12th May 2025 16:51
(Alliance News) - Stocks in London climbed, while the pound sank against the dollar, after the US and China struck a better-than-hoped trade deal.
"Some people thought the best-case outcome from the weekend’s discussions would be an agreement to simply keep talks going. Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise," said Russ Mould at AJ Bell.
The FTSE 100 index ended up 50.18 points, 0.6%, at 8,604.98. The FTSE 250 was up 123.01 points, 0.6%, at 20,627.38, and the AIM All-Share was up 2.39 points, 0.3%, at 729.30.
The Cboe UK 100 was up 0.7% at 858.15 and the Cboe UK 250 was up 0.6% at 18,051.80, and the Cboe Small Companies was up 1.2% at 15,723.00.
Mining stocks supported the London market with fears of a global recession lessening. Anglo American rose 5.5%, Glencore gained 6.1% and Antogagasta advanced 5.8%.
Asia-focused banks Standard Chartered and HSBC firmed 8.2% and 3.9% respectively, while Prudential, which also has its prospects trained on the region, rose 4.0%.
Following a weekend of trade talks in Geneva, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer told reporters the sides had agreed to temporarily roll back 'reciprocal tariffs' for a 90-day period.
US President Donald Trump last month had imposed duties of 145% on imports from China, compared to 10% for other countries. Beijing hit back with duties of 125% on US goods.
Bessent said the two sides agreed to reduce those tariffs by 115 percentage points, taking US tariffs to 30% and those imposed by China to 10%.
Deutsche Bank Research noted it previously had predicted "quick and substantial cuts to tariffs", but "today's announcement even exceeds our constructive expectations".
ING saw it as a win for China.
"Although the de-escalation of the trade war benefits both economies, the agreement, which significantly lowers tariffs without any concessions, is likely to be viewed as a particular victory for China. China had previously demanded a reduction in tariffs before negotiations, and this now seems to have been achieved," the broker said.
AJ Bell's Mould said the coming months will be key.
"The next 90 days are going to be crucial in determining the longer-term tariff levels between the two countries. It would only take China upsetting Trump once for him to rip up the 90-day deal and revert back to sky-high tariffs. China won’t want to come across as weak in any discussion and is certainly not a push-over, yet it will be cognisant of the situation's fragility."
In European equities on Monday, the CAC 40 in Paris was up 1.4%, while the DAX 40 in Frankfurt was up a more modest 0.3%.
Stocks in New York were buoyant. The Dow Jones Industrial Average was up 2.4%, the S&P 500 index up 2.6% and the Nasdaq Composite up 3.6%.
Technology stocks were especially in favour. Chip maker Nvidia rose 4.3%, iPhone maker Apple climbed 5.3% and online retailer and technology firm Amazon.com rose 7.4%.
The thaw in US-China relations saw the dollar rise, while safe haven gold took a tumble.
The pound was quoted lower at USD1.3206 late on Monday in London, compared to USD1.3299 at the equities close on Friday. The euro stood at USD1.1114, slightly lower against USD1.1263. Against the yen, the dollar was trading at JPY148.18, higher compared to JPY145.18 on Friday.
Gold fell sharply to USD3,236.25 an ounce against USD3,342.57 on Friday. Brent oil was quoted at USD65.21 a barrel, up from USD63.66 late Friday.
In London, gold miner Endeavour Mining fell 5.5% and Fresnillo dropped 5.8%.
On the FTSE 250, Victrex fell 6.9% after it warned of a "sizeable" forex headwind and lower sales volumes at its China facility as it reported lower-than-expected half-year profit.
Underlying pretax profit fell 17% to GBP23.2 million from GBP28.0 million, which analysts at Jefferies noted was below the investment bank's GBP26.4 million forecast.
Revenue grew 4.7% to GBP145.9 million from GBP139.3 million, or by 8% at constant currency.
Half-year gross margin fell to 44.1% from 48.0%, due to a softer sales mix within Sustainable Solutions, initial operating challenges of its China ramp-up, and a sizeable currency headwind. Excluding the China manufacturing facility, gross margin was 46.6%.
For the full-year Victrex expects gross margin will now be lower than guidance of around 50%, in a range of 45% to 47%.
Sales volume at the Victrex Panjin manufacturing facility in China, which started in the second half of the prior financial year, is expected to be "closer to" 50 tonnes in the full-year, compared to original expectations of 100 to 200 tonnes.
In addition, Victrex expects a "sizeable currency headwind" of around GBP8 million to GBP9 million on pretax profit for the full-year.
Elsewhere, Diversified Energy rose 2.5%.
The Birmingham, Alabama-based gas and oil production company said total revenue in the first quarter that ended March 31 rose 79% to USD346.9 million from USD193.6 million the previous year.
Adjusted earnings before interest, tax, depreciation and amortisation increased 35% to USD138.2 million from USD102.1 million, while the adjusted Ebitda margin was unchanged at 47%. Diversified Energy also declared a dividend of 29 US cents per share for the quarter, unchanged on-year.
Looking ahead, the company reiterated its full-year guidance, which incorporates a nine-month contribution from assets gained through its acquisition of Maverick Natural Resources in March. The outlook included USD825 to USD875 million in adjusted Ebitda.
Tuesday's economic calendar has UK unemployment and average earnings figures and US inflation data.
The local corporate calendar on Tuesday has full-year results from DCC.
By Jeremy Cutler, Alliance News reporter
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