Trump talks up a trade deal. Should we believe him? The TPP midweek update.

Deal or No Deal?

This seems to be the question which is having the biggest impact on the equity markets at the moment. Whether it’s the U.S. being close to signing with Japan or the UK, or whether talks have started or are about to start with Beijing, the positive news at the moment is that all of these things are on the table.

With Trump it’s hard to know what is true and what is not. He said talks with China had started weeks ago, but Beijing seemed to know nothing about it. After he announced to the public that talks were going well, China’s Ministry of Commerce spokesperson HE Yadong told reporters, “At present there are absolutely no negotiations on the economy and trade between China and the US”. He added that “all sayings” regarding progress on bilateral talks should be dismissed.

President Trump also bragged two weeks ago that he had made “200 deals” on trade and tariffs but when pressed for details, two members of his cabinet could not name a single country that has agreed to one of Trump’s alleged deals.

How do we make investment decisions based on the statements of a man who seems to have no real understanding of what he’s saying?

So, let’s start with what we do know as progress is now being made.

President Xi Jinping’s government provided a boost to China’s economy ahead of announcing trade talks with the US. Vice Premier He Lifeng will travel to Switzerland for meetings this weekend with US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, some of China’s top economic officials announced sweeping measures to stabilise markets, boost tech innovation and protect small businesses.

At a snap briefing in Beijing on Wednesday, central bank Governor Pan Gongsheng announced across-the-board rate cuts alongside other steps that could pump 2.1 trillion yuan into the economy. That marked the most significant dose of easing by China since Donald Trump’s “reciprocal” tariffs unleashed a trade war that’s upending the global economic order and disrupting markets.

Both sides will enter the weekend negotiations starting Saturday, projecting confidence they hold the upper hand. Trump said in a recent interview with NBC that “China’s getting killed right now,” while Bessent has called his nation’s 145% tariff “unsustainable” for export-dependent China.

For its part, Beijing has framed the talks as being initiated by the US while repeatedly saying it would be unafraid to “fight to the end” if necessary.

Either way, both the US and China have an incentive to at least talk about reducing tariffs after a weekslong standoff that risks severing trade links between the world’s biggest economies. While it’s unclear what concessions both countries could bring to what Goldman Sachs Group Inc. has branded “ice-breaker” talks, the fact high-level negotiations are taking place generated optimism that lifted equities in China and the U.S.

However, no matter what happens, it’s hard to believe it will be quick, or that either side will be happy with the result. The trade war has escalated beyond where either side can really save face so ending it will be difficult.

In other trade news, the UK and US are in intensive discussions about an economic agreement that would reduce the impact of some tariffs, with a team of British officials in Washington to negotiate terms this week, people familiar with the matter said.

There is optimism that a deal can be struck, but it was still too early to say whether an agreement could be reached this week. Securing a deal with President Donald Trump has become a priority for UK premier Keir Starmer as he seeks to protect British industry from the impact of US tariffs, particularly 25% levies on steel and car imports.

The talks come as Britain announced a major new trade deal with India on Tuesday, the largest the UK has signed since it left the European Union, as it seeks to deepen economic ties with other nations amid the Trump tariff fallout.

Stocks are a little lower on the week so far. The S&P 500 is down about 1%, the FTSE 100 is down 0.7%, the CAC in France is lower by 2%, while the DAX in Germany has managed to add on 0.2%.

Given the potential progress of the talks, this is a fairly muted reaction. It could be that we are now simply waiting to see what’s true and what is not, as well as whether any deals actually get done.

The pound is currently trading $1.336 against the dollar and 1.176 against the Euro. Brent is trading $61.91 a barrel and UK Gas is trading at £83.18/thm, -33.61% lower on the year.

In the UK BAE Systems said in an update on Wednesday that trading year-to-date was in line with management expectations and reaffirmed its full-year guidance. The FTSE 100 defence specialist noted a strong order backlog and robust pipeline, providing visibility and underpinning long-term growth. It also noted continued investment to support expansion and stated it is well positioned to benefit from increased defence spending.

Online rail ticketing platform Trainline on Wednesday reported a sharp rise in adjusted core earnings on the back of a 12% jump in sales. Adjusted EBITDA rose 30% to £159m, while operating profit surged by 54% to £86m. Group net ticket sales came in at £5.9bn.

On the flipside AstraZeneca and GSK were among the top fallers on London's top-flight index after the US health regulator, the FDA, named vaccine-sceptic Vinay Prasad, as its new head.

In the States Marvell Technology cut the high end of its revenue forecast. Barrick Mining Corp., one of the world’s top gold producers, reported higher-than-expected earnings, with production coming in at the top end of the guidance range at a time of record prices.

Bunge Global SA saw profits shrink less than expected in the first quarter as the company weathered the impact of tariff uncertainty on crop trading and WeightWatchers, known for its diet programs has filed for bankruptcy after struggling to compete with drugs like Ozempic.

Cryptocurrencies

• Bitcoin rose 2.7% to $97,237.18
• Ether rose 3.2% to $1,832.62

Bonds

• The yield on 10-year Treasuries was little changed at 4.29%
• Germany’s 10-year yield declined five basis points to 2.49%
• Britain’s 10-year yield declined five basis points to 4.47%

Commodities

• West Texas Intermediate crude fell 0.3% to $58.89 a barrel
• Spot gold fell 1.1% to $3,394.66 an ounce

Still to come this week, we have the outcome of the Fed meeting this evening. Economists and analysts are unanimous that no rate changes are expected, and the rate will remain in the current range of 4.25%-4.50%. Despite developments in India and Pakistan and news of upcoming talks between the US and China, the market is poised for strong moves, remaining in a state of uncertainty about the central bank's next steps.

Since Trump took office, the Fed has tightened its interest rate policy in response to the pro-inflationary risks expected from tariffs. Rising inflation expectations in the US confirm this trend.
Recent GDP and trade balance data showed an increase in imports before tariffs were imposed, which has a negative effect on the economy. However, this effect can be seen because of strong demand supported by positive employment data.

Then tomorrow it’s the turn of the Bank of England, which is likely to cut interest rates to 4.25% but will keep its options open on the pace of future cuts, as uncertainty swirls about the global trade backdrop and geopolitical tensions.  

A policy decision from the MPC will arrive at 12:02 GMT on Thursday, slightly later than normal due to a two-minute silence at midday to commemorate the 80th anniversary of VE Day.

Alongside the decision, the May Monetary Policy Report and MPC meeting minutes will be published, and Governor Andrew Bailey will host a press conference to explain the rationale behind the decision.

The BoE will also upgrade its GDP growth projection in 2025 and downgrade inflation forecasts, the economists added, expecting the report to warn about downside risks to growth and inflation over the medium term.

That’s it from us until the Week in Review update on Saturday. If you have any questions about the market, or our reports, please do get in touch here.

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Disclaimer: The views expressed in this article are the author’s own and should not be considered in rendering any legal, business or financial advice. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions.

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