ad revenues for Q2, b) update on Banijay bid and c) any word on sale of Studios. Sum-of-parts suggests Studios alone could worth current market cap of almost £3bn.

Compass Group – first half results (14 May)

Organic revenue growth in the half is seen at 8.5% with underlying operating profit  $1,607mn and margin of 7.2%. About 65% of revenues are in USD, so concerns about dollar weakness will be key, as well as US government spending shifts. Shares came off a bit since peer Sodexo cut guidance but rallied ~11% since April lows.

Burberry – FY 2025 results (14 May)

Focus will be on its Burberry Forward turnaround strategy announced in November, with special attention on the relative performance of the luxury brand with peers. Margins given inventory push will be closely watched. Shares have derated post takeover rumours earlier this year but investors still seem positive on the turnaround. Proof of the pudding now but luxury remains tough.

Landsec - FY 2025 results (16 May)

These are the first results since the capital markets day in February – expect an update on strategy execution which is about disposing of retail parks and some office development sites. Like-for-like growth was upgraded to 4% - investors will be keen to see whether this momentum is seen following through to 2026.

National Grid - FY 2025 Results (15 May)

Look for updates on the RIIO-T3 business plan for its National Grid Electricity Transmission (NGET) business, which includes investment of up to £35 billion over the five years to March 2031, and Ofgem communication. Citi and UBS have both said they see “limited upside” for the stock after the stock’s recent rally.