Equity market sentiment improved during the week amid progress on a number of counts towards trade deals across the globe. The UK and the US announced a trade agreement whilst the significant US-China trading relationship also appeared to be making positive strides. The American S&P 500 index closed the week modestly lower, whilst many Asian and European markets enjoyed modest gains heading into the weekend. The yield on the US 10-year note firmed 9 basis points from a week ago to 4.36%.

On Thursday, the US and the UK reached agreement on the framework for a new trade deal. The agreement keeps in place the 10% baseline levy with some exceptions, whilst reducing tariffs on the first 100,000 vehicles exported from the UK, annually. Importantly, it also exempts British steel and aluminium from heavier levies. The UK has agreed to import more US goods, including 10 billion dollars’ worth of Boeing jets. The large-cap FTSE 100 index closed the week slightly lower, however the more domestically orientated FTSE 250 and FTSE AIM All-Share indices rallied.

Crucially to global trade, it became apparent that the US Treasury Secretary Scott Bessent along with trade representatives would meet with Chinese Vice Premier He Lifeng over the weekend to discuss trade. The Shanghai Composite index closed the week 1.92% higher in local currency.

Central bank meetings also confirmed interest rate cuts in both the UK and China. China lowered its benchmark policy rate to 1.4% from 1.5% and cut its reserve requirement ratio 0.5% to an average of 6.2%. The Bank of England lowered its base lending rate to 4.25%, with two policymakers voting for a larger reduction and two of the nine members of the Monetary Policy Committee voting to hold rates steady.  The US Federal Reserve meanwhile held rates unchanged.

Elsewhere, Japan’s Nikkei 225 closed the week 1.83% higher in local currency. Japan’s finance minister back-tracked from comments that the country’s $1 trillion-plus of US Treasuries could be a bargaining chip in trade talks.

In commodities, eight OPEC+ countries are set to rein back voluntary oil production cuts, leading to an increase in production by about 411,000 barrels a day in June. Crude oil futures fell to four-year lows on the news before rebounding. The price of a barrel of West Texas Intermediate crude oil closed at circa $60 per barrel.

Week Ahead

Source: Bloomberg, 12/05/25

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