- FTSE sentiment rises on UK trade agreement with US
- Investors eye progress on China trade discussions as EU plays hardball
- Chinese exports surprise, rising 8.1% in April
- NVIDIA plans new H20 chip to fight export ban
- TSMC’s sales up 48.1% in April
- Brent Crude bounces to around $63 per barrel, Starmer targets Russia’s shadow fleet
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The diplomatic offensive presented conjointly by President Trump and Keir Starmer from Washington and Solihull has ignited a feint spark of optimism in equity markets. The coincidence with VE day commemorations seemed designed to underline the special relationship between the two allies. With details emerging late in the day it wasn’t enough to prevent a down day on the FTSE – but sentiment has picked up this morning with the index set to open higher. There may be some disappointment that the baseline 10% tariffs remain in place but for certain industries the picture on trade restrictions are looking up. While pharmaceuticals have escaped the US Presidents wrath for now, UK companies in the sector and other knowledge-intensive areas have been promised preferential treatment. As yet, that’s not come at the expense of lifting the 2% Digital Services Tax Britain applied to the likes of YouTube and eBay, but with more talks to come on a separate digital services deal, it’s likely to form part of negotiations.
US stocks were up slightly on the day and are largely flat in pre-market trading.Asian stocks trended broadly upwards overnight as attention turns to this weekend’s trade talks with China. Donald Trump’s hinted there may be some scope to reduce the 145% border tax on Chinese goods if discussions go well. So far, the measures haven’t done huge damage to China’s economy. Exports from the People’s Republic grew 8.1% in April much higher than the 1.9% expected. But, notably, shipments to the US were down 2.5%. That cuts both ways with imports from America falling 4.7%, reflecting the 125% tariff imposed by Beijing. But US relations with China aren’t quite as friendly as they are with Whitehall and there’s speculation that these negotiations could be more protracted.
Some companies are choosing not to wait and are taking matters into their own hands. NVIDIA’s said to be developing a lower-powered version of its already modified H20 AI chip that’s now the subject of an export ban to China. It’s not the first time it’s tweaked its designs to mitigate restrictions but, overall, China’s not as important as it once was. There comes a point where dumbing down technology means it’s no longer fit for purpose, especially as local rivals like Huawei up their game. But overall demand for NVIDIA’s ultra-fast processors isn’t showing any cracks, which should benefit investors who choose to take advantage of recent weakness in the share price. That’s also reflected in today’s April sales figures from manufacturing partner TSMC who saw growth accelerate to 48.1% compared to last year.
European indices are also in positive territory. But, while hopes are rising of a trade deal between Britain and its largest trading partner the EU, Brussels is taking a tougher stance against the White House as it mulls further tariffs on a raft of US products including planes, cars and bourbon.
Brent Crude prices have latched on to the potential for further trade deals, but pressures remain on the supply side as OPEC+ nations target increased production. Speculation is also building around a US-Iranian deal setting out rules for Tehran’s nuclear development activities which could see some oil sanctions lifted. The parties are thought to be convening in Oman this weekend. As for Russia, the outlook for supply from the world’s third largest producer hinges on progress towards an end to the war with Ukraine. But there are claims that Vladmir Putin’s 3-day ceasefire has already been broken, and US calls for a longer 30-day respite could see further sanctions imposed if fighting continues. Meanwhile, Keir Starmer is due to unveil the UK’s largest ever sanction package later today at the Joint Expeditionary Force meeting in Oslo. It’s hoped the measures will curtail the activity of Russia’s ‘Shadow Fleet’ of over 100 oil tankers which have made export bans on fossil fuels difficult to enforce.”
Parties related to the author own NVIDIA shares.
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