FTSE 100 surges as Trump retreats on trade war
The FTSE 100 inched closer to a full pre-’Liberation Day’ recovery on Wednesday as President Donald Trump dialled down on his bombastic trade rhetoric.
The blue-chip index rose by over two per cent in early trading as stocks exposed to China surged.
This followed the index finishing in the green for the seventh consecutive day on Tuesday, booking its best run of gains in two years.
Trump told reporters on Tuesday that high tariffs on China will “come down substantially, but it won’t be zero”.
This followed Treasury Secretary Scott Bessent earlier that day saying he expected “de-escalation” between the two superpowers in the “very near future”.
Russ Mould, investment director at AJ Bell, said the shifting tone from the US had “given markets a sense of optimism that recent chaos might have peaked and we’re heading towards calmer waters.”
“It almost suggests that someone has taken Trump to one side and told him it’s time to be more responsible with his words and actions.”
Dan Coatsworth, investment analyst at AJ Bell, said: “Shell and BP helped to drive the FTSE 100 amid hopes that a full-blown trade war can be avoided and by extension, the global economy continues to move forward.
“Oil prices are heavily influenced by economic expectations and the same applies to shares in oil producers.”
It was also revealed on Tuesday that activist hedge fund Elliott Management had acquired a five per cent stake in BP and has been pressing management to slash costs and boost free cash flow by 40 per cent.
Asian-focused lenders bounce back
Asian-focused lenders Standard Chartered and HSBC surged over five per cent as fears of a trade war cooled. Shares in both banks fell over 15 per cent in the days that followed Trump’s ‘Liberation Day’ levies.
William Howlett, financial analyst at Quilter Cheviot, told City AM the “outsized tariffs” Trump slapped on Asian economies made it understandable the pair “sold off the most”.
Whilst Trump’s 90-day pause rolled back the 34 per cent and 46 per cent levies handed to Taiwan and Vietnam, the President scaled up attacks on China.
As the trade war escalated, Trump imposed import taxes of 145 per cent on China, which retaliated with 125 per cent tariffs on US goods, and FTSE firms were caught in the crossfire.
Coatsworth added: “Investors are crossing their fingers that tensions ease between the US and China after Donald Trump said a deal could be reached between the two countries on trade.
“It’s the biggest sign that the chaos of the past three weeks might have peaked and that a trade war could potentially be avoided.”
Trump has also backed down in his attacks on Federal Reserve Chair Jerome Powell.
The President, who had previously said Powell’s “termination cannot come quick enough”, said on Tuesday: “I would like to see him be a little more active in terms of his idea to lower interest rates…but, no, I have no intention to fire him.”
The dollar had suffered amidst Trump’s hounding of Powell, falling to a three-year low on Monday.