Equities later found support on growing hopes of a de-escalation in trade tensions, with news that Treasury Secretary Scott Bessent would meet with Chinese officials in Geneva over the weekend for trade discussions. On Friday Trump hinted that the 145% tariffs on Chinese imports could be rolled back, and indeed the US agreed to reduce the reciprocal tariffs. Furthermore, on Thursday it was announced that the UK had become the first country to strike a deal with the Trump administration in response to the Liberation Day levies.
Despite the trade optimism and the possibility for further deals to be made, for the week the major US equity indices ended slightly lower. The S&P 500 declined 0.5%, the Dow Jones dropped 0.2% and the tech-heavy Nasdaq Composite lost 0.3%. Small caps managed to fare better, with the Russell 2000 up almost 1%. Treasury yields moved higher in response to the tariff news, with the 10-year note climbing to 4.39%. In other news, the Federal Reserve left its interest rates on hold. The central bank will continue to monitor the incoming economic data to steer its decisions, but noted that the “risks of higher unemployment and higher inflation have risen” due to tariffs.
European markets were boosted by the improved trade sentiment. Overall, the pan-European STOXX 600 added 0.3% in its fourth consecutive weekly gain. Automobiles were some of the best performers of the week, given their trade sensitivity. Germany’s DAX rose 1.8%, hitting a record high on Friday and recouping all of its tariff induced losses. In contrast UK and French indices saw modest losses for the week. The Bank of England lowered its policy rate by a quarter percentage point, although two of the nine-member Monetary Policy Committee voted in favour of staying on hold. Meanwhile Norway’s and Sweden’s central banks both remained on hold.
Chinese stocks saw a holiday shortened week but managed to log gains, with the Shanghai Composite up 1.9%. Meanwhile in Hong Kong the Hang Seng rose 1.6%. Aside from the weekend’s scheduled trade discussions, markets got a boost as the People’s Bank of China cut its seven-day reverse repurchase rate by 0.1 percentage points to 1.4%, as well as other rates to release long-term liquidity into the economy. Japanese indices also had a holiday shortened week, with the Nikkei gaining 1.8%, despite limited signs of progress over a US-Japan trade deal.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.